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D.P.U. 19738,.19743, 20055, 20109 & 72- Page iii 1 | D.P.U. 19738,.19743, 20055, 20109 & 72- Page iii 1 | ||
APPEARANCES: (continued) i | APPEARANCES: (continued) i i Ellen J. Messing, Esq.. | ||
i Ellen J. Messing, Esq.. | |||
Two Park Square Boston, Massachusetts 02108 | Two Park Square Boston, Massachusetts 02108 | ||
; for Safe Energy Alliance l Peabody, Brown, Rowley-&_ Storey by: Maurice L. Zilber, Esq., and | ; for Safe Energy Alliance l Peabody, Brown, Rowley-&_ Storey by: Maurice L. Zilber, Esq., and | ||
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Page iv D.P.U. 19738, 19743, 20055, 20109 & 72 TABLE OF CONTENTS - | Page iv D.P.U. 19738, 19743, 20055, 20109 & 72 TABLE OF CONTENTS - | ||
1 I. Statement of the case 7 | 1 I. Statement of the case 7 | ||
II. The context of review | II. The context of review 22 ,, | ||
22 ,, | |||
' III. The need for power 22 A. Introduction ~ | ' III. The need for power 22 A. Introduction ~ | ||
22 B. Montaup demand forecast 25 4 | 22 B. Montaup demand forecast 25 4 | ||
| Line 99: | Line 95: | ||
: 4. New Bedford industrial forecast 156 | : 4. New Bedford industrial forecast 156 | ||
: 5. Cambridge forecast 158 t | : 5. Cambridge forecast 158 t | ||
: 6. Conservation 158 | : 6. Conservation 158 | ||
: 7. Peak load forecast 165 | : 7. Peak load forecast 165 | ||
| Line 107: | Line 102: | ||
: 3. Solar and wind power 199 | : 3. Solar and wind power 199 | ||
: 4. Canadian hydroelectric power 199 | : 4. Canadian hydroelectric power 199 | ||
] | ] | ||
| Line 139: | Line 133: | ||
: 2. The complete cost of the proposed accuisition of the additional ownership shares in the Seabrook facilities; | : 2. The complete cost of the proposed accuisition of the additional ownership shares in the Seabrook facilities; | ||
: 3. The reasons for selecting this method of meeting future ca pa ci ty needs in preference to alternative programs considered by the | : 3. The reasons for selecting this method of meeting future ca pa ci ty needs in preference to alternative programs considered by the | ||
' purchasing companies; and 4 A complete description of the characteristics of service from the Seabrook facilities. | ' purchasing companies; and 4 A complete description of the characteristics of service from the Seabrook facilities. | ||
On November 16, lo7P, the Department issued an order of notice scheduling a pre-hearing conference for December 11, 197a. | On November 16, lo7P, the Department issued an order of notice scheduling a pre-hearing conference for December 11, 197a. | ||
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+ | + | ||
D.P.U. 1973P, lo7a3, 20055, 20109 &77 Page 4 | D.P.U. 1973P, lo7a3, 20055, 20109 &77 Page 4 consolidated proceedings is as follows: | ||
consolidated proceedings is as follows: | |||
Purchaser Seller t Interest MW DPU # | Purchaser Seller t Interest MW DPU # | ||
Fitchburg PSCO 0.2609 6.00 72 CL&P 0.4349 10.00 19743 Montaup CL&P 1.03542 23.81 19738 UI 1.06469 24.49 20109 PSCO 1.00000 23.00 20055 | Fitchburg PSCO 0.2609 6.00 72 CL&P 0.4349 10.00 19743 Montaup CL&P 1.03542 23.81 19738 UI 1.06469 24.49 20109 PSCO 1.00000 23.00 20055 | ||
| Line 208: | Line 199: | ||
l are to be found. Much of the evidence presented f | l are to be found. Much of the evidence presented f | ||
by the petitioners has, therefore, consisted of jections about these future occurrences, and | by the petitioners has, therefore, consisted of jections about these future occurrences, and | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 10 our evaluation of that evidence takes the form | D.P.U. 19738, 19743, 20055, 20109 &72 Page 10 our evaluation of that evidence takes the form | ||
) of an assessment as to the reasonableness of the methodologies and assumptions utilized in the process. Such an exercise cannot be equated with the review of historical events, but rather, demands that we exercise our judgment in d e te r mi n i ng at virtually every step whether the projections are founded upon an analysis that can be relied upon with a reasonable degree of confidence. | ) of an assessment as to the reasonableness of the methodologies and assumptions utilized in the process. Such an exercise cannot be equated with the review of historical events, but rather, demands that we exercise our judgment in d e te r mi n i ng at virtually every step whether the projections are founded upon an analysis that can be relied upon with a reasonable degree of confidence. | ||
While the future-contingent nature of the issues presented in itself creates difficult analytical problems, these p r o ,b l e n s | While the future-contingent nature of the issues presented in itself creates difficult analytical problems, these p r o ,b l e n s are further compounded by recent economic changes in the electric utility industry. | ||
are further compounded by recent economic changes in the electric utility industry. | |||
Petitioners' generating mixes are largely dependent upon oil for fuel. The stability of the region's oil supply in terms of both availability and price has become very uncertain. The cartelization of foreign oil production and the legitimate profit maximizing behavior of domestic oil suppliers create a j l | Petitioners' generating mixes are largely dependent upon oil for fuel. The stability of the region's oil supply in terms of both availability and price has become very uncertain. The cartelization of foreign oil production and the legitimate profit maximizing behavior of domestic oil suppliers create a j l | ||
l | l | ||
| Line 232: | Line 220: | ||
19738, 19743, 20055, 20109 &72 Page 12 D.P.U. | 19738, 19743, 20055, 20109 &72 Page 12 D.P.U. | ||
represents significant additions to the purchasing companies' capital bases, are being undertaken. Further, the question of undue financial burden must not be reviewed solely within the context of capital construction costs, but also with regard to the effect on the ratepayer in terms of reliable se rv ice in light of a company's present overall generation mix and reliance on a particular form.of generation. | represents significant additions to the purchasing companies' capital bases, are being undertaken. Further, the question of undue financial burden must not be reviewed solely within the context of capital construction costs, but also with regard to the effect on the ratepayer in terms of reliable se rv ice in light of a company's present overall generation mix and reliance on a particular form.of generation. | ||
The capitalization of funds used d u r i ng corstruction ("APUDC") and the attendant direct reduction of internally-generated cash | The capitalization of funds used d u r i ng corstruction ("APUDC") and the attendant direct reduction of internally-generated cash flows further compound the problem of access to external capital sources when the construction period for the project encompasses several business cycles and lastu ten years or longer. | ||
flows further compound the problem of access to external capital sources when the construction period for the project encompasses several business cycles and lastu ten years or longer. | |||
As a consequence, ill-defined current or reasonably foreseeabla future interest rates add tremendous uncertainty to the task of forecasting the financial impact of utility investment decisions. . | As a consequence, ill-defined current or reasonably foreseeabla future interest rates add tremendous uncertainty to the task of forecasting the financial impact of utility investment decisions. . | ||
4 Present uncertainty regarding access to the c a pi t al market, however, must be | 4 Present uncertainty regarding access to the c a pi t al market, however, must be | ||
| Line 265: | Line 251: | ||
I D.P.U. 19738, 19743, 20n55, 20109 &72 Page 17 l | I D.P.U. 19738, 19743, 20n55, 20109 &72 Page 17 l | ||
generation mix. | generation mix. | ||
In fact, since the magnitude of the investment is much larger relative to these l companies' respective sizes than for a | In fact, since the magnitude of the investment is much larger relative to these l companies' respective sizes than for a l significantly larger utility, and since the I po te n ti al for financial ruin resulting from a mistaken allocation of more limited resources is I | ||
l significantly larger utility, and since the I po te n ti al for financial ruin resulting from a mistaken allocation of more limited resources is I | |||
greater in tnis instance, CL&P and PSCO's | greater in tnis instance, CL&P and PSCO's | ||
}" | }" | ||
| Line 275: | Line 259: | ||
) simulations of alternative system generation mixes prior to the irrevocable commitment of 4 | ) simulations of alternative system generation mixes prior to the irrevocable commitment of 4 | ||
resources is necessary, rather than fewer such analyses. And if, in fact, the suggestion that t he se companies are incapable of pe r f o rmi ng the required analysis is true, the only possible inference we could draw is that these small companies should be relieved of this h'avy e burden and that .i t should be assumed by the | resources is necessary, rather than fewer such analyses. And if, in fact, the suggestion that t he se companies are incapable of pe r f o rmi ng the required analysis is true, the only possible inference we could draw is that these small companies should be relieved of this h'avy e burden and that .i t should be assumed by the | ||
.i | .i | ||
; Department. To do otherwise would truly place 4 | ; Department. To do otherwise would truly place 4 | ||
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1 4 | 1 4 | ||
D.P.U. 19738, 19743, 20055, 20109 672 Page 20 | D.P.U. 19738, 19743, 20055, 20109 672 Page 20 For many years there was little need for such detailed review, a fact witnessed by Fitchburg's reco rd of serving its customers for the fifty-two years prior to 1972 without a ra te increase. | ||
For many years there was little need for such detailed review, a fact witnessed by Fitchburg's reco rd of serving its customers for the fifty-two years prior to 1972 without a ra te increase. | |||
The process resulting from the accretion of utility ex pe r i e n ce in these areas and the attendant public scrutiny and criticism of u tili ty efforts leads us to the conclusion that the concept of adequate proof in these areas is evolving. For example, purchasing petitioners are currently in the fourth iteration of their demand forecasts with each subsequent forecast clearly showing marked improvement over its predecessor. That is not to say an optimum has by any means been reached; in fact, there are a substantial number of areas where our review is reduced to evaluating naked assertions of judgment supported solely by a claim of experience. This problem is particularly acute when the methodology employed 1 | The process resulting from the accretion of utility ex pe r i e n ce in these areas and the attendant public scrutiny and criticism of u tili ty efforts leads us to the conclusion that the concept of adequate proof in these areas is evolving. For example, purchasing petitioners are currently in the fourth iteration of their demand forecasts with each subsequent forecast clearly showing marked improvement over its predecessor. That is not to say an optimum has by any means been reached; in fact, there are a substantial number of areas where our review is reduced to evaluating naked assertions of judgment supported solely by a claim of experience. This problem is particularly acute when the methodology employed 1 | ||
is not reviewable and we are left with assessing the reasonableness of quantitative assertions in | is not reviewable and we are left with assessing the reasonableness of quantitative assertions in | ||
19738, 19743, 20055, 20100 &72 Page 21 D.P.U. | 19738, 19743, 20055, 20100 &72 Page 21 D.P.U. | ||
| Line 318: | Line 298: | ||
art, science and informed judgment, the re is no dispute. We now turn to the manner in which these elements have been applied. | art, science and informed judgment, the re is no dispute. We now turn to the manner in which these elements have been applied. | ||
B. ppglapp_p3magg_fgggpasy Montaup is the wholesale power subsidiary in the Eastern Utilities Associates | B. ppglapp_p3magg_fgggpasy Montaup is the wholesale power subsidiary in the Eastern Utilities Associates | ||
(" EU A") system. There are two retail subsidiaries in the system, Eastern Edison Company (" Eastern Edison") and Blackstone Valley | (" EU A") system. There are two retail subsidiaries in the system, Eastern Edison Company (" Eastern Edison") and Blackstone Valley Electric Company ("Blackstone"), both of which are wholly owned by EUA. Fastern Edison is the present name of the B roc k to n Edison Company, | ||
Electric Company ("Blackstone"), both of which are wholly owned by EUA. Fastern Edison is the present name of the B roc k to n Edison Company, | |||
D.P.U. 19739, 197d3, 20055, 20109 &77 Page 23 whose name was changed when the Fall River i | D.P.U. 19739, 197d3, 20055, 20109 &77 Page 23 whose name was changed when the Fall River i | ||
| Line 328: | Line 306: | ||
Supervisor of System Planning for EUA Service Corporation; and Mr. John F. Marien, Senior Engineering Assistant for EUA Service Corporation. EUA forecasts its primary energy requirements in its Third Supplement to the 1976 Long-Range Forecast of Electric Power Needs and Requirements, 1979-198P (Exh. M-10) by , | Supervisor of System Planning for EUA Service Corporation; and Mr. John F. Marien, Senior Engineering Assistant for EUA Service Corporation. EUA forecasts its primary energy requirements in its Third Supplement to the 1976 Long-Range Forecast of Electric Power Needs and Requirements, 1979-198P (Exh. M-10) by , | ||
separately e s ti ma ti ng the demands of its three retail service territories, Blackstone, Prockton, l l | separately e s ti ma ti ng the demands of its three retail service territories, Blackstone, Prockton, l l | ||
1 1 | 1 1 | ||
| Line 351: | Line 328: | ||
' are derived (Exh. M-10, pp. II-11 to II-19). | ' are derived (Exh. M-10, pp. II-11 to II-19). | ||
Attorney General witness Paul Chernick, a utility rate analyst, criticizes five major aspects of the residential forecast. | Attorney General witness Paul Chernick, a utility rate analyst, criticizes five major aspects of the residential forecast. | ||
We will examine the residential forecast in detail and deal with these criticisms seriatim. | We will examine the residential forecast in detail and deal with these criticisms seriatim. | ||
: a. Eggigggtlal_yg33ehgip_jjz3 i Ersisstiss5 EUA employs the ratio of service i | : a. Eggigggtlal_yg33ehgip_jjz3 i Ersisstiss5 EUA employs the ratio of service i | ||
| Line 416: | Line 392: | ||
l M-29, IR-8, 11). We acknowledge the decrease in average use which has occurred since 1975 and a t tr i bu te this decrease to increased energy awareness and conservation by consumers. We reject the claim. however, that the 1976-1979 i | l M-29, IR-8, 11). We acknowledge the decrease in average use which has occurred since 1975 and a t tr i bu te this decrease to increased energy awareness and conservation by consumers. We reject the claim. however, that the 1976-1979 i | ||
trend is likely to contine~ as Mr. Chernick has predicted. We do not find this prediction plausible. We find similarly with respect to , | trend is likely to contine~ as Mr. Chernick has predicted. We do not find this prediction plausible. We find similarly with respect to , | ||
water heating. | water heating. | ||
Mr. Chornick's final criticisn with re spe ct- to average use per a ppli a n ce is that EUA has erroneously assumed that reduced family size does not affect average use. We j | Mr. Chornick's final criticisn with re spe ct- to average use per a ppli a n ce is that EUA has erroneously assumed that reduced family size does not affect average use. We j | ||
| Line 451: | Line 426: | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 39 | D.P.U. 19738, 19743, 20055, 20109 &72 Page 39 | ||
: p. 12). Mr. Chernick prefers to utilize the saturation rate increase predicted by EUA fo r 1979-1980, as evidenced for Brockton in Exhibit M-10, pp. 11-16. We note an absence of data in the reco rd regarding major app)'ence saturation rates for tne years 1975-1979, 10/ and therefore will deal with this issue by e x a m i n i ng the actual base use growth rates predicted by E U'A . | |||
: p. 12). Mr. Chernick prefers to utilize the | |||
saturation rate increase predicted by EUA fo r 1979-1980, as evidenced for Brockton in Exhibit M-10, pp. 11-16. We note an absence of data in the reco rd regarding major app)'ence saturation rates for tne years 1975-1979, 10/ and therefore will deal with this issue by e x a m i n i ng the actual base use growth rates predicted by E U'A . | |||
EUA's analysis of base use growth is presented in Exhibit M-14, pp. 6-10. | EUA's analysis of base use growth is presented in Exhibit M-14, pp. 6-10. | ||
Compound growth rates for each of the three service territories are on the order of 12 percent for 1960-1970, 6.5 percent for 1960-197P/1979 and slightly less than 1 percent for 1970-1979. 11/ EUA utilized roughly | Compound growth rates for each of the three service territories are on the order of 12 percent for 1960-1970, 6.5 percent for 1960-197P/1979 and slightly less than 1 percent for 1970-1979. 11/ EUA utilized roughly | ||
| Line 481: | Line 453: | ||
Chernick argues that historical base use data includes a consumption effect attributable to new developments, and that the inclusion of a separate new developments category for the forecast period double-counts electricity ~ | Chernick argues that historical base use data includes a consumption effect attributable to new developments, and that the inclusion of a separate new developments category for the forecast period double-counts electricity ~ | ||
4 consumption attributable to new developments (Exh. AG-237, p. 27). | 4 consumption attributable to new developments (Exh. AG-237, p. 27). | ||
We acknowledge the overlap a | We acknowledge the overlap a | ||
between ba se use and new developments, a nd agree with Mr. Chernick that EUA's method of accounting for such growth is analytically incorrect. When employing an engineering analysis which accounts for electricity consumption by end-use category, one must factor out of the agg r eg a te category 12/ (in this 4 | between ba se use and new developments, a nd agree with Mr. Chernick that EUA's method of accounting for such growth is analytically incorrect. When employing an engineering analysis which accounts for electricity consumption by end-use category, one must factor out of the agg r eg a te category 12/ (in this 4 | ||
| Line 540: | Line 511: | ||
by separating the industrial sector into two categories. One consists of known, large industrial customers and the other of EUA's remaining small industrial customers (Exh. M-10, | by separating the industrial sector into two categories. One consists of known, large industrial customers and the other of EUA's remaining small industrial customers (Exh. M-10, | ||
: p. II-26; Exh. M-29, IR-22). Historical da ta is then adjusted to account for patterns FUA considers aberrant, namely, the departure of certain customers from FUA's service territory , | : p. II-26; Exh. M-29, IR-22). Historical da ta is then adjusted to account for patterns FUA considers aberrant, namely, the departure of certain customers from FUA's service territory , | ||
(Exh. M-29. IR-22; Tr. 22, pp. 6P-69). Adjusted historical da ta is analyzed, and, in nost | (Exh. M-29. IR-22; Tr. 22, pp. 6P-69). Adjusted historical da ta is analyzed, and, in nost instances, FUA applies the 1970-1979 compound growtn rate as a simple g rowth r a te in the j | ||
instances, FUA applies the 1970-1979 compound growtn rate as a simple g rowth r a te in the j | |||
latter years of the forecast, and smooths the simple growth rate in t he immediately preceding years back to the simple growth rate experienced in the last historical year, 1979 (Exh. M-29, t | latter years of the forecast, and smooths the simple growth rate in t he immediately preceding years back to the simple growth rate experienced in the last historical year, 1979 (Exh. M-29, t | ||
IR-22). 13/ The exceptions to this procedure are for Blackstone, which also has a level adjustment for specified forecast years to I37- I939-actuaII9 contains only tEree Eonths of historical data. | IR-22). 13/ The exceptions to this procedure are for Blackstone, which also has a level adjustment for specified forecast years to I37- I939-actuaII9 contains only tEree Eonths of historical data. | ||
| Line 566: | Line 535: | ||
Page 47 D.P.U. 19738, 197d3, 20055, 20109 &72 large Fall Diver customers (Exh. AG-232, p. 33). | Page 47 D.P.U. 19738, 197d3, 20055, 20109 &72 large Fall Diver customers (Exh. AG-232, p. 33). | ||
Second, Mr. Chernick faults EUA's me t hod of subjectively interpolating forecast growth rates from the 1979 simple growth rate to the 1970-1079 compound growth r a te in 198P (Exh. | Second, Mr. Chernick faults EUA's me t hod of subjectively interpolating forecast growth rates from the 1979 simple growth rate to the 1970-1079 compound growth r a te in 198P (Exh. | ||
AG-232, p. 33). Pr. Chernick points to E l'A ' s M-29, volatile historical i nd u s t r i al sales (Exh. | AG-232, p. 33). Pr. Chernick points to E l'A ' s M-29, volatile historical i nd u s t r i al sales (Exh. | ||
IR-22) and states there is no justification for a s s um i ng that short-term growth will approximate 1979 growtn. He suggests EUA might more reasonably use the 1970-1979 c o m po u nd growth rate to apprcximate the forecast period growth | IR-22) and states there is no justification for a s s um i ng that short-term growth will approximate 1979 growtn. He suggests EUA might more reasonably use the 1970-1979 c o m po u nd growth rate to apprcximate the forecast period growth | ||
| Line 580: | Line 548: | ||
_ _ _ _ ~ . _ _ . . . . _ . . - - - . _ .-- . | _ _ _ _ ~ . _ _ . . . . _ . . - - - . _ .-- . | ||
D.P.U. 19738, 19743, 20055, 2n109 &72 Page aP growth ratts in EUA's service territory have | D.P.U. 19738, 19743, 20055, 2n109 &72 Page aP growth ratts in EUA's service territory have IR-22, pp. 2, 4, t | ||
IR-22, pp. 2, 4, t | |||
indeed been volatile (Exh. M-29, 67), even to the point of being random. This r | indeed been volatile (Exh. M-29, 67), even to the point of being random. This r | ||
fact leads us to disagree with Mr. Chernick that unadjusted sales da ta is more informative, especially of structural or macro-economic conditions, than is adjusted data. The seemingly random fluc tua ti ons in EUA's t | fact leads us to disagree with Mr. Chernick that unadjusted sales da ta is more informative, especially of structural or macro-economic conditions, than is adjusted data. The seemingly random fluc tua ti ons in EUA's t | ||
| Line 630: | Line 596: | ||
l | l | ||
Page 41 D.P.U. 19738, 197e3, 2nn55, 20109 &72 the 1970-1979 compound growth rates. EUA has | Page 41 D.P.U. 19738, 197e3, 2nn55, 20109 &72 the 1970-1979 compound growth rates. EUA has provided no evidence wnich suggests such a result will indeed obtain, nor has it provided adecuate justification for the use of this methodology. | ||
provided no evidence wnich suggests such a result will indeed obtain, nor has it provided adecuate justification for the use of this methodology. | |||
+ | + | ||
While we have previously noted the great volatility of EUA's historical industrial data, we see no better evidence in the r eco rd to use for p r o j e c t i ng industrial growth during the forecast period. We are reluctant, however, to include projected 1979 IR-22, p. 2, fn. 1) as pa r t of data (Exh. P-29, the h i's t o r i c al period. We prefer to accept 1970-1979 as the relevant historical period for analysis, and with the exception of Brockton's small industrial class, apply the 1970-197P ad j us ted c o m po u nd g rowth rates to the forecast period (1978-19PP) for each industrial class in | While we have previously noted the great volatility of EUA's historical industrial data, we see no better evidence in the r eco rd to use for p r o j e c t i ng industrial growth during the forecast period. We are reluctant, however, to include projected 1979 IR-22, p. 2, fn. 1) as pa r t of data (Exh. P-29, the h i's t o r i c al period. We prefer to accept 1970-1979 as the relevant historical period for analysis, and with the exception of Brockton's small industrial class, apply the 1970-197P ad j us ted c o m po u nd g rowth rates to the forecast period (1978-19PP) for each industrial class in | ||
| Line 641: | Line 605: | ||
: p. 4), r e sul t i ng in a compound growth rate of -3.63 l | : p. 4), r e sul t i ng in a compound growth rate of -3.63 l | ||
Page 57 D.P.U. 19738, ~147t3, 20055, 20109 &77 l ' | Page 57 D.P.U. 19738, ~147t3, 20055, 20109 &77 l ' | ||
percent. FUA attributes this decline to a , | percent. FUA attributes this decline to a , | ||
| Line 680: | Line 643: | ||
adjustment, reducing 1989 commercial consumption by 10 percent (Exh. F-10, pp. II-22, 23). | adjustment, reducing 1989 commercial consumption by 10 percent (Exh. F-10, pp. II-22, 23). | ||
Mr. Chernick criticizes EUA's commercial forecast as based on unsound . , | Mr. Chernick criticizes EUA's commercial forecast as based on unsound . , | ||
methodology (Exh. AG-232, p. 'n). Specifically, | methodology (Exh. AG-232, p. 'n). Specifically, M r.. Chernick posits that the number of i | ||
M r.. Chernick posits that the number of i | |||
i | i | ||
- . , , e n - - | - . , , e n - - | ||
| Line 714: | Line 675: | ||
" natural unit" for conveying information r eg a r d i ng commercial consumption. We a re not persuaded, however, that this' variable cannot be i e | " natural unit" for conveying information r eg a r d i ng commercial consumption. We a re not persuaded, however, that this' variable cannot be i e | ||
> used e f f ec tively' to predict cornercial , | > used e f f ec tively' to predict cornercial , | ||
consumption, regardless of the methodology employed. Our concern, therefore, is with how this variable is used, not whether it should be | consumption, regardless of the methodology employed. Our concern, therefore, is with how this variable is used, not whether it should be used at all. We do not think the record supports the conclusion that there is so much variability a mo ng the various commercial | ||
used at all. We do not think the record supports the conclusion that there is so much variability a mo ng the various commercial | |||
~ establishments'-yearly consumption that 'one cannot me ani ng f ully multiply average commercial i | ~ establishments'-yearly consumption that 'one cannot me ani ng f ully multiply average commercial i | ||
- - - - - n. | - - - - - n. | ||
| Line 730: | Line 689: | ||
i e | i e | ||
D . P . t! . 19738, 19743, 20055, 20104 &72 Page 59 E t1 A employs multi-variate regression analysis to estimate the number of | D . P . t! . 19738, 19743, 20055, 20104 &72 Page 59 E t1 A employs multi-variate regression analysis to estimate the number of commercial-customers as a linear function of population and family size (Exh. M-10, p. II-21). | ||
commercial-customers as a linear function of population and family size (Exh. M-10, p. II-21). | |||
I T ne latter explanatory variable, family size, is the same variable employed in the residential model (Exh. M-In, p. II-22), where it is defined as the ratio of people (or po pul a t i o n) to number IR-13; Exh. | I T ne latter explanatory variable, family size, is the same variable employed in the residential model (Exh. M-In, p. II-22), where it is defined as the ratio of people (or po pul a t i o n) to number IR-13; Exh. | ||
of residential customers (Exh. M-29, M-10, p. II-5). Data from each service territory are regressed using this model (Exh. | of residential customers (Exh. M-29, M-10, p. II-5). Data from each service territory are regressed using this model (Exh. | ||
M-20, IR-13). | M-20, IR-13). | ||
We have examined the regression results for each service territory (Exh. M-29, IR-13) and find tnat they indicate the pr e se nc e | We have examined the regression results for each service territory (Exh. M-29, IR-13) and find tnat they indicate the pr e se nc e of numerous statistical problems. First, we , | ||
of numerous statistical problems. First, we , | |||
l note that r. o acceptable results were obtained for Fall River (Exh. AG-232, p. 32; ' Ex h. M-20, IR 23, p. 13). Second, we note that the Durbin-Watson statistic for Blackstone 17/ | l note that r. o acceptable results were obtained for Fall River (Exh. AG-232, p. 32; ' Ex h. M-20, IR 23, p. 13). Second, we note that the Durbin-Watson statistic for Blackstone 17/ | ||
f - - - - - - - - - - - -- - -- | f - - - - - - - - - - - -- - -- | ||
| Line 809: | Line 764: | ||
4 EUA in its projections; 26/ and, in any event, 4 | 4 EUA in its projections; 26/ and, in any event, 4 | ||
the total sys tem commercial growth r a te for this | the total sys tem commercial growth r a te for this | ||
! t period is still greater than tne growth rate | ! t period is still greater than tne growth rate i | ||
utilized by EUA. 27/ Conseouently, despite our reservations'about t he u tili ty of-EUA's commercial model, we do not find the compound growth rates employed by the Company to be unreaconable. | |||
! 26/ We would no te tnat such a historical trend analysis was utilized by the Attorney General for this very example in an effort to refute EUA's commercial growth projection. Tne ; | ! 26/ We would no te tnat such a historical trend analysis was utilized by the Attorney General for this very example in an effort to refute EUA's commercial growth projection. Tne ; | ||
Attorney General focused on tne growth .r a te in average consumption per commercial customer and found that average consumption increased by only l | Attorney General focused on tne growth .r a te in average consumption per commercial customer and found that average consumption increased by only l | ||
| Line 841: | Line 795: | ||
accept t he forecast as projected by FUA in Exhibit M-10. . | accept t he forecast as projected by FUA in Exhibit M-10. . | ||
N b | N b | ||
i l | i l | ||
~e -- | ~e -- | ||
| Line 868: | Line 821: | ||
, 1 | , 1 | ||
4 | 4 D.P.U. 19738,-19743, 20055, 70109 &77 | ||
D.P.U. 19738,-19743, 20055, 70109 &77 | |||
.Page'6P | .Page'6P | ||
: that' this 2.7 percent 30/. reduction in the 107P peak reduces EUA's-projected 10PP peak b y 2. 2. | : that' this 2.7 percent 30/. reduction in the 107P peak reduces EUA's-projected 10PP peak b y 2. 2. | ||
percent also, tnereby reducing E ll A ' s projected 1988 peak by about 19.MW. | percent also, tnereby reducing E ll A ' s projected 1988 peak by about 19.MW. | ||
I EUA defends the use of 1% degrees Panrenheit as a winter peak base tempe r a tu re on the ground that i t a pproxima te s December's average tempe ra tu re at peak for the last several years (Exn. M-76, p. 71) . Specifically, EUA States tnat the " post-embargo (post-1974) peak | I EUA defends the use of 1% degrees Panrenheit as a winter peak base tempe r a tu re on the ground that i t a pproxima te s December's average tempe ra tu re at peak for the last several years (Exn. M-76, p. 71) . Specifically, EUA States tnat the " post-embargo (post-1974) peak temperature averages are in the 17-12 degrees l | ||
temperature averages are in the 17-12 degrees l | |||
Fahrenneit range (and tha t) it was these latter averages which EUA used as the guide for its peak temperature ba se of 15 deg rees Fa hrenheit" (Exh. M-76, p. 21). | Fahrenneit range (and tha t) it was these latter averages which EUA used as the guide for its peak temperature ba se of 15 deg rees Fa hrenheit" (Exh. M-76, p. 21). | ||
We can see no causal rela tb.n shi p whatsoever between weather-and the 1973-1974 oil enbargo and, in fact, consider yearly variations in weather to be randomly distributed. In light 1 | We can see no causal rela tb.n shi p whatsoever between weather-and the 1973-1974 oil enbargo and, in fact, consider yearly variations in weather to be randomly distributed. In light 1 | ||
| Line 1,044: | Line 993: | ||
; Supplement Ic (Exh. FGF-7) by separately estinating tne energy demands of its residential, i | ; Supplement Ic (Exh. FGF-7) by separately estinating tne energy demands of its residential, i | ||
commercial and municipal, and industrial classes. | commercial and municipal, and industrial classes. | ||
4 i These demands are summed for each year to produce a yearly forecast through 1999 i Fitchburg's peak load forecast is | 4 i These demands are summed for each year to produce a yearly forecast through 1999 i Fitchburg's peak load forecast is then derived from the energy forecast using 1 | ||
then derived from the energy forecast using 1 | |||
; customer class load curve informatior. (Exh. FCF-7, | ; customer class load curve informatior. (Exh. FCF-7, | ||
: p. 5). Customer class load curve i | : p. 5). Customer class load curve i | ||
| Line 1,098: | Line 1,045: | ||
' residential forecast. Mr. Chernick finds fault i | ' residential forecast. Mr. Chernick finds fault i | ||
with the projection cf. growth in sales to existing customers for 1979 (Exh. AG-232, p. 3P), | with the projection cf. growth in sales to existing customers for 1979 (Exh. AG-232, p. 3P), | ||
the projection of average electric heating energy use, and the allowance for appliance I | the projection of average electric heating energy use, and the allowance for appliance I | ||
~l l | ~l l | ||
| Line 1,105: | Line 1,051: | ||
,* e' D . P . tt . 1973P, 19743, 2nn55, 20104 A77 Page PS efficiency standards. | ,* e' D . P . tt . 1973P, 19743, 2nn55, 20104 A77 Page PS efficiency standards. | ||
Mr. Chernick asserts that Fitchburg's g rowth in base use for 1979 (use by existing residential customers) is incorrectly | Mr. Chernick asserts that Fitchburg's g rowth in base use for 1979 (use by existing residential customers) is incorrectly u | ||
f calculated. Fi tenb u rg details tne metnodology used for tne growth calculation which is applied to the entire forecast period in Fxhibit FGE-P, Schedule 2. Fx hi bi t AG-201, IR-41 44/ | |||
estimates KWH sales to existing customers for 1979. Tne methodology employed in Exhibit AG-201, IR-4 wnich is used to c alcula te " actual | estimates KWH sales to existing customers for 1979. Tne methodology employed in Exhibit AG-201, IR-4 wnich is used to c alcula te " actual | ||
; growth in WWF sales to existing customers for 1979" differs substantially from the metnodology l in Exhibit PGE-8, Schedule 7, used to calculate i forecasted growth in residential ba se use for the forecast period. The methodologies in both exhibits project growth of approximately 1 l | ; growth in WWF sales to existing customers for 1979" differs substantially from the metnodology l in Exhibit PGE-8, Schedule 7, used to calculate i forecasted growth in residential ba se use for the forecast period. The methodologies in both exhibits project growth of approximately 1 l | ||
| Line 1,128: | Line 1,073: | ||
Fi tc hb u rg then multiplies this value by 12/5 to I | Fi tc hb u rg then multiplies this value by 12/5 to I | ||
arrive at a yearly consumption of 1,ne7,192 KWH. | arrive at a yearly consumption of 1,ne7,192 KWH. | ||
Mr. Chernick claims that the appropriate custonar number to apply to the five | Mr. Chernick claims that the appropriate custonar number to apply to the five month period KFF data employed by Fi tc hb u rg is j the number of new customers added between the a | ||
month period KFF data employed by Fi tc hb u rg is j the number of new customers added between the a | |||
! two periods, not t ho se added in the 1979 period alone (Fxh. AG-237, p. 39). Using an average i value of 204.5 new customers, Mr. Chernick | ! two periods, not t ho se added in the 1979 period alone (Fxh. AG-237, p. 39). Using an average i value of 204.5 new customers, Mr. Chernick | ||
; derives annual growth of 273,192 FWH for l | ; derives annual growth of 273,192 FWH for l | ||
e x i s t i ng customers. | e x i s t i ng customers. | ||
b (11) (1000) (h)=18,333 KWH EI Jan.-May 1979 37,512,842 KWH Jan.-May 1978 37,058,197 454,663 | b (11) (1000) (h)=18,333 KWH EI Jan.-May 1979 37,512,842 KWH Jan.-May 1978 37,058,197 454,663 | ||
-la,333 436,330 KWH | -la,333 436,330 KWH | ||
| Line 1,145: | Line 1,087: | ||
: l. Exhibit FGE-8, Schedule 2, growtn in consumption i due to existing customers totals 912,000 KWH fo r 1979. We prefer to use actual rather than estimated data when possible, and accept these ; | : l. Exhibit FGE-8, Schedule 2, growtn in consumption i due to existing customers totals 912,000 KWH fo r 1979. We prefer to use actual rather than estimated data when possible, and accept these ; | ||
figures for 1970 This produces a 1975-1979 average yearly growth in consumption by existing customers of 999,000 KWH by Mr. Garlick's estimate (Tr. 34, p. ad). | figures for 1970 This produces a 1975-1979 average yearly growth in consumption by existing customers of 999,000 KWH by Mr. Garlick's estimate (Tr. 34, p. ad). | ||
We find the method of calculating | We find the method of calculating growth in base use by existing customers during tne forecast period as presented in Fxhibit FGF-9, Schedule 2, tc be reasonable. It enables one to use a longer time span to smooth out the irregularities exhibited by Fi tc hbu rg 's volatile customer growth data (a methodological | ||
growth in base use by existing customers during tne forecast period as presented in Fxhibit FGF-9, Schedule 2, tc be reasonable. It enables one to use a longer time span to smooth out the irregularities exhibited by Fi tc hbu rg 's volatile customer growth data (a methodological | |||
. , , , , , -, ,- - - , ,, .-..,c. ~+ ,n -.n- - - - , , - - - - - - . , - - . - - - , - - - - . - - - , , . | . , , , , , -, ,- - - , ,, .-..,c. ~+ ,n -.n- - - - , , - - - - - - . , - - . - - - , - - - - . - - - , , . | ||
+ | + | ||
I D.P.U. 1973P, 19723, 20055, 20100 &72 Page PR l characteristic Mr. Chernick noted as desirable 47/ (Tr. 42, op. 30-311). | I D.P.U. 1973P, 19723, 20055, 20100 &72 Page PR l characteristic Mr. Chernick noted as desirable 47/ (Tr. 42, op. 30-311). | ||
In accepting the period 1975-1978 as relevant for our calculation, we do not accept Mr. Chernick's argument that post-1976 | In accepting the period 1975-1978 as relevant for our calculation, we do not accept Mr. Chernick's argument that post-1976 da ta is most relevant for the ba se u se growth calculation (Exh. AG-232, p. 43). We acknowledge that the calculation's sensitivity to starting year is not marginal (Exh. AG-237, | ||
da ta is most relevant for the ba se u se growth calculation (Exh. AG-232, p. 43). We | |||
acknowledge that the calculation's sensitivity to starting year is not marginal (Exh. AG-237, | |||
: p. 43), but conclude that 1975 is the appropriate year in which to start. We include 1975 d a ta specifically to smooth oat data | : p. 43), but conclude that 1975 is the appropriate year in which to start. We include 1975 d a ta specifically to smooth oat data | ||
: fluctuations. | : fluctuations. | ||
| Line 1,172: | Line 1,108: | ||
i t | i t | ||
i i | i i | ||
19738, 19743, 200%5, 20109 &77 Page P9 | 19738, 19743, 200%5, 20109 &77 Page P9 D.P.U. | ||
D.P.U. | |||
1 increasingly colder. The witness interprets the l | 1 increasingly colder. The witness interprets the l | ||
relatively constant heating use over this period, | relatively constant heating use over this period, | ||
| Line 1,211: | Line 1,145: | ||
. . . . , o--. - | . . . . , o--. - | ||
D.P.U. 1973P, 10743, 2nn55, 20109 &72 Page 91 1 | D.P.U. 1973P, 10743, 2nn55, 20109 &72 Page 91 1 | ||
i ne a t i ng u se ' in t he f a ce of colder weather is tne result of physical conservation, higher electricity bills, sensitivity of he a ti ng use to 1 | i ne a t i ng u se ' in t he f a ce of colder weather is tne result of physical conservation, higher electricity bills, sensitivity of he a ti ng use to 1 | ||
l HDD, sensitivity to weather' patterns, a 1 | l HDD, sensitivity to weather' patterns, a 1 | ||
reduction in no n-he a t i ng use consurption, or a combination of these factors. What we do know is that total consumption has remained | reduction in no n-he a t i ng use consurption, or a combination of these factors. What we do know is that total consumption has remained relatively constant. | ||
relatively constant. | |||
Mr. Chernick assumes that the | Mr. Chernick assumes that the | ||
; sudden decline in this ratio of average heating use to HDD is due to conservation, and that tne j | ; sudden decline in this ratio of average heating use to HDD is due to conservation, and that tne j | ||
1975-1978 trend will continue through 19P9 Ve i are neither willing to assume that a sirple tire trend regression analysis using d a ta as problematical as this can adequately nodel 4 future consumption trends, nor a re we wi ll i ng to assume that one can confidently attribute the t , | 1975-1978 trend will continue through 19P9 Ve i are neither willing to assume that a sirple tire trend regression analysis using d a ta as problematical as this can adequately nodel 4 future consumption trends, nor a re we wi ll i ng to assume that one can confidently attribute the t , | ||
precipitous decline in " Heating Use Pe r HDD" to conservation alone. We are thus unwilling to a cce pt Mr. Cherntek's results in place of Fitchburg's, and,'after review of the record, we . | precipitous decline in " Heating Use Pe r HDD" to conservation alone. We are thus unwilling to a cce pt Mr. Cherntek's results in place of Fitchburg's, and,'after review of the record, we . | ||
find Fitenburg's deternination regarding constant consumption per heating custoner over l | find Fitenburg's deternination regarding constant consumption per heating custoner over l | ||
l l-i l | l l-i l | ||
| Line 1,240: | Line 1,170: | ||
Mr. Chernick, however, asserts that Fitenburg neglects to include in its calculation the reduction in consumption f | Mr. Chernick, however, asserts that Fitenburg neglects to include in its calculation the reduction in consumption f | ||
attributable to the replacement of worn-out appliances witn more efficient appliances (Fxh. | attributable to the replacement of worn-out appliances witn more efficient appliances (Fxh. | ||
AG-232, p. 45). Mr. Chernick estimates a 4.P GWH reduction in refrigerator usage'alone due to 42 percent more efficient replacements in the refrigerator stock starting i n 1981. As noted | AG-232, p. 45). Mr. Chernick estimates a 4.P GWH reduction in refrigerator usage'alone due to 42 percent more efficient replacements in the refrigerator stock starting i n 1981. As noted i | ||
i | |||
. ._ . - . , - .-c. ., , r- ,,,-y-r ,-- -m ~ - . -n . - . - , , ,, . , , , _ ,--+---w --,-e~>- -,v. .--w, | . ._ . - . , - .-c. ., , r- ,,,-y-r ,-- -m ~ - . -n . - . - , , ,, . , , , _ ,--+---w --,-e~>- -,v. .--w, | ||
| Line 1,290: | Line 1,218: | ||
l i | l i | ||
~ | ~ | ||
D.P.U. 1973P, 19743, 20055, 70109 &72 Page 95 | D.P.U. 1973P, 19743, 20055, 70109 &72 Page 95 i, | ||
Fi te nbu rg territory.may consume approximately 20.25 4 | |||
i, Fi te nbu rg territory.may consume approximately 20.25 4 | |||
percent of total residential consumption. Even f | percent of total residential consumption. Even f | ||
without specific da ta on penetration, saturation i | without specific da ta on penetration, saturation i | ||
' and replacement rates, we are confident that 1 | ' and replacement rates, we are confident that 1 | ||
| Line 1,325: | Line 1,251: | ||
industrial park customers of P.76 GWH yearly. | industrial park customers of P.76 GWH yearly. | ||
Tne "Other Srall New" customer category is i | Tne "Other Srall New" customer category is i | ||
estimated to i nc r e a se consumption at the rate of 2 GWH per year (Exh. FGF-5, p. 10). The yearly increase in "Fxisting Customer" consumption is | estimated to i nc r e a se consumption at the rate of 2 GWH per year (Exh. FGF-5, p. 10). The yearly increase in "Fxisting Customer" consumption is | ||
; increased 3 GWH in 1979 to reflect known 4 | ; increased 3 GWH in 1979 to reflect known 4 | ||
| Line 1,335: | Line 1,260: | ||
.- - . . - . __ - -- = . ... . _ - . . --. . - . . . . - . - . . | .- - . . - . __ - -- = . ... . _ - . . --. . - . . . . - . - . . | ||
o | o D.P.U. 14739, 19741, 20055, 20100 &72 Page 07 i | ||
D.P.U. 14739, 19741, 20055, 20100 &72 Page 07 i | |||
t 4 | t 4 | ||
presents historical da ta on to t al industrial , | presents historical da ta on to t al industrial , | ||
| Line 1,348: | Line 1,271: | ||
l year (Exn. FGE-10, p. 1 of ?) , a value l considerably greater tnan the average historica! | l year (Exn. FGE-10, p. 1 of ?) , a value l considerably greater tnan the average historica! | ||
growth in Exhibit FGF-10, p. 2 of 2. Ve - nav e 1 | growth in Exhibit FGF-10, p. 2 of 2. Ve - nav e 1 | ||
difficulty interpreting tnis historical ' | difficulty interpreting tnis historical ' | ||
information for. purposes of growth e x t r a pola t ion j into the future, especially in light of Mr. | information for. purposes of growth e x t r a pola t ion j into the future, especially in light of Mr. | ||
I Garlick's statement that he does not expect i | I Garlick's statement that he does not expect i | ||
| Line 1,370: | Line 1,291: | ||
i whien we can reasonably rely in' order to utilize I | i whien we can reasonably rely in' order to utilize I | ||
the historical average growth as an | the historical average growth as an | ||
.i approximation of yearly growtn over tne forecast period. Consecuently, we will look to the reasonableness of the various components of | .i approximation of yearly growtn over tne forecast period. Consecuently, we will look to the reasonableness of the various components of Fitenburg's industrial growth, and tneir relation to total growth, in order to assess i this portion of the forecast. | ||
Fitenburg's industrial growth, and tneir relation to total growth, in order to assess i this portion of the forecast. | |||
Fr. Chernick levels the general l criticism against Fitenburg's industrial | Fr. Chernick levels the general l criticism against Fitenburg's industrial | ||
, forecast enat the subjective derivation of tnose i . | , forecast enat the subjective derivation of tnose i . | ||
| Line 1,378: | Line 1,297: | ||
; i growth (industrial parks and otner small new I i | ; i growth (industrial parks and otner small new I i | ||
j c u s tore r s) is i ncommensu ra te with the importance j of these contributions to the industrial l forecast (Exh. AG-232, pp. d4-47). Specifically, | j c u s tore r s) is i ncommensu ra te with the importance j of these contributions to the industrial l forecast (Exh. AG-232, pp. d4-47). Specifically, | ||
! F r .- Chernick charges that Fitchburg relied on | ! F r .- Chernick charges that Fitchburg relied on | ||
} | } | ||
| Line 1,397: | Line 1,315: | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 100 I | D.P.U. 19738, 19743, 20055, 20109 &72 Page 100 I | ||
testimony to include one additional industrial park for a total of 41 lots as currently subdivided (Tr. 29, pp. 4-5). As we find no , | testimony to include one additional industrial park for a total of 41 lots as currently subdivided (Tr. 29, pp. 4-5). As we find no , | ||
r | r i evidence in the record which controverts Mr. | ||
i evidence in the record which controverts Mr. | |||
1 Garlick's revised te?timony, we acce pt the se | 1 Garlick's revised te?timony, we acce pt the se | ||
; figures. Furthermore, we note that the lots 1 | ; figures. Furthermore, we note that the lots 1 | ||
| Line 1,418: | Line 1,334: | ||
historical industrial growth does not inform us as to the likely rate of. industrial park occupancy or size of occupant. Indeed, we see no reasonable way to rely on this aggregate historical information in assessing industrial park growth. | historical industrial growth does not inform us as to the likely rate of. industrial park occupancy or size of occupant. Indeed, we see no reasonable way to rely on this aggregate historical information in assessing industrial park growth. | ||
We do not find sufficient evidence in the record to support as reasonable | We do not find sufficient evidence in the record to support as reasonable | ||
. , _ _.. m . _ . _ _ ._. _ . _ _ _ _ _ _ _ _ . . _ . .- _ _ . _ . _ . _ _ __ . _ . | . , _ _.. m . _ . _ _ ._. _ . _ _ _ _ _ _ _ _ . . _ . .- _ _ . _ . _ . _ _ __ . _ . | ||
| Line 1,424: | Line 1,339: | ||
) | ) | ||
i 4 | i 4 | ||
Mr. Garlick's assumption that industrial parks within Fitchburg's electric service territory l | Mr. Garlick's assumption that industrial parks within Fitchburg's electric service territory l | ||
will add four 500 KW. customers per year to i < | will add four 500 KW. customers per year to i < | ||
| Line 1,435: | Line 1,349: | ||
l Fitchburg has projected for this industrial cate-i i | l Fitchburg has projected for this industrial cate-i i | ||
gory. Likewise, we accept Fitchburg's forecast of a constant base throughout the forecast period. | gory. Likewise, we accept Fitchburg's forecast of a constant base throughout the forecast period. | ||
; Mr. Chernick criticizes | ; Mr. Chernick criticizes | ||
! Fitchburg's lack of substantiation for its "Other Small New" industrial growth of 2 GWH pe r year. | ! Fitchburg's lack of substantiation for its "Other Small New" industrial growth of 2 GWH pe r year. | ||
| Line 1,462: | Line 1,375: | ||
l *. . .; | l *. . .; | ||
D . P . t! . 1973e, 19743, 20055, 20109 &72 Page 104 t | D . P . t! . 1973e, 19743, 20055, 20109 &72 Page 104 t | ||
19PO (Tr. 2P, p. 114), a fact which disturbs us. | 19PO (Tr. 2P, p. 114), a fact which disturbs us. | ||
| Line 1,515: | Line 1,427: | ||
.h | .h | ||
.* .= l | .* .= l D.P.U. 1973P,'19743, 20055, 20109 &72 Page 107 j | ||
D.P.U. 1973P,'19743, 20055, 20109 &72 Page 107 j | |||
4 Fitchburg's_ Peak _ Demand Fitchburg's peak d e m a nd forecast is derived from its energy forecast. Load factors consistent with customer consumption patterns at system peak are applied to each class' yearly energy forecast to derive a peak load forecast for the Company (Exh. FGE-5, p. 11; Exn. FGE-7, pp. 5-6; Exh. FGE-11, Sch. 1-5). | 4 Fitchburg's_ Peak _ Demand Fitchburg's peak d e m a nd forecast is derived from its energy forecast. Load factors consistent with customer consumption patterns at system peak are applied to each class' yearly energy forecast to derive a peak load forecast for the Company (Exh. FGE-5, p. 11; Exn. FGE-7, pp. 5-6; Exh. FGE-11, Sch. 1-5). | ||
Besidential customer load curve information was taken from a 1973 transmission study performed | Besidential customer load curve information was taken from a 1973 transmission study performed | ||
| Line 1,527: | Line 1,437: | ||
, commercial g rowth 'is a l so derived from the | , commercial g rowth 'is a l so derived from the | ||
, United Engineers'' study (Exb. FGE-7, p. 5-b), as well.as from customer specific analysis (Tr. 24, PP. 11, le). Similarly, the additional contribution to peak attributable to the | , United Engineers'' study (Exb. FGE-7, p. 5-b), as well.as from customer specific analysis (Tr. 24, PP. 11, le). Similarly, the additional contribution to peak attributable to the | ||
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 108 | D.P.U. 1973P, 19743, 20055, 20109 &72 Page 108 industrial class is calculated u s i ng customer specific analysis and load information derived | ||
industrial class is calculated u s i ng customer specific analysis and load information derived | |||
! from the United Engineers' study (Exh. FGE-7, p. | ! from the United Engineers' study (Exh. FGE-7, p. | ||
5-c; Exh. AG-200, IR-14; Tr. 29, pp. 13-21). | 5-c; Exh. AG-200, IR-14; Tr. 29, pp. 13-21). | ||
| Line 1,541: | Line 1,448: | ||
\ | \ | ||
: H l | : H l | ||
l | l | ||
--- - - -_ D | --- - - -_ D | ||
| Line 1,623: | Line 1,529: | ||
of our estimated maximum non-coincident demand ' | of our estimated maximum non-coincident demand ' | ||
attributable to the industrial parks. , | attributable to the industrial parks. , | ||
__________________________ - - - . _______ = 5, | __________________________ - - - . _______ = 5, r | ||
"The estimated four industrial customers H; | |||
--57/ j s 500 "W per customer. | --57/ j s 500 "W per customer. | ||
, The figure here in column 5, line 31 of Exh. AG-201, IR-14a, Sheet 3 of 3 for the 500 in reality should have been 2,000. So this is understated" (Tr. 20, p. 15). , | , The figure here in column 5, line 31 of Exh. AG-201, IR-14a, Sheet 3 of 3 for the 500 in reality should have been 2,000. So this is understated" (Tr. 20, p. 15). , | ||
| Line 1,679: | Line 1,584: | ||
l l | l l | ||
D . P . tl . 19738, 19743, 20055, 20109 &72 Page 120 proceedings,_the Company has indicated that the contract can probably be extended another five years, and-consequently, has included this power in its revised exhibits. We have no reasor. to believe, however, that the contract can be extended beyond 1991/1992 and find it imprudent | D . P . tl . 19738, 19743, 20055, 20109 &72 Page 120 proceedings,_the Company has indicated that the contract can probably be extended another five years, and-consequently, has included this power in its revised exhibits. We have no reasor. to believe, however, that the contract can be extended beyond 1991/1992 and find it imprudent to believe so for planning purposes. | ||
to believe so for planning purposes. | |||
As a result of this loss of contract capacity, Fitchburg's reserve margin in 1991-1992 will be 5.1 percent if we assume no growtn in peak for those three years a nd include the proposed 16 MW of Seabrook in the company's generation mix. If we were to further assume an additional 10 MW from the conversion of Unit 7 . | As a result of this loss of contract capacity, Fitchburg's reserve margin in 1991-1992 will be 5.1 percent if we assume no growtn in peak for those three years a nd include the proposed 16 MW of Seabrook in the company's generation mix. If we were to further assume an additional 10 MW from the conversion of Unit 7 . | ||
to combined cycle operation, Fi tchbu rg would have a reserve margin of 15.4 percent. Based upon our findings, we conclude that Fitchburg has thus demonstrated an intermediate to long-term need for additional ca pa ci ty e q u a l i ng at least 16 MW. | to combined cycle operation, Fi tchbu rg would have a reserve margin of 15.4 percent. Based upon our findings, we conclude that Fitchburg has thus demonstrated an intermediate to long-term need for additional ca pa ci ty e q u a l i ng at least 16 MW. | ||
| Line 1,820: | Line 1,723: | ||
* MICROCOPY RESOLUTION TEST CHART a | * MICROCOPY RESOLUTION TEST CHART a | ||
[t de 44 <$ xxxxA cg | [t de 44 <$ xxxxA cg | ||
+ | + | ||
em v %'//,w,) _ . . _ | em v %'//,w,) _ . . _ | ||
| Line 1,851: | Line 1,753: | ||
NP-19). These figures were used in a Draft Water Qu al i ty Report published by SRPEDD in 1977 (see Exh. NB-27). The Final Water Quality Report as published in 1978 and containetl new, | NP-19). These figures were used in a Draft Water Qu al i ty Report published by SRPEDD in 1977 (see Exh. NB-27). The Final Water Quality Report as published in 1978 and containetl new, | ||
l | l Page 136 D.P.U. 1973P, 19743, 20055, 70109 &72 higher population figurcs for Dartmouth cnd the Mr. Fox City of Ne w Bedford (see Exh. Nf3 - 7 3 ) . | ||
Page 136 D.P.U. 1973P, 19743, 20055, 70109 &72 higher population figurcs for Dartmouth cnd the Mr. Fox City of Ne w Bedford (see Exh. Nf3 - 7 3 ) . | |||
claims that NEGEA personnel obtained these revised population estimates fo r the municipaliti3s and incorporated them into Schedules 7-1, 7-2 and 7-3 of Ex h i b i t AG-23P, NEGEA's " population consistency check." | claims that NEGEA personnel obtained these revised population estimates fo r the municipaliti3s and incorporated them into Schedules 7-1, 7-2 and 7-3 of Ex h i b i t AG-23P, NEGEA's " population consistency check." | ||
After careful ,eview of the evidence, we find Mr. Fox's explanation of the population discrepancy fo r the City of New However, ve Bedford and Dartmouth satisfactory. | After careful ,eview of the evidence, we find Mr. Fox's explanation of the population discrepancy fo r the City of New However, ve Bedford and Dartmouth satisfactory. | ||
agree with Ms. neller that the implied new-population increases r e s u l t i ng from N EG EA 's Customer forecast are more informative about the consistency of NEGEA's results with SRPEDD population forecasts than are comparisons of population totals. We have examined the record with respect to this issue and find that the figures in Schedule C of Mr. Fox's rebuttal thstimony, Exhibit NB-29, are the most a ppro pr ia te figures to use for ev al u a t i ng population increases. We note that Mr. Fox has revised the population estimates for Duxbury and | agree with Ms. neller that the implied new-population increases r e s u l t i ng from N EG EA 's Customer forecast are more informative about the consistency of NEGEA's results with SRPEDD population forecasts than are comparisons of population totals. We have examined the record with respect to this issue and find that the figures in Schedule C of Mr. Fox's rebuttal thstimony, Exhibit NB-29, are the most a ppro pr ia te figures to use for ev al u a t i ng population increases. We note that Mr. Fox has revised the population estimates for Duxbury and | ||
19738, 19743, 2d055, 20109 &72 Page 137 D.P.U. | 19738, 19743, 2d055, 20109 &72 Page 137 D.P.U. | ||
| Line 1,927: | Line 1,826: | ||
! a nd consequently, new he a t i ng customers' forecasted use is targeted too high. | ! a nd consequently, new he a t i ng customers' forecasted use is targeted too high. | ||
We have reviewed the evidence l | We have reviewed the evidence l | ||
I l | I l | ||
l i | l i | ||
| Line 1,949: | Line 1,847: | ||
New Bed f o rd division. | New Bed f o rd division. | ||
S! 5,175 line 15, Exh. NB-8, Sch. F3, p.1 14,825 line 17, Exh. NB-8, Sch. F3, p.2 4,050 line 30, Exh. NB-8, Sch. F3, p.3 24,050 b! 5,150 line 15, Exh. NB-8, Sch. F3, p.13 14,850 line 17, Exh. NB-8, Sch. F3, p.14 4,300 line 30, Exh. NB-8, Sch. F3, p.15 24,300 E/ 4,120 line 15, Exh. NB-8, Sch. F3, p.25 13,880 line 17, Exh. NB-8, Sch. F3, p.26 4,750 line 30, Exh. NB-8, Sch. F3, p.27 22, .3 i | S! 5,175 line 15, Exh. NB-8, Sch. F3, p.1 14,825 line 17, Exh. NB-8, Sch. F3, p.2 4,050 line 30, Exh. NB-8, Sch. F3, p.3 24,050 b! 5,150 line 15, Exh. NB-8, Sch. F3, p.13 14,850 line 17, Exh. NB-8, Sch. F3, p.14 4,300 line 30, Exh. NB-8, Sch. F3, p.15 24,300 E/ 4,120 line 15, Exh. NB-8, Sch. F3, p.25 13,880 line 17, Exh. NB-8, Sch. F3, p.26 4,750 line 30, Exh. NB-8, Sch. F3, p.27 22, .3 i | ||
l l | l l | ||
| Line 1,964: | Line 1,861: | ||
6A/ (5929 HDP) (1. 6 3 2 RWE7hDD7Cust. ) . Sii line 19, Exn. NB-8, Sch. F3, p. 2. | 6A/ (5929 HDP) (1. 6 3 2 RWE7hDD7Cust. ) . Sii line 19, Exn. NB-8, Sch. F3, p. 2. | ||
69/ (5764 HDD) ( 2.18 9 KWH/HDD/Cust.). See line 19, Exh. NR-8, Sch. F3, p. 14 70/ (5305 H DD) ( 1. 7 0 4 MWH/HDD/Cust.). See line 19, Exh. NB-8, Sch. F 3, p. 26. | 69/ (5764 HDD) ( 2.18 9 KWH/HDD/Cust.). See line 19, Exh. NR-8, Sch. F3, p. 14 70/ (5305 H DD) ( 1. 7 0 4 MWH/HDD/Cust.). See line 19, Exh. NB-8, Sch. F 3, p. 26. | ||
l l | l l | ||
: i. .. .. | : i. .. .. | ||
Page 149 D.P.U. 19738, 19743, 20055, 20109 &72 | Page 149 D.P.U. 19738, 19743, 20055, 20109 &72 | ||
: e. Seasonal _ Customers NEGEA includes u se attributable to seasonal customers in the "All Other Residential Classes" category (Exh. AG-197, IR-15, 16,17). NEGEA assumes this class will increase consumption at the base load ra te of growth (Exh. | : e. Seasonal _ Customers NEGEA includes u se attributable to seasonal customers in the "All Other Residential Classes" category (Exh. AG-197, IR-15, 16,17). NEGEA assumes this class will increase consumption at the base load ra te of growth (Exh. | ||
| Line 2,009: | Line 1,904: | ||
* 19738, 197A3, 20055, 20109 &72 Page 154 D.P.U. | * 19738, 197A3, 20055, 20109 &72 Page 154 D.P.U. | ||
We concur with Dr. Stutz and Ms. | We concur with Dr. Stutz and Ms. | ||
Geller that the evidence presented by'NEGEA | Geller that the evidence presented by'NEGEA tells us n o t h i ng about any u nd e rl yi ng causal relationship or about the existence of any " natural" relationship. We conclude the re is insufficient analysis of commercial growth by NEGEA to rely on its conclusions with an acceptable level of confidence. Nor, as previously explained r eg a r d i ng the residential sector, can we accept Dr. Stutz's adjustment to the commercial class based on LILCO data. We agree with Ms. Geller that NEGEA's ratio analysis (see Exh. NB-8, Sch. | ||
tells us n o t h i ng about any u nd e rl yi ng causal relationship or about the existence of any " natural" relationship. We conclude the re is insufficient analysis of commercial growth by NEGEA to rely on its conclusions with an acceptable level of confidence. Nor, as previously explained r eg a r d i ng the residential sector, can we accept Dr. Stutz's adjustment to the commercial class based on LILCO data. We agree with Ms. Geller that NEGEA's ratio analysis (see Exh. NB-8, Sch. | |||
F3, p. 44) is inadequate, and rely on her analysis of Plymouth and New Bed fo rd ratios for , | F3, p. 44) is inadequate, and rely on her analysis of Plymouth and New Bed fo rd ratios for , | ||
this conclusion (Exh. AG-237, pp. 31-32). Her graphic analysis (Exh. AG-237, pp. 33-34) as well as that presented by NEGEA (Exh. NB-76) leads us to acknowledge a downward change in the rate of g rowth of consumption since approximately 1973 for both the residential and commercial classes for all three New Bedford Company divisions (see Exh. AG-237, pp. 33-34; i | this conclusion (Exh. AG-237, pp. 31-32). Her graphic analysis (Exh. AG-237, pp. 33-34) as well as that presented by NEGEA (Exh. NB-76) leads us to acknowledge a downward change in the rate of g rowth of consumption since approximately 1973 for both the residential and commercial classes for all three New Bedford Company divisions (see Exh. AG-237, pp. 33-34; i | ||
| Line 2,100: | Line 1,993: | ||
i d ue to the pa uc i ty of d a ta for t he se sectors and the lack of any estimate regarding them by Ne w Bedford. | i d ue to the pa uc i ty of d a ta for t he se sectors and the lack of any estimate regarding them by Ne w Bedford. | ||
7 Peak Lo a d _ Fo r e c a s t NEGEA develops its peak load forecast by a ppl yi ng historical l o ad f acto rs to the energy requirements of the New Bedford divisions and the Cambridge division (Exh. NB-8, pp. 18-20). The Cape and Plymouth divisions, which are primarily residential, have load 4 | 7 Peak Lo a d _ Fo r e c a s t NEGEA develops its peak load forecast by a ppl yi ng historical l o ad f acto rs to the energy requirements of the New Bedford divisions and the Cambridge division (Exh. NB-8, pp. 18-20). The Cape and Plymouth divisions, which are primarily residential, have load 4 | ||
factors historically 2 to 3 percent below that of the more industrially intense New Bedford division (Exh. NB-8, p. 19). NEGEA does not expect these division characteristics to change | factors historically 2 to 3 percent below that of the more industrially intense New Bedford division (Exh. NB-8, p. 19). NEGEA does not expect these division characteristics to change over the forecast period, and thus anticipates , | ||
over the forecast period, and thus anticipates , | |||
that their respective load f acto rs will continue in the same relationship (Exh. NB-8, p' . 20). | that their respective load f acto rs will continue in the same relationship (Exh. NB-8, p' . 20). | ||
Because NEGEA anticipates faster growth in the low load factor Ca pe and Plymouth divisions than in the high load factor New Bedford division, absent any offsetting influences, NEGFA would expect New Bedford's f | Because NEGEA anticipates faster growth in the low load factor Ca pe and Plymouth divisions than in the high load factor New Bedford division, absent any offsetting influences, NEGFA would expect New Bedford's f | ||
| Line 2,126: | Line 2,017: | ||
i D.P.G. ??738, 19743, 20055 20109 &72 Page 167 4 | i D.P.G. ??738, 19743, 20055 20109 &72 Page 167 4 | ||
companies is based on the sum of the peak loads | companies is based on the sum of the peak loads of the individual companies multiplied by a diversity factor (Exh. NP-8, p. 21). The diversity factor a ppli ed is 90 percent of the Cambridge peak added to 100 percent of the New Bedford peak (Exh. NB-8, p. 22; Exh. NB-8, Sch. | ||
of the individual companies multiplied by a diversity factor (Exh. NP-8, p. 21). The diversity factor a ppli ed is 90 percent of the Cambridge peak added to 100 percent of the New Bedford peak (Exh. NB-8, p. 22; Exh. NB-8, Sch. | |||
F3, p. 4 3) . Our review of Schedule FS p. 43, f | F3, p. 4 3) . Our review of Schedule FS p. 43, f | ||
however, is at variance with NEGEA's ass'rtion i | however, is at variance with NEGEA's ass'rtion i | ||
| Line 2,174: | Line 2,063: | ||
w 3e e 2 | w 3e e 2 | ||
- f d* * *- | - f d* * *- | ||
Cl ==. e=. E. E. ==. .C cr N == | Cl ==. e=. E. E. ==. .C cr N == | ||
* O N C E | * O N C E | ||
| Line 2,579: | Line 2,467: | ||
,C. | ,C. | ||
1 k < - | 1 k < - | ||
N, e C <q w e .e | N, e C <q w e .e | ||
; e c, | ; e c, | ||
| Line 2,657: | Line 2,544: | ||
: s. M g~ - . e n g :.c = | : s. M g~ - . e n g :.c = | ||
g | g | ||
.ae (* e 1 | .ae (* e 1 | ||
m av b se N d. | m av b se N d. | ||
| Line 2,970: | Line 2,856: | ||
I It sidemtial With I'Irrtric thit 2la) AMitirmal etkr mmitive 1047 807 1211 1147 1451 1577 1(.91 1811 1941 *n57 ctw ryy-trw ctistrerers il An X 17a) tt41 | I It sidemtial With I'Irrtric thit 2la) AMitirmal etkr mmitive 1047 807 1211 1147 1451 1577 1(.91 1811 1941 *n57 ctw ryy-trw ctistrerers il An X 17a) tt41 | ||
[ | [ | ||
67438 66114 67R | 67438 66114 67R)) 69894 72119 74647 76502 7R492 Rf% 18 R2940 o | ||
i 22a) Total sales forecast - 8%18G clectric twaat ossttwrs b (ira + 19a e 20a + 2[a) 4 Crrn, th Rate 4 -1.67 2.26 1.07 1.21 1 42 2.49 2.6 2.7) 2.R% 2.95 y o | i 22a) Total sales forecast - 8%18G clectric twaat ossttwrs b (ira + 19a e 20a + 2[a) 4 Crrn, th Rate 4 -1.67 2.26 1.07 1.21 1 42 2.49 2.6 2.7) 2.R% 2.95 y o | ||
Ongun1 Crtseth 2.19% e o | Ongun1 Crtseth 2.19% e o | ||
| Line 2,989: | Line 2,875: | ||
, 4 | , 4 | ||
_1 _978 197_9 19R. O 190_1 1980 19R.I l'I.R.4 | _1 _978 197_9 19R. O 190_1 1980 19R.I l'I.R.4 | ||
. 1. 9R_5 19.R6 _19_ .R_7 19. .R_R | . 1. 9R_5 19.R6 _19_ .R_7 19. .R_R All Ot f r=s Mitirmtial Classr n | ||
All Ot f r=s Mitirmtial Classr n | |||
, r.rrwt h Rate == resirirmtial arwnul qstwth rate (%) | , r.rrwt h Rate == resirirmtial arwnul qstwth rate (%) | ||
4.27 4.34 4.28 4.17 4.04 1.94 1.85 .1.71 1.64 3.55 O | 4.27 4.34 4.28 4.17 4.04 1.94 1.85 .1.71 1.64 3.55 O | ||
| Line 3,027: | Line 2,911: | ||
(previous year 's custenners X 15al (MWil) e 6* | (previous year 's custenners X 15al (MWil) e 6* | ||
4 | 4 | ||
. i | . i f | ||
f | |||
. _ ..m_ m.__ _. .- _ _.m . .. _._, _ m _ . . . . _ . _ ._ _ - . . . _ _ _ _ _ _ _ _ . _ _ . . . . _ - .m_ _ . . , . . . . _ _ _ _ . | . _ ..m_ m.__ _. .- _ _.m . .. _._, _ m _ . . . . _ . _ ._ _ - . . . _ _ _ _ _ _ _ _ . _ _ . . . . _ - .m_ _ . . , . . . . _ _ _ _ . | ||
| Line 3,055: | Line 2,937: | ||
W s | W s | ||
o 1 | o 1 | ||
w. | w. | ||
| Line 3,145: | Line 3,026: | ||
U | U | ||
".O C | ".O C | ||
< G =D | < G =D Tbtcl fisrurut fievisn1 Formast Icontira nt) | ||
Tbtcl fisrurut fievisn1 Formast Icontira nt) | |||
W w | W w | ||
19AS l'#R6 19R7 19H8 g 19RI 19R2 19R1 1994 1978 1979 1980 4 br | 19AS l'#R6 19R7 19H8 g 19RI 19R2 19R1 1994 1978 1979 1980 4 br | ||
| Line 3,165: | Line 3,044: | ||
.- . _ . . - . . . ._ ~ _ . _ _ _ . _ .. _. _. _ _ . . _ _ _ _ _ . __ _.._ _ | .- . _ . . - . . . ._ ~ _ . _ _ _ . _ .. _. _. _ _ . . _ _ _ _ _ . __ _.._ _ | ||
y | y | ||
~ | ~ | ||
| Line 3,194: | Line 3,072: | ||
t F. E | t F. E | ||
- ~ | - ~ | ||
: r. F&~ K Q :* ~2 0 e; | : r. F&~ K Q :* ~2 0 e; y | ||
3 ; 2 1 - | |||
I h | I h | ||
* ^ y e E *% P i | * ^ y e E *% P i | ||
| Line 3,222: | Line 3,099: | ||
r - - | r - - | ||
= E! Ei ; e -% G 2*S e | = E! Ei ; e -% G 2*S e | ||
,I | ,I C | ||
e - c - - < | |||
~-{ | ~-{ | ||
f5 | f5 | ||
| Line 3,242: | Line 3,118: | ||
~ = | ~ = | ||
* e* , | * e* , | ||
FI E: | |||
E 23~ 5 85s$s 5 | E 23~ 5 85s$s 5 | ||
- e e e $. e- | - e e e $. e- | ||
| Line 3,251: | Line 3,126: | ||
* 0 1 | * 0 1 | ||
e e e -- | e e e -- | ||
p ~ ~e e o - e | p ~ ~e e o - e g :i. | ||
g :i. | |||
G! E- | G! E- | ||
* S3S$S : | * S3S$S : | ||
| Line 3,301: | Line 3,174: | ||
617 629 675 70R.4 744 7 8./ | 617 629 675 70R.4 744 7 8./ | ||
I coitihbien t demand 611 642.5 6%9.I 6R2 72 f. | I coitihbien t demand 611 642.5 6%9.I 6R2 72 f. | ||
dtt,wtli' Rate' E ~ 89 | dtt,wtli' Rate' E ~ 89 | ||
.- 2.24% i | .- 2.24% i | ||
| Line 3,307: | Line 3,179: | ||
l | l | ||
>s S 6 h ; | >s S 6 h ; | ||
D.P.U. 19738, 197A3, 20055, 20109 &72 Page 185 IV. ALTERNATIVES A. Introduction Petitioners assert that, given their d e mo n s t r a t ed need for future power, Seabrook is the least costly available alternative. They point to the inc*usion of conservation adjustments in their demand forecasts and a v a r i e ty of particular efforts to encourage consumer conservation. Pe ti tione r s a l so a rg ue that load management, by flattening their load curves, will increase rather than d ec rea se the need for base load capacity. With regard to particular generation technologies, petitioners limit their direct cases to the economic comparison of oil, coal, gas and nuclear fueled units. 74/ This limitation of alternatives is essentially based on petitioners' assertions that there are simply no other realistic alternatives. We will assess petitioners' and intervenors' claims concerning alternatives in the f ollo wi ng sections. | D.P.U. 19738, 197A3, 20055, 20109 &72 Page 185 IV. ALTERNATIVES A. Introduction Petitioners assert that, given their d e mo n s t r a t ed need for future power, Seabrook is the least costly available alternative. They point to the inc*usion of conservation adjustments in their demand forecasts and a v a r i e ty of particular efforts to encourage consumer conservation. Pe ti tione r s a l so a rg ue that load management, by flattening their load curves, will increase rather than d ec rea se the need for base load capacity. With regard to particular generation technologies, petitioners limit their direct cases to the economic comparison of oil, coal, gas and nuclear fueled units. 74/ This limitation of alternatives is essentially based on petitioners' assertions that there are simply no other realistic alternatives. We will assess petitioners' and intervenors' claims concerning alternatives in the f ollo wi ng sections. | ||
| Line 3,336: | Line 3,207: | ||
We fully expect such conservation and load management plans to result from the. | We fully expect such conservation and load management plans to result from the. | ||
a d m i n.i s t r a t i v e hearings required by D.P.U. 1P810 for every investor-owned Massachusetts utility. | a d m i n.i s t r a t i v e hearings required by D.P.U. 1P810 for every investor-owned Massachusetts utility. | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 190 We a re firmly committed to realizing all potential benefits from conservation er3 load management. 76/ Once such plans a re fully articulated 1]/ and we have more information with which to gauge consumer responses, we will consider plans for conservation and load management the equivalent of plans for additional capacity. 78/ | D.P.U. 19738, 19743, 20055, 20109 &72 Page 190 We a re firmly committed to realizing all potential benefits from conservation er3 load management. 76/ Once such plans a re fully articulated 1]/ and we have more information with which to gauge consumer responses, we will consider plans for conservation and load management the equivalent of plans for additional capacity. 78/ | ||
| Line 3,351: | Line 3,221: | ||
With particular reference to voltage control, the Attorney General suggests that it is a significant source of potential energy savings in terms of both cost and peak reduction. Petitioners c o n t e nd that the ! | With particular reference to voltage control, the Attorney General suggests that it is a significant source of potential energy savings in terms of both cost and peak reduction. Petitioners c o n t e nd that the ! | ||
implementation of voltage control would be too expensive, that present information about the ; | implementation of voltage control would be too expensive, that present information about the ; | ||
benefits of voltage control is inconclusive, and that their systems are not a ppro pr ia te candidates for voltage control. We ag ree that it represents a potential for e ne rgy seeings; the evidence before us is, however, simply insufficient to conclude that voltage control is an appropriate strategy Tar petitioners to pursue. Nevertheless, we urge pe ti tione rs to fully inform themselves about its applicability to their systems. | benefits of voltage control is inconclusive, and that their systems are not a ppro pr ia te candidates for voltage control. We ag ree that it represents a potential for e ne rgy seeings; the evidence before us is, however, simply insufficient to conclude that voltage control is an appropriate strategy Tar petitioners to pursue. Nevertheless, we urge pe ti tione rs to fully inform themselves about its applicability to their systems. | ||
l l | l l | ||
| Line 3,386: | Line 3,255: | ||
We do not, however, have this type of evidence i | We do not, however, have this type of evidence i | ||
before us. | before us. | ||
We view investment in independent | We view investment in independent power production as a competitive r e s po n se to utility rates over which petitioners exercise no con t r ol with respect to the decision to- i nve st . | ||
power production as a competitive r e s po n se to utility rates over which petitioners exercise no con t r ol with respect to the decision to- i nve st . | |||
If all investment of this type were solely for 5 -the internal needs of the producer, utility involvement with the producer would be limited to the provision of back-up service. | If all investment of this type were solely for 5 -the internal needs of the producer, utility involvement with the producer would be limited to the provision of back-up service. | ||
There are, however, a large number of possible situations where the | There are, however, a large number of possible situations where the | ||
| Line 3,484: | Line 3,351: | ||
I l | I l | ||
l I | l I | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 209 rather, it merely substitutes o ne fuel source 1 | D.P.U. 19738, 19743, 20055, 20109 &72 Page 209 rather, it merely substitutes o ne fuel source 1 | ||
for another. There are, however, several ways in which coal conversion could impact on the l least cost solution to each petitioner's optimum generating mix. Plant dispatch is ba s ed on continuous system minimization of variable costs over time subject to the plant ca pa c i ty factor, plant availability and system demand charactyristics. The variable costs are 1 | for another. There are, however, several ways in which coal conversion could impact on the l least cost solution to each petitioner's optimum generating mix. Plant dispatch is ba s ed on continuous system minimization of variable costs over time subject to the plant ca pa c i ty factor, plant availability and system demand charactyristics. The variable costs are 1 | ||
typically fuel and O&M expenses with fossil fuel costs occupying by far t he largest portion of total variable costs. To the extent coal is less expensive-than equivalent units of fuel oil, l | typically fuel and O&M expenses with fossil fuel costs occupying by far t he largest portion of total variable costs. To the extent coal is less expensive-than equivalent units of fuel oil, l | ||
l it is possible the conversion of existing oil-fired units to coal in combination with either the reactivation and renovation of oil-fired units or the reactivation, renovation and conversion to coal of oil-fired units could l | l it is possible the conversion of existing oil-fired units to coal in combination with either the reactivation and renovation of oil-fired units or the reactivation, renovation and conversion to coal of oil-fired units could l | ||
| Line 3,565: | Line 3,430: | ||
4 l | 4 l | ||
D.P.U. 19738, 19743, 20055, 20109 E72 Page 21P We reject Mr. Chernick's findings that rely on the Rand study fo r the following , | D.P.U. 19738, 19743, 20055, 20109 E72 Page 21P We reject Mr. Chernick's findings that rely on the Rand study fo r the following , | ||
reasons. First, the regression equation in the Rand study which Mr. Chernick used identifies time (i.e., date of construction permit issuance) as the chief variable to explain changes in real price per KW (1976 d oll a r s) of light water reactors (" LWR"). Economists are generally loa th to posit such a simplistic model for forecasting purposes, because it must be i m pl i c i tly assumed that a stable relationship l | reasons. First, the regression equation in the Rand study which Mr. Chernick used identifies time (i.e., date of construction permit issuance) as the chief variable to explain changes in real price per KW (1976 d oll a r s) of light water reactors (" LWR"). Economists are generally loa th to posit such a simplistic model for forecasting purposes, because it must be i m pl i c i tly assumed that a stable relationship l | ||
| Line 3,574: | Line 3,438: | ||
Second, we feel that the use cf the Rand study to estimate the final cost o-Seabrook is i na ppro pr i a te because the da ta are | Second, we feel that the use cf the Rand study to estimate the final cost o-Seabrook is i na ppro pr i a te because the da ta are | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 219 4 extremely stale. The thirty-nine plants which were analyzed in the Rand regression equation were granted construction permits between 1966 and 1971. In contrast, Seabrook's construction 4 | D.P.U. 19738, 19743, 20055, 20109 &72 Page 219 4 extremely stale. The thirty-nine plants which were analyzed in the Rand regression equation were granted construction permits between 1966 and 1971. In contrast, Seabrook's construction 4 | ||
permit was issued in mid-1977. In a forecast that uses time as an explanatory variable, the uncertainty of an e s ti ma te increases dramatically as the estimates go beyond the dates in the d a ta base. PSCO notes that the 95 percent confidence interval around Mr. | permit was issued in mid-1977. In a forecast that uses time as an explanatory variable, the uncertainty of an e s ti ma te increases dramatically as the estimates go beyond the dates in the d a ta base. PSCO notes that the 95 percent confidence interval around Mr. | ||
I Chernick's estimated cost of Seabrook is plus or I minus $1,000 per KU (PSCO initial brief at 19). | I Chernick's estimated cost of Seabrook is plus or I minus $1,000 per KU (PSCO initial brief at 19). | ||
Finally, we reject Mr. Chernick's analysis using the Rand study because we believe that the inflation rates which Mr. Chernick used to translate the costs of Seabrook, as stated in 1976 dollars, i n to final construction costs are without substantiation or merit. | Finally, we reject Mr. Chernick's analysis using the Rand study because we believe that the inflation rates which Mr. Chernick used to translate the costs of Seabrook, as stated in 1976 dollars, i n to final construction costs are without substantiation or merit. | ||
Mr. Chernick also analyzes historic cost increases associated with four New Eng l a nd nuclear units (Connecticut Yankee, Millstone I and II, Pilg ri m I) and concludes the | Mr. Chernick also analyzes historic cost increases associated with four New Eng l a nd nuclear units (Connecticut Yankee, Millstone I and II, Pilg ri m I) and concludes the l | ||
experience with these units demonstrates the j | |||
,. . ., - ~ - | ,. . ., - ~ - | ||
r | r | ||
| Line 3,591: | Line 3,453: | ||
! D.P.U. 19738, 19743, 20055, 20109 &72 Page 221 methodology PSCO used in deriving its i | ! D.P.U. 19738, 19743, 20055, 20109 &72 Page 221 methodology PSCO used in deriving its i | ||
construction cost estimates; nor did they inquire into the basis for PSCO's revisions of its cost estimates or PSCO's belief that its present estimates are reliable. Rather, as just | construction cost estimates; nor did they inquire into the basis for PSCO's revisions of its cost estimates or PSCO's belief that its present estimates are reliable. Rather, as just 1 | ||
noted, they utilized analyses based upon j | |||
reinterpretations of industry-wide economettic | reinterpretations of industry-wide economettic | ||
] studies and on coat histories of four New England nuclear units. We have found these analyses inadequate to support total project cost estimates of the magnitudes asserted. | ] studies and on coat histories of four New England nuclear units. We have found these analyses inadequate to support total project cost estimates of the magnitudes asserted. | ||
This is not to say that we necessarily c o n s'i d e r PSCO's March 1980 estimate to be the final cost figure. We have no doubt that the cost of the project will increase due to money market conditions, inflation and sc h ed u l i ng changes. We do, however, find PSCO's most current estimate reasonable fo r planning purposes. | This is not to say that we necessarily c o n s'i d e r PSCO's March 1980 estimate to be the final cost figure. We have no doubt that the cost of the project will increase due to money market conditions, inflation and sc h ed u l i ng changes. We do, however, find PSCO's most current estimate reasonable fo r planning purposes. | ||
Nevertheless, because of uncertainty concerning the project's completion dates, we will consider a range of total costs | Nevertheless, because of uncertainty concerning the project's completion dates, we will consider a range of total costs within which the final cost will most likely i | ||
within which the final cost will most likely i | |||
D.P.U. 19738, 19743, 20055, 20109 &72 Pa g e ??2 | D.P.U. 19738, 19743, 20055, 20109 &72 Pa g e ??2 fall. At one end of the spectrum is the March 1980 estimate of $3.42 billion, or a per KW cott of $1,487 At the other end is an amount of $4.28 e | ||
fall. At one end of the spectrum is the March 1980 estimate of $3.42 billion, or a per KW cott of $1,487 At the other end is an amount of $4.28 e | |||
billion, or $1,860 per KW, M/ which PSCO j estimates will be the total project cost should the in-service date of Unit II be delayed four years. 96/ | billion, or $1,860 per KW, M/ which PSCO j estimates will be the total project cost should the in-service date of Unit II be delayed four years. 96/ | ||
In concluding this section, we would note that the $880 million difference between the March 1980 estimate and the cost we will utilize as an upper limit was identified in a scock prospectus issued by PSCO (Exh. PSC-12, | In concluding this section, we would note that the $880 million difference between the March 1980 estimate and the cost we will utilize as an upper limit was identified in a scock prospectus issued by PSCO (Exh. PSC-12, | ||
| Line 3,616: | Line 3,473: | ||
: 2. Capacity _ Factors i - | : 2. Capacity _ Factors i - | ||
The average ca pa c i ty factor of a nuclear plant which can be expected once the unit comes on line is an o pe r a t i ng condition that has a direct bearing upon the cost of the 9_77 As oY the end of 1079 approximately P7 percent of the basic engineering design was complete; 95 percent of the equipment was on order (portions of this equipment, however, are subject to escalation clauses); 91 percent of the construction work was under contract; construction of Unit I and the facilities common | The average ca pa c i ty factor of a nuclear plant which can be expected once the unit comes on line is an o pe r a t i ng condition that has a direct bearing upon the cost of the 9_77 As oY the end of 1079 approximately P7 percent of the basic engineering design was complete; 95 percent of the equipment was on order (portions of this equipment, however, are subject to escalation clauses); 91 percent of the construction work was under contract; construction of Unit I and the facilities common | ||
, to both units was 31.1 percent complete; Unit II | , to both units was 31.1 percent complete; Unit II was 6.5 percent complete; and the whole project was 22.6 percent complete (Exh. PSC-10 at 2; Tr. | ||
was 6.5 percent complete; and the whole project was 22.6 percent complete (Exh. PSC-10 at 2; Tr. | |||
32, pp. 109-10). | 32, pp. 109-10). | ||
1 | 1 | ||
| Line 3,633: | Line 3,488: | ||
- D.P.U. 19738, 19743, 20055, 20109 &72 Page 225 i | - D.P.U. 19738, 19743, 20055, 20109 &72 Page 225 i | ||
operation. ,9,R / In light of this range of i variation, we must concur with the Attorney B | operation. ,9,R / In light of this range of i variation, we must concur with the Attorney B | ||
General's assertion that "some set of plants and | General's assertion that "some set of plants and | ||
| Line 3,653: | Line 3,507: | ||
19738, 19743, 20n55, 20109 &72 Page 227 D.P.U. | 19738, 19743, 20n55, 20109 &72 Page 227 D.P.U. | ||
l the re are four factors which would te nd to i | l the re are four factors which would te nd to i increase the Seabrook units' expected average capacity factors and one which would tend to decrease them. None of the Yankee units, however, exceeds P25 MW. Based on a 28-year life, Montaup's worst case assumptions imply an average lifetime c a pa c i ty factor of 59 percent, wnile New Bedford and Fitchburg utilize 69 percent. Petitioners support t he ir projections by pointing to the role of Yankee, and by utilizing a combination of modified PFCO projecions, NEPOOL data, historical data, and judgment. Of all the pe ti tione r s , Montaup conducted the most t't .ough examination of this issue. | ||
increase the Seabrook units' expected average capacity factors and one which would tend to decrease them. None of the Yankee units, however, exceeds P25 MW. Based on a 28-year life, Montaup's worst case assumptions imply an average lifetime c a pa c i ty factor of 59 percent, wnile New Bedford and Fitchburg utilize 69 percent. Petitioners support t he ir projections by pointing to the role of Yankee, and by utilizing a combination of modified PFCO projecions, NEPOOL data, historical data, and judgment. Of all the pe ti tione r s , Montaup conducted the most t't .ough examination of this issue. | |||
The Attorney General criticizes pe ti tion e r s' choices of capacity factors and suggests that the results of three studies demon s t r a te the likelihood of average capacity factors for the Seabrook units to range between 55 and 65 percent. Our review of Mr. Chernick's testimony concerning the Ea s te rli ng study leads us to conclude that the re is simply insufficient | The Attorney General criticizes pe ti tion e r s' choices of capacity factors and suggests that the results of three studies demon s t r a te the likelihood of average capacity factors for the Seabrook units to range between 55 and 65 percent. Our review of Mr. Chernick's testimony concerning the Ea s te rli ng study leads us to conclude that the re is simply insufficient | ||
1 d | 1 d | ||
i D.P.U. 19738, 19743, 20055, 20109 &72 Page 229 i | i D.P.U. 19738, 19743, 20055, 20109 &72 Page 229 i | ||
d e ta il in the r e co rd about the reliability of the study to utilize its results. 1n0/ We do find that the Komanoff study ---101/ tends to 4 j | d e ta il in the r e co rd about the reliability of the study to utilize its results. 1n0/ We do find that the Komanoff study ---101/ tends to 4 j | ||
l suggest the existence of an inverse relationship j betweeen plant size and ca pa c i ty factor as well as direct r ela tion shi ps between age, vintage and , | l suggest the existence of an inverse relationship j betweeen plant size and ca pa c i ty factor as well as direct r ela tion shi ps between age, vintage and , | ||
| Line 3,692: | Line 3,543: | ||
5 i | 5 i | ||
i Page 230 D.P.U. 19738, 19743, 20055, 20109 &72 i | i Page 230 D.P.U. 19738, 19743, 20055, 20109 &72 i | ||
i | i | ||
: 3. Operation and Maintenance 1, | : 3. Operation and Maintenance 1, | ||
| Line 3,742: | Line 3,592: | ||
; additional statistics mentioned above are i necessary to assess the statistical significance of. the ex pla na to ry variable and to inform us of j the margin of error exhibited by the predicted | ; additional statistics mentioned above are i necessary to assess the statistical significance of. the ex pla na to ry variable and to inform us of j the margin of error exhibited by the predicted | ||
; dependent values. | ; dependent values. | ||
i | i i | ||
4 y , , _ , ,yn.m, _ _ r-. e . w . , - - , o- , - , , .my- y ,..w,--- , - - , - - - - - - * - - y- | |||
y , , _ , ,yn.m, _ _ r-. e . w . , - - , o- , - , , .my- y ,..w,--- , - - , - - - - - - * - - y- | |||
) | ) | ||
| Line 3,765: | Line 3,613: | ||
i k | i k | ||
I D.P.U. 19738, 19743, 20055, 20109 &72 Page 236 | I D.P.U. 19738, 19743, 20055, 20109 &72 Page 236 E. Hgrst_ _ _ Case _ Simulation _of , | ||
E. Hgrst_ _ _ Case _ Simulation _of , | |||
_A_l t e r n a t i v e s . | _A_l t e r n a t i v e s . | ||
j Petitioners have simulated the , | j Petitioners have simulated the , | ||
| Line 3,782: | Line 3,628: | ||
i i | i i | ||
I l | I l | ||
I | I i | ||
i | |||
.o . | .o . | ||
| Line 3,843: | Line 3,687: | ||
.. . . . . _ . _ - _ _ . , . , _ _ _ _ - ~ _ _ . . | .. . . . . _ . _ - _ _ . , . , _ _ _ _ - ~ _ _ . . | ||
i t | i t | ||
2 D.P.U. 19738, 19743~, 20055, 20109 &72 Page 243 i | 2 D.P.U. 19738, 19743~, 20055, 20109 &72 Page 243 i | ||
| Line 3,885: | Line 3,728: | ||
, y _q e - .p-- +w y -- y 7?- | , y _q e - .p-- +w y -- y 7?- | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 247 petitioners' financial ability is not seriously | D.P.U. 19738, 19743, 20055, 20109 &72 Page 247 petitioners' financial ability is not seriously impaired. The updated cost esti-- .e is in the record and the magnitude of the increased burden | ||
; which the higher capital commitment will impose upon the petitioners can be assessed in lig ht of the financial testimony presented. The issue is susceptible to this type of analysis because the ability to finance cannot be considered to exist I only up to a clearly identifiable level of capital expenditure. There is not a pa r ti cula r i | |||
impaired. The updated cost esti-- .e is in the record and the magnitude of the increased burden | |||
; which the higher capital commitment will impose upon the petitioners can be assessed in lig ht of the financial testimony presented. The issue is susceptible to this type of analysis because the ability to finance cannot be considered to exist I only up to a clearly identifiable level of | |||
capital expenditure. There is not a pa r ti cula r i | |||
dollar amount of investment which can be precisely pinpointed as the unquestioned d i v id i ng line between financial ability and ruin. | dollar amount of investment which can be precisely pinpointed as the unquestioned d i v id i ng line between financial ability and ruin. | ||
Rather, the very nature of the question lends itself to qualitative judgments which can be made over a wide range of potential expense levels. These judgments are possible given the extensive evidence before us. | Rather, the very nature of the question lends itself to qualitative judgments which can be made over a wide range of potential expense levels. These judgments are possible given the extensive evidence before us. | ||
| Line 3,924: | Line 3,763: | ||
FGE-14R). Thiu statement is based upon a number of assumptions i n cl u d i ng the following: | FGE-14R). Thiu statement is based upon a number of assumptions i n cl u d i ng the following: | ||
: 1) New long-term debt at 13.5 percent; | : 1) New long-term debt at 13.5 percent; | ||
: 2) Preferred stock at 12 percent; 1147 Fitchburg- Local represents e x pt. nd i t u r e s by tee Company to maintain its equipscnt at present levels (capital addi tians) . | : 2) Preferred stock at 12 percent; 1147 Fitchburg- Local represents e x pt. nd i t u r e s by tee Company to maintain its equipscnt at present levels (capital addi tians) . | ||
115/ Based on PSCO construction cost estimate oT January 1979. | 115/ Based on PSCO construction cost estimate oT January 1979. | ||
| Line 3,931: | Line 3,769: | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 252 j | D.P.U. 19738, 19743, 20055, 20109 &72 Page 252 j | ||
*l | *l | ||
: 3) Common stock issues priced to i | : 3) Common stock issues priced to i achieve a 10 percent yield on { | ||
achieve a 10 percent yield on { | |||
the then e x i s t i ng dividend (less $1.00 per share for the cost 3 of issue); | the then e x i s t i ng dividend (less $1.00 per share for the cost 3 of issue); | ||
: 4) Short-term borrowings at 14 percent; | : 4) Short-term borrowings at 14 percent; | ||
| Line 3,983: | Line 3,819: | ||
19738, 19743, 20055, 20109 &72 Page 257 D.P.U. | 19738, 19743, 20055, 20109 &72 Page 257 D.P.U. | ||
C. Montaup's_ Financial , | C. Montaup's_ Financial , | ||
Capabi_lity i | Capabi_lity i | ||
Montaup requests Department approval to increase its ownership s. M in the Seabrook project from its presently owned 1.9 percent to approximately 5 percent, or an inc re a se of 3.1 percent. Montaup has agreed to purchase approximately 1.03 percent or 23.P1 MW from CL&P; 1.06 percent or approximately 24.49 MW from UI; and approximately 1 percent or 23 MW from PSCO. | Montaup requests Department approval to increase its ownership s. M in the Seabrook project from its presently owned 1.9 percent to approximately 5 percent, or an inc re a se of 3.1 percent. Montaup has agreed to purchase approximately 1.03 percent or 23.P1 MW from CL&P; 1.06 percent or approximately 24.49 MW from UI; and approximately 1 percent or 23 MW from PSCO. | ||
| Line 4,011: | Line 3,846: | ||
cover its projected internal o pe r a t i ng deficit of S49 million between 19PO-19P5 in the following manner: | cover its projected internal o pe r a t i ng deficit of S49 million between 19PO-19P5 in the following manner: | ||
l | l | ||
19738, 19743, 20055, 20109 &72 Page 260 D.P.U. | 19738, 19743, 20055, 20109 &72 Page 260 D.P.U. | ||
| Line 4,019: | Line 3,853: | ||
: 2) Sufficient rate relief; | : 2) Sufficient rate relief; | ||
: 3) Short-term interest ra te s (prime) at 10-11.75 percent; | : 3) Short-term interest ra te s (prime) at 10-11.75 percent; | ||
: 4) Common stock d i v i d e nd payout ratio of $12 per share; | : 4) Common stock d i v i d e nd payout ratio of $12 per share; | ||
: 5) Ope r a t i ng and maintenance increase of 8 percent per year; | : 5) Ope r a t i ng and maintenance increase of 8 percent per year; | ||
| Line 4,029: | Line 3,862: | ||
121/ Montaup has also filed wi th FFRC an ipplication for a general rate increase (nocket ER80-520). This action has been consolidated with Docket EL80-8, and the Department has interveneG in these proceedings. | 121/ Montaup has also filed wi th FFRC an ipplication for a general rate increase (nocket ER80-520). This action has been consolidated with Docket EL80-8, and the Department has interveneG in these proceedings. | ||
i | i | ||
D . P . tl . 19738, 19743, 20055, 20109 &72 Page 262 On March 24, 19R0, additional financial testimony (Exh. M-72) was filed by Mr. | D . P . tl . 19738, 19743, 20055, 20109 &72 Page 262 On March 24, 19R0, additional financial testimony (Exh. M-72) was filed by Mr. | ||
| Line 4,247: | Line 4,079: | ||
i | i | ||
D.P.U. 19738, 19743, 20055, 20109 &72 Page 289 represents a particularized and well defined future source of generation capacity. Moreover, with r eg a rd to the ability to finance, we have found that Fitchburg and New Pedford can meet the financial commitments of the full ownership interests requested in their petitions and that | D.P.U. 19738, 19743, 20055, 20109 &72 Page 289 represents a particularized and well defined future source of generation capacity. Moreover, with r eg a rd to the ability to finance, we have found that Fitchburg and New Pedford can meet the financial commitments of the full ownership interests requested in their petitions and that Montaup can meet the additional financial burdens given an interest less than that proposed. | ||
Montaup can meet the additional financial burdens given an interest less than that proposed. | |||
* We have also found that each of the Massachusetts petitioners has shown a need for significant amounts of capacity to satisfy f utu re consumer demand. The reader has perhaps gleaneI from the demand sections of this decision that f o r e c a s t i ng future e ne rg y needs for a utility is not a simple undertaking. As we noted in 3ection II, inferential chains in the forecasting process are interdependent, extremely long, and ul tima tely rely upon the a ppl i c a t i on of informed judgments at each link. | * We have also found that each of the Massachusetts petitioners has shown a need for significant amounts of capacity to satisfy f utu re consumer demand. The reader has perhaps gleaneI from the demand sections of this decision that f o r e c a s t i ng future e ne rg y needs for a utility is not a simple undertaking. As we noted in 3ection II, inferential chains in the forecasting process are interdependent, extremely long, and ul tima tely rely upon the a ppl i c a t i on of informed judgments at each link. | ||
In r e v i e w i ng the various need for power claims we have, thus, carefully considered all of the projectie;ns and where a ppro pr ia te applied our | In r e v i e w i ng the various need for power claims we have, thus, carefully considered all of the projectie;ns and where a ppro pr ia te applied our | ||
| Line 4,278: | Line 4,108: | ||
In closing, we would note that, although we have commented that partial deferral of the project's in-service dates would have a positive impact upon petitioners' cash flow positions, we do not feel delay is in anyone's best interest. Without_ delay, the project is | In closing, we would note that, although we have commented that partial deferral of the project's in-service dates would have a positive impact upon petitioners' cash flow positions, we do not feel delay is in anyone's best interest. Without_ delay, the project is | ||
D.P.U. 1973P, 197d3, 20055, 20109 G72 Page 294 demonstrably less expensive by significant amounts to both petitioners and the consumers they serve. In this instance, the tension between the provision of reliable future capacity at the lowest cost and the strict adherence to financially conservative income and balance sheet criteria a pp r o pr i a te for ordinary times should be resolved in favor of the least costly provision of capacity. The recent forces which have been impinging the electric utility industry are clearly extraordinary when viewed | D.P.U. 1973P, 197d3, 20055, 20109 G72 Page 294 demonstrably less expensive by significant amounts to both petitioners and the consumers they serve. In this instance, the tension between the provision of reliable future capacity at the lowest cost and the strict adherence to financially conservative income and balance sheet criteria a pp r o pr i a te for ordinary times should be resolved in favor of the least costly provision of capacity. The recent forces which have been impinging the electric utility industry are clearly extraordinary when viewed from the perspective of the days when the Department could order reductions in rates subsequent to expansion of capacity. | ||
from the perspective of the days when the Department could order reductions in rates subsequent to expansion of capacity. | |||
j | j | ||
| Line 4,291: | Line 4,119: | ||
r i | r i | ||
j Electric Company and Public Service Company of New Hampshire i | j Electric Company and Public Service Company of New Hampshire i | ||
l docketed as D.P.U. 20055 requesting approval of said ac-quisition and the terms thereof is hereby approved; and it | l docketed as D.P.U. 20055 requesting approval of said ac-quisition and the terms thereof is hereby approved; and it is FURTHER ORDERED: That the acquisition by Montaup j Electric Company of a 1.03542 percent interest in the Seabrook l | ||
is FURTHER ORDERED: That the acquisition by Montaup j Electric Company of a 1.03542 percent interest in the Seabrook l | |||
f | f | ||
! project from Connecticut Light & Power Company and the 1 , | ! project from Connecticut Light & Power Company and the 1 , | ||
Latest revision as of 20:59, 15 March 2020
| ML19343A651 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 10/30/1980 |
| From: | Bonsall J, Pote D, Sprague G MASSACHUSETTS, COMMONWEALTH OF |
| To: | CONNECTICUT YANKEE ATOMIC POWER CO., MONTAUP ELECTRIC CO., NEW BEDFORD GAS & EDISON LIGHT CO. |
| Shared Package | |
| ML19343A648 | List: |
| References | |
| NUDOCS 8011190383 | |
| Download: ML19343A651 (303) | |
Text
{{#Wiki_filter:" r l l l r^T %-weawnmpwm b b kB N0110ttDHfDCh DI [H55EChtsciis e ad"if ; m. jjir DEPARTMENT OF PUBLIC UTILITIES ([ October 30, 1980 D.P.U. 19733 Joint petition of Montaup Electric Company and the Connecticut Light and Power Company under General Laws, Chapter 164, section 97 and 101, as amended, for approval by the Department of Public Utilities of the purchase by M)ntaup Electric Comoany and the sale by the Connecticut Ligh' and Power Company of certain property and the determination that the terms thereof are consis-tent with the public interest; and D.P.U. 19743 Joint petition of Fitchburg Gas and Electric Light Company and Connecticut Light and Power Company under General Laws, Chapter 164. section 97 and 101, as amended, for approval by the Department of Public Utilities of the purchase by Fitchburg Gas and Electric Light Company and the sale by the Connecticut Light and Power Com-pany of certain property and the determination that the terns thereof are consistent with the public interest; and D.P.U. 20055 Joint petition of Montaup Electric Company and New Bedford Gas and Edison Light Company and the Public Service Company of New Hampshire under General Laws, Chapter 164, section 97 and 101, as amended, for approval by the Department of Public Utilities of a readjustment of certain interests in property located in New Hampshire by the acquisition of interests in such property by Montaup Electric Company and New Bedford Gas and Edison Light Company and the corresponding reduction of interest therein of Public' Service Company of New Hampshire, and determination that the terms thereof are consistent with the public interest; and D.P.U. 20109 Joint petition of Montaup Electric Company and the United Illum~ inating Company under General Laws, Chapter 164, section 97 and 101, as amended, for approval by the Department of Public Utilities of the purchase by Montaup Electric Company and the sale by the United Illuminating Company of certain property and the determination that the terms thereof are consistent with the public interest; and I g o 3 319 CLdII N
. . l i
l i D.P.U. 19738, 19743, 20055, 20109 & 72 Page ii i
. \
D.P.U. 72 Joint petition of Fitchburg Gas and Electric Light Company and the Public Service Company of New Hampshire under General Laws, Chapter 164,-section 97 and 101, as amended, for approval by l the Department of Public Utilities of a readjustment of certain interests in property located in New Hampshire by the acquisi-tion of interests in such property by Fitchburg Gas and Electric '
- l. Light Company, and the corresponding reduction of interest
. therein of Public Service Company of New Hampshire, and determina-tion that the terms thereof are consistent with the public interest. 5 APPEARANCES: Department of the Attorney General by: James C. McManus, Esq., and ' Robert Dewees, Esq. One Ashburton Place Boston, Massachusetts 02108 Brickley, Sears & Cole by: Richard L. Brickley, Esq., and Richard L. Brickley, Jr., Esq. 75 Federal Street Boston, Massachusetts 02110 for Fitchburg Gas & Electric Light Company Gaston Snow and Ely Bartlett by: Edward T. Robinson, Esq., and Arthur I. Anderson, Esq. One Federal Street Boston, Massachusetts 02110 for Montaup Electric Company LeBoeuf, Lamb, Leiby & MacRae by: Gerard A. Maher, Esq., Thomas E. Mark, Esq., and Cecelia Kempler, Esq. 140 Broadway New York, New York 10005 for Fitchburg Gas & Electric Light company May, Bilodeau, Dondis & Landergan by: ' Michael F. Donlan, Esq., Franklin M. l'undley , Esq. , and Eric J. Krathwohl, Esq. , 294 Washington Street Boston, Massachusetts 02108 for New Bedford Gas & Edison Light Company
i . a l D.P.U. 19738,.19743, 20055, 20109 & 72- Page iii 1 APPEARANCES: (continued) i i Ellen J. Messing, Esq.. Two Park Square Boston, Massachusetts 02108
- for Safe Energy Alliance l Peabody, Brown, Rowley-&_ Storey by
- Maurice L. Zilber, Esq., and
-Eric J. Krathwohl,-Esq.
One Boston Place-Boston, Massachusetts 02108 for Connecitcut Light & Power Company and United Illuminating Company Ropes & Gray by: John A.-Ritsher, Esq., and Thomas G. Dignan, Jr., Esq. 225 Franklin Street Boston, Massachusetts 02110 , for Public Service Company of New Hampshire l b f l
Page iv D.P.U. 19738, 19743, 20055, 20109 & 72 TABLE OF CONTENTS - 1 I. Statement of the case 7 II. The context of review 22 ,, ' III. The need for power 22 A. Introduction ~ 22 B. Montaup demand forecast 25 4 l
- 1. Residential forecast '
26
- a. Residential household size projections
' b. Saturation, conversion', replacement, and 29 penetration rates of appliances 32 i
- c. Average use per appliance 36
- d. Base use 40
- e. New developments 45
- 2. Industrial forecast 54
- 3. EUA commercial forecast 65
- 4. Wholesale contracts 65 i 5. Street lighting and miscellaneous forecast 66
- 6. Peak demand 74 I 7. Reserve margins and the nead for power
- 82 C. Fitchburg demand forecast 1 83
- 1. Residential ~ forecast 95
- 2. Industrial forecast -
104
- 3. Commercial and municipal .
107
- 4. Fitchburg's peak demand 117
- 5. .The effect of 1979 actual data 118
- 6. Reserve margins and the need for power
D.P.U. 19738, 19743, 20055, 20109 & 72 Page v Table of Contents D. New Bedford demand forecast 121
- 1. New Bedford residential forecast 122
- a. Customer number 125
- b. Electric heat penetration 137
- c. Average residential non-weather sensi-tive use 139
- d. Average residential weather sensitive use 141
, e. Seasonal customers 149
- 2. New Bedford commercial forecast 152
- 3. New Bedford municipal forecast 155
- 4. New Bedford industrial forecast 156
- 5. Cambridge forecast 158 t
- 6. Conservation 158
- 7. Peak load forecast 165
- 8. The need for power 169 IV. Alternatives 185 A. Introduction 185 B. Conservation and load management 186 C. Alternative power sources 192
- 1. Introduction 192
- 2. Independent power production and cogen-eration 194
- 3. Solar and wind power 199
- 4. Canadian hydroelectric power 199
] D.P.U. 19738, 19743, 20055, 20109 & 72 Page vi Table of Contents
- 5. Hydroelectric power 200
- 6. -Coal conversion 208- ,
D. The Seabrook alternative 211
- 1. Capital cost 211
- 2. Capacity factors 223
- 3. Operation and maintenance costs 230
- 4. Interim replacement costs 234 E. Worst case simulation of alternstives 236 V. Financial capability 242 A. Introduction 242 B. Fitchburg's financial capability 249 l
i C. Montaup's financial capability 257 1 D. New Bedford's financial capability 271 VI. Viability of the-Seabrook project 281 VII. Conclusion 288 4 ) VIII. Order 295 Appendix A: June 28th Order I 't 4 i I
D.P.U. 19738, 19743, 20055, 20109 &72 Page 1 I. STATEMENT OF THE CASE On September 22, 1978, Montaup Electric Company ("Montaup"), New Bedford Gas and Fdison Light Company ("New Bed f o rd") and the Connecticut Lig ht and Power Company ("CL&P") filed a petition, pursuant to G.L. c. .164, sec. 97 and 101, as amended, for approval by the Department of Public Utilities (" Department") of the purchase by Montaup and New Ped f o rd and the sale by CL&P of certain ownership interests in Seabrook Unite I and II, and for a determination that tne proposed transfers are consistent with the public interest. This petition was docketed as D.P.U. 1973P. On September 25, 197P, Fitchburg Gas and Electric Light Company-("Fitchburg"), as purchaser, and C L& P , as seller, filed a substantially identical petition which i was docketed as D.P.U. 19743. 1/ 17-~~PurchisiE~~petitiohirs-~present-ownership Interests in the project are: Montaup 1.9064 percent or 43.8P MW, New Bedford 1.3539 percent or'31 MW and Fitchburg 0.1716 percent or 3.9 MW. These interests are not at issue in this . proceeding.
l . . Page ? D.P.U. 19739, 19743, 20055, 20104 &77 On October 13, 197P, the Commission, pursuant to its investigative authority under the present sec. 97 and 101, ordered each petitioner to file direct testimony and exhibits a d d r e s s i ng at a minimun:
- 1. The future ca pa ci ty needs of the purchasing conpanies;
- 2. The complete cost of the proposed accuisition of the additional ownership shares in the Seabrook facilities;
- 3. The reasons for selecting this method of meeting future ca pa ci ty needs in preference to alternative programs considered by the
' purchasing companies; and 4 A complete description of the characteristics of service from the Seabrook facilities.
On November 16, lo7P, the Department issued an order of notice scheduling a pre-hearing conference for December 11, 197a. At this p r e- he a r i ng conference, the Attorney General of the Commonwealth of Massachusetts : (" Attorney General") filed a petition for intervention which was subsequently granted. 1 l l
D.P.U. 19738, 19743, 20055, 20109 &77 Page 3 After a discovery stage, the first hearing was conducted on February 13, 1979. At that nearing, a motion by Fitchburg to consolidate the two proceedings was granted. Fourteen days of hearings were held, concluding on April 11, 1979. Briefg and reply briefs were filed by all parties, wi th petitioners' reply briefs being received on June 1~ , 1079. On May 18, 1979, Public Service company of New Hampshire ("PSCO"), as seller, and Montaup and New Bedford, as purchasers, petitioned the Department for approval of the proposed realignment of additional ownership i interests in the Seabrook units. This petition was docketed as D.P.U. 20055. On June 7, 1979,
- we or'dered PSCO to filo direct testimony and exhibits on the v i a b i l i 'cy of the Seabrook project.
On June 26, 1979, Montaup, as purchaser, and United Illuminating Company ("UI"), as seller, petitioned the Department for approval of further proposed re ad j u stmen ts of
19738, 19743, 20055, 20109 &72 Page d D.P.U. 1 the ownership interests in the Seabrook project; this petition was docketed as D.P.U. 20109. On June 2P, 1979, we issued an interim order that the pe ti t io n s docketed as D.P.U. 19738 and D.P.U. 19743 be consolidated for further hearing, investigation and consideration with the petition docketed as D.P.U. 20055 (" June 28th Order"). The June 2Pth Order also defined the stand a rd of review for the case, further delineated the issues in the case, assigned the burden of proof to the petitioners, 2/ and required petitioners to provide the Department with certain additional information. A c o py of the June 29th Order is attacned hereto as Appendix A. 3/ Subsequent to the June 28th Order, we granted intervention status to Safe Energy Alliance (" SEA"), an association representing ' 27~ TEroEghoUt- this~ order-we' collectively ~ refer to the utility parties as petitioners and companies. While we are not always referring to all six utility parties the context of use should remove any ambiguity. . 3/ The June 28th Order inadvertently transposed the parties associated with the docket numbers.
1 19738, 19743, 20055, 20109 &72 Page 5 D.P.U. i various customers of New Bedford. August 7, 1979, was the first hearing day subsequent to On September 6, 1979, we the June 28th Order.
' consolidated D.P.U. 20055 and D.P.U. 20109. On January 3, 1990, Fi tchbu rg and PSCO petitioned the Department for approval of the further realignment of certain ownership interests in the Seabrcok project which was docketed as D.P.U. 72. On January a, 1980, counsel fo r New Bedford announced that company's intention to J let its agreement to pu r cha se f rom CL& P expire
( D .'P . U . 19738). On January 21, 1980, acting on the joint motion of Fitchburg and PSCO, we consolidated D.P.U. 72 with D.P.U. 20055 and D.P.U. 20109 After fifty days of hearing, e x c e p t i ng certain minor outstanding matters, the record was closed on April 15, 1990. Briefs and reply briefs were filed by all parties with the reply briefs received on June 3, 1980. The proposed realignment of ownership interests in the Seabrook project l presently before the Department in the J +
D.P.U. 1973P, lo7a3, 20055, 20109 &77 Page 4 consolidated proceedings is as follows: Purchaser Seller t Interest MW DPU # Fitchburg PSCO 0.2609 6.00 72 CL&P 0.4349 10.00 19743 Montaup CL&P 1.03542 23.81 19738 UI 1.06469 24.49 20109 PSCO 1.00000 23.00 20055
! Jew Bedford PSCO 2.1739 50.00 20055 s
N p.s l
4 E k 19738, 19743, 20055, 20109 &72 Page 7 i D.P.U. I t
' II. THE CONTEXT OF REVIEW In the June 28th Order, we placed the burden on petitioners to establish by credible evidence tnat the proposed transactions were consistent with the public interest in a reliable source of electric power at just and reasonable rates. We further indicated that this burden c oi:l d be satisfied by an affirmative demonstration with r eg a rd to four overriding issues. These issues are whether:
I'
- l. There is a need for ti.e amount of capacity sought to be accuired; 1
' 2. Purchase of the ownership shares represents the most economical available alternative;
- 3. The purchasing utility has
' the ability to finance the proposed' acquisition without i m po s i ng an undue burden upon its ability to provide service currently and in the future; and a 4 9 i i
.,n. .. .-- , -- - - .-. , ,
D.P.U. 19738, 197e3, 20055, 20109 &72 Page e
- d. PSCO has the ability to complete the Seabrook project. 4/
When we initially determined these issues to be the principal areas of inquiry in this proceeding, we were fully aware that answers to these issues could not be derived through the application of some well-established formula or by reference to easily verified historical facts. Each issue is multi-faceted, dependent upon numerous variables, a nd shrouded in large part by future events. Moreover, the scope of.our inquiry is necessarily dictated by the nature of the proposed transfers. Given that the projected contributions of the in-service costs to the 77- Xi Ti TUTIV fipITeaEeH in tee JuE- 2Pth Order this proceeding does not involve a decision on the he al th or safety of nuclear power. While our jurisdiction clearly encompasses issues dealing with the need for power, we question whether the Department has any a u t ho r i ty at all to r eg ula te in the area of radiological health and safety. See Northern : plates _fgweI_ggmpapy v. S t a te _ o f __FT- j s o_t a , 447 ; F. 2d 1143 (CA 8 1971), aff'd 405 U.S. 1035 (1977). l l l l
19738, 19743, 20055, 20109 &72 Page 9 D.P.U. capital structures of these three relatively small Massachusetts utilities are extraordinary in magnitude, it is clear that the proposed additional acquisitions are not mere realignments of utility properties in any traditional sense, but, rather, are more akin to a joint venture, the ultimate success of which may not be known for 30 years. The extent of the complexity inherent in presenting and . deciding these issues does much to explain the ! comple te review which we have insisted upon in l this case. Of the complexities which underlie each issue, their inherent future orientation has had a significant bearing upon both the type of evidence presented and the na tu re of our review. As will be seen throughout this Order, l i f it is in the un f old i ng of future events where l many of the factual ingredients necessary to achieve certitude regarding the issues raised I l are to be found. Much of the evidence presented f by the petitioners has, therefore, consisted of jections about these future occurrences, and
D.P.U. 19738, 19743, 20055, 20109 &72 Page 10 our evaluation of that evidence takes the form ) of an assessment as to the reasonableness of the methodologies and assumptions utilized in the process. Such an exercise cannot be equated with the review of historical events, but rather, demands that we exercise our judgment in d e te r mi n i ng at virtually every step whether the projections are founded upon an analysis that can be relied upon with a reasonable degree of confidence. While the future-contingent nature of the issues presented in itself creates difficult analytical problems, these p r o ,b l e n s are further compounded by recent economic changes in the electric utility industry. Petitioners' generating mixes are largely dependent upon oil for fuel. The stability of the region's oil supply in terms of both availability and price has become very uncertain. The cartelization of foreign oil production and the legitimate profit maximizing behavior of domestic oil suppliers create a j l l
Page 11 D.P.U. 19738, 19743, ?0055, 20109 & '/ 2 . i l i i situation which does not necessarily coincide with petitioners' production needs and thereby I injects major u nc e r t a i n ty wi th respect to the uninterrupted future availability of oil as a Moreover, reliable fuel for electric generation. we find it difficult to overstate the problems associated with petitioners' principal dependence upon a commodity which in less than e ig ht years has increased in price in excess of 700 percent. Due to petitioners' leveraged capital structures, their financing capabilities are directly dependent on the stability of the ' c a pi tal market. Recent experience with the l capital market has demonstrated little stability, as evidenced by prime l e n d i ng rate fluctuations ranging from 9 percent to 2n percent during the course of this proceeding. 4 Recent utility offerings, when viewed from a historical perspective, have been l extraordinarily expensive. This dependency is particularly critical when large construction 4 projects such as the present venture, which i
19738, 19743, 20055, 20109 &72 Page 12 D.P.U. represents significant additions to the purchasing companies' capital bases, are being undertaken. Further, the question of undue financial burden must not be reviewed solely within the context of capital construction costs, but also with regard to the effect on the ratepayer in terms of reliable se rv ice in light of a company's present overall generation mix and reliance on a particular form.of generation. The capitalization of funds used d u r i ng corstruction ("APUDC") and the attendant direct reduction of internally-generated cash flows further compound the problem of access to external capital sources when the construction period for the project encompasses several business cycles and lastu ten years or longer. As a consequence, ill-defined current or reasonably foreseeabla future interest rates add tremendous uncertainty to the task of forecasting the financial impact of utility investment decisions. . 4 Present uncertainty regarding access to the c a pi t al market, however, must be
1973P, 19743, 20055, 20109 &72 Page 13 D.P.U. viewed in the context of the u t ili ty planning process: capital additions to utility base load plant have construction lead times and useful lives which are of a long-term nature, and which, in combination, may exceed forty years. The provision of an adeouate and reliable supply of electricity is an absolute public necessity which must not be dominated by short-term economic uncertainties. The rapid increases in fuel oil costs, and the change from relatively easy access to external capital at moderate cost to difficult access at unprecedentedly high cost have, however, further complicated both the petitioners' ability to plan, and our ability to review those plans with exact precision. Whereas the industry has historically been ch'aracterized by a relatively high proportion of fixed to variable costs, a factor wnich both increases management control over the production process and lends stability and pr e d i c t a b ili ty to end-user prices, this situation has been reversed to such an extent that it is not unusual for the fuel clause l l
D . P . tl . 1973P, 10743, 20055, 20109 &72 Page 14 adjustment alone to exceed the fixed cost portion of the consuming public's monthly utility bill. As a result, electricity prices, rather tnan declining in real terms and being relatively stable as in the past, have been accelerating at unprecedented rates. These price increases have in turn undermined our knowledge of the structure of demand and our' e bili ty to predict its future course. While it is clear that there is some level below which, regardless of price, consumption of electricity will not fall, and while it is also clear that the recent increases in the price of electricity have encouraged a sl a c k e n i ng of growth in demand significantly below historical levels, the fact remains there is little experience with which to reasonably predict the elasticity of demand for electricity in r e s po n se to price changes, let alone to predict the cross elasticit'es associated wi t h various asserted alternatives. Governmental rosponse to changes in utility industry economics has likewise been t i l l
D.P.U. 19738, 19743, 20055, 20109 &72 Page 15 evolving. The Power Plant and Industrial Fuel Use Act, the National Ene rgy Conse rva tion Policy Act, the Public Utility Regulatory Policies Act of 1978 ("PUPPA"), and our own D.P.U. 18F10 proceedings evidence broad based attempts to increase sources of supply, decrease demand, and both stabilize prices and ensure their equitable distribution among classes of ratepayers. That these actions are f o rc i ng structural change in the industry is indisputable. On the supply side, for example, the now mandatory interconnection of independent power producers and cogenerators has injected a competitive element and external source of generation capacity which was virtually non-existent prior to the enactment of PURPA. The relative newness of these governmental actions, and the fact that their effective implementation is only partially comple te , however, make the task of projecting their intermediate to long-term impact on supply and consumption patterns problematical. ; CL&P and PSCO have suggested that, regardless of the complexity of t he cuestions
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 16 presented in this case, the Department should not impose the same standards of technical i sophistication and rigor upon these three small Massachusetts utilities that_it would expect i f r on. larger utilities in the same situation. They maintain that to do so, in light of the companies' limited planning resources, would place an unconscionable burden upon their customers. As a novel variant of the deep-pocket theory of competitive advantage we find this argument interesting. In this case, however, it cannot be used to support a lesser degree of scrutiny. It may be true that these small
' companies have smaller service territories and serve fewer customers than do larger utilities in the Commonwealth; this fact does not, however, make the problem of demand forecasting less complex. Rather, it merely reduces t he absolute size of the numbers involved in the forecasting task. The same may be said for the production simulation of those least cost alternatives !
which should be i n cl u d ed in a company's
)
l 1 i
I D.P.U. 19738, 19743, 20n55, 20109 &72 Page 17 l generation mix. In fact, since the magnitude of the investment is much larger relative to these l companies' respective sizes than for a l significantly larger utility, and since the I po te n ti al for financial ruin resulting from a mistaken allocation of more limited resources is I greater in tnis instance, CL&P and PSCO's }" suggestion leads us to the conclusion that \ imposing a greater number of front-end
) simulations of alternative system generation mixes prior to the irrevocable commitment of 4
resources is necessary, rather than fewer such analyses. And if, in fact, the suggestion that t he se companies are incapable of pe r f o rmi ng the required analysis is true, the only possible inference we could draw is that these small companies should be relieved of this h'avy e burden and that .i t should be assumed by the
.i ; Department. To do otherwise would truly place 4
the customers of these companies in an . unconscionable position. In fact, we do not find such an
Page 18 D.P.U. 19738, 10743, 20055, 20109 &72 inability to plan f lo wi ng from a lack of resources. As will be seen in the area of demand forecasting, Montaup's overall approach, despite some technical problems, is adequate in terms of sophistication and reviewability. In I the area of financial analysis, Fitchburg's approach is comple te in terms of id e n tif yi ng and discussing each of the major financial variables. Likewise in the area of fixed and variable cost simulation of alternative system generation mixes, each of the companies has demonstrated tne ability to produce technically co mpe t e n t analyses. The burden of adequate analysis is not p r o po r tio na te to size, nor is it related to the number of man hours spent on the ta sk . We agree with PSCO's assertion that t he concept of proving the need for power is an evolving issue, and we find that this assertion applies equally well to the issue of forecasting both financial ability and alternative strategies. . Most fundamentally, the process of proving these issues is iterative in nature. T he inferential l l
I D.P.U. 19738, 19743,_2nn55, 20109 &72 Page 19 chains are extremely lo ng and ultimately 4
- dependent upon judgment at each link. Even with complete agreement about methodology, slight i variations in tne application of judgment easily lead to different conclusions. Our principal concern is with the sufficient articulation of the bases of these judgments in order that we may review their reasonableness in the context of the ultimate conclusions for which they are offered in proof.
We are cognizant that rational forecasting a nd pl a n n i ng is very much an art; and tnat insofar as it may be called a science, the rigorous employment of alternative analytical and inferential tools is to a great extent dependent upon a company's experience with these tools. Yet detailed public scrutiny of company forecasts and the methodologies t employed is a relatively recent phenomenon. 5/ . 57- Ne_i cEiptir T237 57 iEE 7Ets oT 19Y3: see also D . P ll . Docket 19494. 1 4
D.P.U. 19738, 19743, 20055, 20109 672 Page 20 For many years there was little need for such detailed review, a fact witnessed by Fitchburg's reco rd of serving its customers for the fifty-two years prior to 1972 without a ra te increase. The process resulting from the accretion of utility ex pe r i e n ce in these areas and the attendant public scrutiny and criticism of u tili ty efforts leads us to the conclusion that the concept of adequate proof in these areas is evolving. For example, purchasing petitioners are currently in the fourth iteration of their demand forecasts with each subsequent forecast clearly showing marked improvement over its predecessor. That is not to say an optimum has by any means been reached; in fact, there are a substantial number of areas where our review is reduced to evaluating naked assertions of judgment supported solely by a claim of experience. This problem is particularly acute when the methodology employed 1 is not reviewable and we are left with assessing the reasonableness of quantitative assertions in
19738, 19743, 20055, 20100 &72 Page 21 D.P.U. SS-Although our specific criticisms and findings with regard to whether petitioners have met their burden are found in the following sections, we are not willing to i m po se on petitioners the burden of meeting standards we may consider ideal, nor a re we willing to judge their efforts by those evolving star.dards which a re more a ppr opr ia te for the future. $/ 57~~EE do7~howeve rI~ la ce petitioners on notice that we expect continued improvements in the future. In particular, we expect mo re factual support for judgments presented as based on experience and greater reviewability of whatever In the methodological approaches are chosen. areas of fixed and variable cost simulation of generation alternatives and financial impact analysis, we expect more comprehensive sets of sinulations. Specifically, there should be more sensitivity analyses e m pl o y i ng the systematic variation of the values assigned to critical assumptions, a nd there should be a greater range of " worst case" simulations wherein larger numbers of the critical variables are simultaneously set to their extreme values. The advent of low cost, high speed digital computers makes the "in-house" -development of the software to support this t y pe of analysis clearly within the financial capabilities of the purchasing companies; furthermore, the magnitude of the resource commitments at stake makes the - increased use of this type of f ron t-e nd analysis ' not only a legitimate above-the-line expense, but imperative.
+
D.P.U. 19738, 19743, 20055, 20109 &77 Page 22 III. THE ?4EED F OR POWER ,
^- letsetestien i In the following sections we will examine pu r c ha s i ng petitioners' projected need This examination will consist 1
for power. primarily of a detailed review of petitioners' ten-year demand forecasts, the capacity requirements implied by ' hose forecasts and the generation capacity c rojected to be available in order to reliably supply that demand. That load forecasting is an inextricable combination of , art, science and informed judgment, the re is no dispute. We now turn to the manner in which these elements have been applied. B. ppglapp_p3magg_fgggpasy Montaup is the wholesale power subsidiary in the Eastern Utilities Associates (" EU A") system. There are two retail subsidiaries in the system, Eastern Edison Company (" Eastern Edison") and Blackstone Valley Electric Company ("Blackstone"), both of which are wholly owned by EUA. Fastern Edison is the present name of the B roc k to n Edison Company,
D.P.U. 19739, 197d3, 20055, 20109 &77 Page 23 whose name was changed when the Fall River i Electric Light Company was merged into it on July 31, 1979. Montaup is wholly owned by Eastern Edison. Although Montaup is the petitioner in this proceeding, its justification for need is system-wide. Consequently, we'will consider Montaup's demand forecast and capacity reauirements within the context of its affiliation with EUA and EUA's participation in NEPOOL. EUA called three witnesses in support of its d ema nd forcast: Mr. John P. Gmeiner, Vice President of Ell A Service Corporation; Mr. Wilfred W. Freve, Jr., Supervisor of System Planning for EUA Service Corporation; and Mr. John F. Marien, Senior Engineering Assistant for EUA Service Corporation. EUA forecasts its primary energy requirements in its Third Supplement to the 1976 Long-Range Forecast of Electric Power Needs and Requirements, 1979-198P (Exh. M-10) by , separately e s ti ma ti ng the demands of its three retail service territories, Blackstone, Prockton, l l 1 1
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 2/ and Fall River, s u mm i ng these requirements and adding to this result the estimated miscellaneous a nd wholesale contract demands of non-affiliated customers (Exh. *-10, Section VI). For each service territory EUA has separately estimated the energy requirements of the residential, commercial and i nd u s t r i al classes, and then summed these requirements across service territories. EUA's forecasting me thodolog y varies a c c o rd i ng to customer class (Exh. M-10, Section II). Similarly, the requisite forecasting assumptions vary according to me thodolog y employed , service territory analyzed, end-use under consideration a nd available data. In assessing the sufficiency of EUA's forecast, we will look to the reasonableness of these assumptions and the results thereby derived. Our ul tima te concern is w i .t h the growth rates projected by EUA and the reasonableness of these rates in li g ht of the evidence presented in this proceeding. We do not, however, limit ourselves to accepting
Page 75 D.P.U. 1973P, 19743, 20055, 20109 &77 solely the testimony of either EUA or the Attorney General. 7/ Where appropriate, we will apply our i nd e pe nd e n t judgment to the evidence subnitted and arrive at figures we deem most reasonable. l- E'!1pential_fgigga3t
- The residential portion of EUA's forecast calculates, for each service territory, the estimated number of residential customers and the average use per customer in kilowatthours ("FWH"). FUA then multiplies these values to arrive at an overall residential energy forecast (Exh. M-10, pp. II-3 to II-??).
The residential customer estimate is calculated by dividing local planning agency population estimates by an econometrically-derived people / customer ratio which represents family pp. II-3 to II-7). EUA size (Exh. M-10, utilizes an engineering approach to estimate 77 YEF 5EEir TEiirviB5r in enis proceeding, SEA, . presented no testimony on EUA's demand forecast. . J 1
- - - - - , .-1.. ,-.s _- 1- r .,
I Page 76 D.P.U. 19738, 197e3, 20055, 20109 &72 i average yearly energy u se per custoner. Energy l consumption is broken down into major end-use categories. Penetration, saturation, conversion and conservation rates are then applied to these categories and a v e r a .g e use per customer figures
' are derived (Exh. M-10, pp. II-11 to II-19).
Attorney General witness Paul Chernick, a utility rate analyst, criticizes five major aspects of the residential forecast. We will examine the residential forecast in detail and deal with these criticisms seriatim.
- a. Eggigggtlal_yg33ehgip_jjz3 i Ersisstiss5 EUA employs the ratio of service i
territory nopulation to customer number as a proxy for family size (Exh. M-10, p. II-5). This ratio is then divided i n to independently estimated population forecasts to arrive at the projected customer number. Mr. Chernick does not take issue with EUA's decision to econome trically es tima te family size. He does, ' however, criticize EUA's complete lack of method i
19738, 19743, 20055, 20109 &72 Page 27 D. P.!!. 8 for e s tima ti ng family size for Brockton P/ (Exh. AG-232, p. 5) as well as the da ta base choice I: for Blackstone (1950-1980), for Prockton (1945-1990) and for Fall River (1950-1979) on the ground that they are unrepresentative of today's trends (Exh. AG-232, p. 4). Mr. Chernick substitutes alternative time periods (1966-1990 for Blackstone, 1969-1980 for Brockton and 1960-1979 for Fall River) 0/ and reperforms E ll A ' s regression analysis to derive family size values which, when applied to the independently derived population forecasts, result in a to tal estimate of growth in the number of customers for loPP which is 2 percent lower than that derived by EUA. Mr. Chernick points out that his customer number growth estimate for the forecast period is 21.7 percent lower than EUA's (Exh. AG-232,
- p. 5).
87 EUI~ rejected ~ iis Brockton~ regressions as Inadeouate and projected the Prockton family size ratio subjectively (Exh. M-29, IR-2). 6 9/ Ekh. AG-232, p. 6. i l 1 1 l 1
P P.U. 19738, 19743, 20055, 2010) &72 Page 28 EUA rebuts this criticism by pointing to Mr. Chernick's essentially constant family size values (see Exh. AG-232, p. 6) for the period 1979-19P8 (Exh. M-76, pp. 2-3). EUA's principal planning witness, Mr. Gmeiner, argues that FUA's projected decline in family size from 3.26P7 in 1978 to 3.1844 in 1988, a d e c re a se of only 0923, or less than one-tenth of a person, is reasonable (Exh. M-76, p. 2) . He compares EUA's decline of .0843 for 197P-1988 to Flectric_World's projected d e c r e a se of .3457 for the same period and suggests that FUA's decrease in household size is a rg ua bly too small (Exh. M-63; Exh. M-74,
- p. 2).
We consider that Mr. Chernick's , i estimated family size decrease over the next decade is too small. While we do not find I simple time trend equations entirely satisfactory for the prediction of family size, we find the modest decreases in family size which FUA projects over the next decade to be reasonable, a nd t he re f o re we accept EUA's residential customer number projections. i
l f-19738, 10743, 20055, 20109 &72 Page 29 D.P.U. 3
- b. Saturation, _ Conversion, _Peplacement, agg_ Pepp tf a t _f on_R a te s_o f _ Appl i a n c e s FUA generates future appliance saturations by applying penetration rates to new customers and conversion rates to existing customers in each year (Exh. M-la, pp. 2-6).
Mr. Chernick claims EUA's saturation and penetration rates are un subs ta n ti a ted and too
- high (Exh. AG-232, pp. 7-8). Mr. Chernick notes that the penetration rates employed by EUA fo r water he a t i ng increase over the forecast period are 463 percent for Blackstone, 317 percent for Brockton and 45d percent for Fall River, while the increases in space heating penetration rates for the service territories are 529 percent, 560 percent and 500 percent, respectively (Exh. AG-232,
- p. 7). EUA offers as support for these increasing penetration rates its judgment that electric he a t i ng will become more competitive with home oil heating due to oil price increases and uncertainty co n c e r n i ng oil supply availability.
Mr. Chernick quantifies the i
D.P.U. 19738, 19743, 20055, 20109 &72 Pace 30 l effect of EUA's penetration and saturation rate increases over tne forecast period, calculating that 5.2 percent of residential use in 19P9 is due to increases in these parameters over the period 1980-1998 (Exh. AG-232, p. 8). Mr. Cnernick asserts that this increase in use is entirely unjustified (Exh. AG-232, p. 8). We have carefully examined Mr. Chernick's a rg ument and the figures he presents. Mr. Cnernick has calculated 1999 a pplia nce energy consumption based on 1980 penetration and saturation rates (see Exh. AG-232, p. 8). We do not think that some i nc r e a se in penetration and saturation rates over the forecast period is unjustified. The assumption that penetration and saturation rates will not increase at all beyond 1980 strikes us as too conservative, and without adequate justification. We deem EUA's justification for the penetration and saturation increases in electric space and hot water hea ti ng (Exh. M-29, IR-11; Exh. .M-14, pp. 37-18) . to be reasonable. We do not find Mr. Chernick's efutation of EUA's position persuasive. Nor .
D.P.U. 1073P, 19743, 2n055, 20100 &72 Page 31 are we convinced that Mr. Chernick's analysis of marginal fuel costs (Exh. AG-232, pp. 10-11) is e 'i t h e r a ccu ra te or appropriate. And although we agree with Mr. Chernick that EUA's argument conc e r n i ng relative fuel prices (Exh. AG-232, p.
- 10) does not account for increased saturations of electric appliances, we nevertheless think EUA has provided satisfactory corroboration elsewhere (Exh. M-10, p. II-7; Exh. M-29, IR-2) for the assumptions employed concerning electric appliance saturation rates.
The conversion and replacement rates employed by FUA are, in our opinion, modest and justified. The absolute numbers which result from this portion of EUA's forecast are not exorbitant, nor do we find that Fil A exercised ina ppro pr ia te judgment with respect to the determination of penetration, saturation, conversion and replacement rates. We acknowledge the absence of data analysis to determine these rates. and we would have liked to have seen a more rigorous determination of such rates; l I r I
D.P.U. 10738, 10743, 20055, 20109 &72 Page 32 however, we recognize the di f ficul ty of obtaining reliable data and acknowledge the ne ce s r i ty of a ppl y i ng judgment when such data is i unavailable,
- c. gverage_use_ger_3ppliance Mr. Chernick claims EtI A makes the following four errors in p r o j e c t i ng average use per appliance by assuming that: (1) existing federal Department of Energy appliance efficiency standards will not be met; (2) new, tougher appliance efficiency standards ill not be imposed before 1988; (3) historic declines in hot water a nd space he a t i ng usage will not continue; and (t) decreasing f a mily size will not affect average use (Exh. AG-232, pp. 11-12).
We find Mr. Chernick's testimony regarding efficiency standards unconvincing. The standards to which Mr. Chernick refers and which EUA modifies a re preliminary technologically feasible energy efficiency levels,-and a re presented in a DOE January, 1980, advance notice of proposed rulemaking (Exh. M-6d, p. 56). The standards a re subject
D.P.U. 1073P, 19743, 20055, 20109 &72 Page 33 to modification. Wnen adopted in their final form, they will apply only to appliances l manufactured after June, 1981, and will be phased in over a five-year period. It is our judgment that EUA acted reasonably in the manner in which it incorporated these appliance efficiency improvements into its forecast. Mr. Chernick next criticizes t EUA's forecasted average he a ti ng use figures for inclusion of an unwarranted 197P-1979 increase a nd subsequent constancy (Exh. AG-237, pp. 17-20). He has analyzed normalized space and wa te r he a ti ng consumption iot the period 1976-1978 (Exh. AG-232, pp. 17-20) and finds that each territory has exhibited negative growth in energy consumption during this period (Exh. AG-237,
- p. 17). Mr. Chernick extrapolates this 1976-1979 decline in space heating and water h e a t i ng use over the forecast period, projecting 1988 consumption which is 220 GWH lesc than that projected by EUA (Exh. AG-232, p. 19).
We find Mr. Chernick's analysis and conclusions deficient for several reasons. J
D.P.U. 19738, 19743, 20055, 20109 &72 Page 34 We do not believe that-EUA's average space i heating consumption figures for the forecast period reflect an unwarranted increase from 197F to 1979. EUA employs 1978 average unadjusted KWH consumption figures for each-service ) territory throughout the forecast period (Exh. l M-29, IR-8, 11). We acknowledge the decrease in average use which has occurred since 1975 and a t tr i bu te this decrease to increased energy awareness and conservation by consumers. We reject the claim. however, that the 1976-1979 i trend is likely to contine~ as Mr. Chernick has predicted. We do not find this prediction plausible. We find similarly with respect to , water heating. Mr. Chornick's final criticisn with re spe ct- to average use per a ppli a n ce is that EUA has erroneously assumed that reduced family size does not affect average use. We j note that the reduction in family size predicted by EUA is on the order of a tenth of a person (Exh. M-76, p. 2), while that suggested by Mr. Chernick is considerably less (Exh. AG-237, p. 6) . l t - - - . . _ _ _ _ s _ ,_
1973P, 14743, 20055, 20109 &72 Page 35 D.P.U. The Tennessee valley Authority study results presented by Mr. Chernick, that a household reduction of one child for an average EUA sized family results in 16.1 percent less electricity consumed (rxn. AG-232, p. 22), deals with family size enanges ten times as large as those predicted for F t1 A ' s service territory. We find no evidence in the record which suggests a proportionality effect (which would reduce the total electricity consumption effect to 1.6 percent for each one-tenth of a person reduction in household size), nor do we believe such a proportionality effect is likely. While we agree that the consequences of reduced family size as suggested by Mr. Chernick (Exh. AG-232, I
- p. 21), with the exception, perhaps, of home f occupancy, are likely results, given the family size reduction and time period under consideration, we feel that the home, refrigerator and freezer size effects are unlikely to be experienced. We find the magnitude of the remaining consecuences to be extremely uncertain. In general, we find the
._= - . _ - .
1973P, 197d3, 20055, 701n9 &72 Page 36 D.P.U. household size reductions under consideration to be of a sufficiently small magnitude as to have l l a nealigible effect on FUA's projected average electricity consumption per household. l
- d. Base _Use To calculate base use, EUA applied saturation rates to the average use of six major household appliances for specified historical years and subtracted the resulting average effective use from the total average use of a non-electric space heating customer (Fxh.
M-14, p. 8). To derive annual electric space he a t i ng average use, EUA subtracted the sur of average effective appliance use and average base use from average total use for a space heating customer (Exh. M-14, p. 8). Mr. Chernick criticizes the use of constant saturation rates for major , appliances during the historical years 1975, 1976 and 1979, and the use of increasing saturation rates for these appliances during the forecast period (Exh. AG-232, p. 22). He also faults EUA for failing to acknowledge
4 D.P.U. 19738, 19743, 20055, 20109 &72 Page 37 substantial space and water he a t i ng usage decreases over the same period in its base use calculations (Exh. AG-232, p. 22). Mr. Chernick produces new base use figures (Exh. AG-232, pp. 23-24), consistent with saturation assumptions i in EUA's forecast, which show negative growth in base use for each service territory. In rebuttal testimony (Exh. M-76, pp. 3-15), Mr. Gmeiner points out several errors in Mr. Chernick's analysis. The most crucial error, in our opinion, is Mr. Chernick's
; inclusion of the space and wa te r heating reduction d ue to normalization in the base use 1
category. We agree with Mr. Gmeiner that base use should be i nde pe nd ent of space a nd water heating electricity usage (Exh. M-76, pp. 7-P). We think that the large decreases in base use i produced by Mr. Chernick are due largely to this analytical error. We now turn to the issue of major
- appliance saturation. rates as used in the base .
i use calculation. The Company asserts these rates were constant during 1975-1978 (Exh. M-76,
. _ . _ . - ~ _ _
D.P.U. 19738, 19743, 20055, 20109 &72 Page 39
- p. 12). Mr. Chernick prefers to utilize the saturation rate increase predicted by EUA fo r 1979-1980, as evidenced for Brockton in Exhibit M-10, pp. 11-16. We note an absence of data in the reco rd regarding major app)'ence saturation rates for tne years 1975-1979, 10/ and therefore will deal with this issue by e x a m i n i ng the actual base use growth rates predicted by E U'A .
EUA's analysis of base use growth is presented in Exhibit M-14, pp. 6-10. Compound growth rates for each of the three service territories are on the order of 12 percent for 1960-1970, 6.5 percent for 1960-197P/1979 and slightly less than 1 percent for 1970-1979. 11/ EUA utilized roughly
-- _=----------- . --_ -------___
10/ Exh. M-29, IR-2 provides incomplete data on saturation rates. 11/ The actual 1970 to 1978 rates for FIackstone and Fall River are .P3 percent and
.70 percent, respectively (Exh. M-14, p. 10).
The rate for Prockton based on a 1970 average use of 1,P24 KWH (Exh. M-14, p. 10) and a
. recalculated 1979 average base use of 1,941 KWH (Exh. M-76, p. 10) is .69 percent.
1 1 D.P.U. 19738, 19743, 20055, 20109 &72 Page 30 4 one-half the 1960-197P growth ra te for the forecast period, relying on judgnent for the selection of this f ig u re (Tr. 20, pp. 57-59; Exh. M-14, p. 10). We note both petitioner's and
- intervenor's acknowledgement that historical base use figures have both an existing and "new" component. We see the majority of increases in the former component coming from two basic sources
- more intensive use of appliances already owned by consumers and tne purchase of
. additional appliances which are not new to the market. The latter component is equivalent to EUA's new developments category. We consider 1970-197P/1970 to be the most relevant period for a s se s s i ng growth in the base use category. In this instance, the more recent past, 1970-1978/1979, is a more reliable guide for the future than data (1960-197P) which includes d e m a nd patterns that are no longer relevant for forecasting purposes. We . t he r e f o re adjust EUA's base use growth, exclusive of new developments, to increase at
. ~
Page 40 D . P . t! . 19738, 19743, 20055, 20109 &72 4 the historical rates observed for this period.
- e. New_ Developments EUA forecasts the electricity ~
consumption of a new developments category to account for demand attributable to pr e sen tl y 11). Mr. unforeseen appliances (Exh. M-14, p. Chernick argues that historical base use data includes a consumption effect attributable to new developments, and that the inclusion of a separate new developments category for the forecast period double-counts electricity ~ 4 consumption attributable to new developments (Exh. AG-237, p. 27). We acknowledge the overlap a between ba se use and new developments, a nd agree with Mr. Chernick that EUA's method of accounting for such growth is analytically incorrect. When employing an engineering analysis which accounts for electricity consumption by end-use category, one must factor out of the agg r eg a te category 12/ (in this 4 T77- TETi citegory Ti Torecast Eisid upon Historical consumption patterns.
. y
, 2 .- sw.m -, - ,
D.P.U. lo73P, 19743, 20055, 20109 &72 Page al instance, ba se use) specific end-uses (e.g., i new developments) which are forecast separately. A component of the historical consumption in the aggregate category is due to tne now se pa r a tel y forecasted specific end-use. The result is double-counting unless this overlap is ac knowledg ed and somehow factored out of base use. EUA reasons that it has indeed conceptually adjusted its forecast for this overlap (Exh. M-14, p. 10). Selecting the 1960-197P compound growth ra te as the relevant i period, E tt A determines base use, including all components, to have g rown at around 6.5 percent. E tl A concludes that base use, less new developments, has g rown at around 3.5 percent. New developments, Ell A reasons, will comprise 8 percent of 198P average residential consumption (Exh. M-10, p. II-10), and smooths this new developments consumption judgmentally back to 1981. The sum of new developments and base use produces a growth ra te of arp:nr.imately f 5 percent (Exh. M-la, p. 10), which compares 4
1 . . 1 i i t D.P.U. 19738, 19743, 20055, 20109 &72 Page 42 favorably with the identified 6.5 percent
! benchmark.
We find EUA's conceptual i re a son i ng- i ntui tively attractive, especially in 1
! light of wnat we see as considerable i difficulties in id e n ti f yi ng t he historical i
i occurrence of new developments and factoring i i this consumption out of base use. However, as we disagree with EUA over the relevant base use historical period, we do not accept EUA's t figures. We find the 1970-197P/1979 compound g ro wth rates to be appropriate estimates for base use growth due to the prev'ously identified former component of base use, but too conservative to include growth in ba se use d ue to new developments. We conclude that an additional .3 percent growth in base use will account for growth attributable to new developments. We therefore eliminate EUA's se pa ra te new developments category, a nd adjust base use to grow at compound rates, inclusive of new developments, of 1.13 percent for + 4
, ,, , . - - - , - - ..m, .--
D.P.U. J9738, 19743, 20055, 20109 &72 Page 43 I Plackston , .99 percent for Prockton, and 1 percent for Fall River. I We summarize the result of our adjustments in Table 1. e 4
O 5 Page 44 D.P.U. 1973P, 10743, 20055, 70109 &77 l TABLE 1 EUA RESIDENTIAL ADJUSTMENTS (MWH) Exh. M-10 l 15'79 1988 i Pil-13 Blackstone 70,579 customer number 66,379 304,898 425,962 total residential (195,433 ) (less new dev. & base use) (113,332) avg. base & new dev. 1,702 1,883 i
@l.13% 113,348 132,900 plus eff ective base use 363,429 Total Adj'd Residential 304,914 l Pil-16 Brockton 102,588
- customer number 88,612 633,962 876,756 total residential (303,865)
(161,390) (less new dev. & base use) avg. base & new d :v. 1,f ti 1,990
@.99% 204,132 plus effective base use 161,362 Total Adj'd Residential 633,934 777,023 Pil-19 Fall River 46,429 customer number 44,795 196,823 272,251 total residential (127,772)
(less new dev. & base use). (75,248) avg. base & new dev. 1,837 1,680 l @l% 85,308 plus ef fective base use 75,256 Total Adj'd Residential 196,831 229,787 1,135,679 1,370,239 Compound Growth 2.11% EUA Total Adj'd Residential 4 e
-mv,.. a.- , , . - - . _ . _ . - , - ~- - , , , , , ------4
. -. . = _ - . -. __ -. _ .. . _ . .- - _.
. o D'. P . U . 19738, 19743, 20055, 20105 &72 Page 45
- 2. Industrial Forecast i
EUA forecasts industrial growth i by separating the industrial sector into two categories. One consists of known, large industrial customers and the other of EUA's remaining small industrial customers (Exh. M-10,
- p. II-26; Exh. M-29, IR-22). Historical da ta is then adjusted to account for patterns FUA considers aberrant, namely, the departure of certain customers from FUA's service territory ,
(Exh. M-29. IR-22; Tr. 22, pp. 6P-69). Adjusted historical da ta is analyzed, and, in nost instances, FUA applies the 1970-1979 compound growtn rate as a simple g rowth r a te in the j latter years of the forecast, and smooths the simple growth rate in t he immediately preceding years back to the simple growth rate experienced in the last historical year, 1979 (Exh. M-29, t IR-22). 13/ The exceptions to this procedure are for Blackstone, which also has a level adjustment for specified forecast years to I37- I939-actuaII9 contains only tEree Eonths of historical data. k
Page AA D.P.U. 1973P, 19743, 20055, 20109 &72 . 4 e account for known, anticipated load changes (Exh. M-29, IR-22, pp. 1-3; Tr. 72, pp. 60-65), ' Brockton's small i nd u s t r i al class, for which the ' i 1979 simple growth rate of 42 percent is increased to .5 percent by 1993 and applied IR-??, pp. 4-5), constantly thereafter (Exh. F-29, and Fall River's small industrial class, for which the 1970-1979 compound growth rate is applied evenly throughout the f o re ca st period (Exh. M-29, IR-27, pp. 6-7). Pr. Chernick makes three general First, I criticisms of EUA's industrial forecast. i he takes issue with the propriety of adjusting ? I historical da ta as EUA has done (Fxh. AG-232, i pp. 37-33). The net effect of such an l
' adjustment is to a t tenua te the actual out-migration of industrial customers ex pe r i e nc ed by EUA.
This adjustment masks the true desirability of EUA's service territory to industrial customers. Mr. Chernick notes that l including all historical data would decrease service territory historical growth rates, actually making the growth rate negative fo r l
l t Page 47 D.P.U. 19738, 197d3, 20055, 20109 &72 large Fall Diver customers (Exh. AG-232, p. 33). Second, Mr. Chernick faults EUA's me t hod of subjectively interpolating forecast growth rates from the 1979 simple growth rate to the 1970-1079 compound growth r a te in 198P (Exh. AG-232, p. 33). Pr. Chernick points to E l'A ' s M-29, volatile historical i nd u s t r i al sales (Exh. IR-22) and states there is no justification for a s s um i ng that short-term growth will approximate 1979 growtn. He suggests EUA might more reasonably use the 1970-1979 c o m po u nd growth rate to apprcximate the forecast period growth
- p. 33; Tr. 41, p. III -
rate (Exn. AG-232, Third, Mr. Chernick faults EUA's methodology of se pa r a t i ng the industrial class into two categories which consume significantly 41, pp. different amounts of electricity (Tr. 18-19; Tr. 42, pp. 23-26). Such a me thod places undue emphasis on small, rapidly growing ' categories and results in a higher composite growth ra te than would calculating a growth rate . for the industr'. class as a whole. First, we no te that. industrial 4 i l
)
)
_ _ _ _ ~ . _ _ . . . . _ . . - - - . _ .-- . D.P.U. 19738, 19743, 20055, 2n109 &72 Page aP growth ratts in EUA's service territory have IR-22, pp. 2, 4, t indeed been volatile (Exh. M-29, 67), even to the point of being random. This r fact leads us to disagree with Mr. Chernick that unadjusted sales da ta is more informative, especially of structural or macro-economic conditions, than is adjusted data. The seemingly random fluc tua ti ons in EUA's t industrial d a ta tell us no t hi ng about economic conditions for industry in the EUA service i j territories. We find EUA's adjustments warranted, especially in light of the asserted unusual circumstances behind the d e pa r tu re of the two large industrial customers in Fall River (Exn. M-29, p. 6; Tr. 22, pp. 68-70) and the ( sudden and very likely non-representative sales decrease in Brockton d ue to the loss of two large industrial customers in 1974 (Tr. 22, pp. 65-67). Given the small number of large industrial customers in t he se two territories . (four in Fall River, nine i n Brockton), 14/ 14/ Exn. M-29, TR-??. ry+ + . , , .y7 .m. .._.-9
- ._ ~_.- - - . _._- - - . --- - -._. _ _ - . . .
I Page do D.P.U. 1973P, 10743, 70055, 70100 &72 s 6 inclusion of the d a ta in question may result in , non-representative growth patterns. 'r. i Chernick's analysis of Fall River (Exh. AG-232, i is a case in point. Including all data P. 35) l for the large industrial group results in a -6.34 percent compound growth rate over the 1070-1079 1 historical period. A ppl y i ng this value to the forecast period results in 19PP consumption of
' 18,492 MWH (compared to 1979 consumption of 43,064 MWH). 15/ This value indicates the loss of pe r ha ps two of the remaining four customers, i
There is no evidence to suggest such an outcome 1s likely. Mr. Chernick's adherence to historical data, without interpretation of his results, s i m pl y for the sake of consistency (Tr. 41, p. 20) is inappropriate. We therefore allow EUA's adjustment of historical data. We also disagree with Mr. Chernick's third criticism. We find that the volatility of EUA's industrial d a ta necessitates disaggregation to obtain meaningful results. We a ------ - __ Exh. M-79, IR-22, p. 6. 15/
. -_ . _ _ - - . _ . - . - _ - -- ~ _ . . ._ _ - - . .
Page 50 D.P.U. 1973P, 10743, 20055, 20109 &72 .
- =
note that Mr. Chernick is correct with respect j .c c to his mathematical observation concerning I disaggregated growth rates (Tr. 42, pp. 23-26); however, he provides no rationale for the , ( i l employment of his recommended " aggregate" me thodolog y o the r than to achieve a lower i forecast. We find this approach unacceptable. It is quite likely, in view of the randomness of EUA's industrial data, that f o r e c a s t i ng the i industrial class as a whole will underestimate , EUA's true industrial growth. We find EUA's method of disaggregating the industrial forecast acceptable. We find Mr. Chernick's second criticism to be well founded. We can see no rational justification fo r employing the 1970-1979 compound growth ra te as a simple growth ra te in the latter years of the forecast, and smoothing the p r e c e d i ng yearly simple growth rates back to the growth rate for the final historical year. We note that the net effect of such a ; methodology is to. produce compound growth rates for the forecast period which are larger than , l
Page 41 D.P.U. 19738, 197e3, 2nn55, 20109 &72 the 1970-1979 compound growth rates. EUA has provided no evidence wnich suggests such a result will indeed obtain, nor has it provided adecuate justification for the use of this methodology. + While we have previously noted the great volatility of EUA's historical industrial data, we see no better evidence in the r eco rd to use for p r o j e c t i ng industrial growth during the forecast period. We are reluctant, however, to include projected 1979 IR-22, p. 2, fn. 1) as pa r t of data (Exh. P-29, the h i's t o r i c al period. We prefer to accept 1970-1979 as the relevant historical period for analysis, and with the exception of Brockton's small industrial class, apply the 1970-197P ad j us ted c o m po u nd g rowth rates to the forecast period (1978-19PP) for each industrial class in ^ each service territory. Brockton's small industrial class has experienced a very nearly steady. declining . growth rate from 1970 to 197P (Exh. M-29, IR-22,
- p. 4), r e sul t i ng in a compound growth rate of -3.63 l
Page 57 D.P.U. 19738, ~147t3, 20055, 20109 &77 l ' percent. FUA attributes this decline to a , 5); failing snoe industry (Exh. M-29, IR-72, p. ' however, we no te a f a i rly consistent historical (1970-197P) pattern of declining or_near constant consumption for thirteen of the l nineteen industrial classifications wi th positive consumption in Table E-a of Exhibit M-10 M-10, p. IV-3). We are unwilling, however, (Fxh. to project negative growth-for this class without additional evidence. We therefore limit 4 Brockton's small industrial class to a zero growth rate _over the forecast period. We summarize the result of our adjustments in-Table 2. 4 4 e
4 i D.P.U. 19738, 19743, 20055, 20109 &72 Page 53 J Table 2 EUA Industrial Growth (MWH) i Blackstone Prockton Fall River Total 1978 MWH O large class2 / 189,792 49,063 41,876 small class 342,956 88,240 107,133 Total 532,748 137,303 149,009 819,060 Compound Growth Rate large class 1.10 % 4.04 % 1.77 % i small class 1.80 % 0% 5.82% j Total (1978-1988) 2.06 %E 1.62 % 4.82 % 2.54% 1988 MWH 7 i large class 211,733 72,930 49,931 l small class 410,076 88,240 188,635 level adjustment 31,300 Total 653,109 161,170 238,566 1,052,845 II Large and small class data taken from Exh. M-29, IR-22. E' Brockton and Fall River are adjusted (Exh. M-29, IR-22, pp. 4,6). EI includes level adjustment of 31,300 MWH. ] m - r . . , - - - - , -+g , ,,-,w- -+ ,eu-~ ~ , - - - - - -
._. . , . . .- ~ .
( 1973P, 19743, 20055, 20109 &72 page 54 P.P.U. 9 3* EEb_E9EE*E2i BS_[959 cast EUA forecasts commercial consumption for each service territory using M-10, p. II-21; Exh. regression analysis (Exh. M-14, p. 19 ) . This procedure entails separately i e s ti ma t i ng the number of commercial customers as a function of population and family size, and average use per commercial customer as a function of population and the ratio of ! M-10, t r e sid e n ti al to commercial customers (Exh. i I p. II-21; Exh. M-29, IR-13). The number of commercial customers is then mu l t i pl i ed by average use per commercial customer for each year of the forecast to derive total average commercial consumption (Exh. M-14, p. IP; Exh. M-10, p. II-21). To total average commercial l consumption EUA then applies a conservation i ' adjustment, reducing 1989 commercial consumption by 10 percent (Exh. F-10, pp. II-22, 23). Mr. Chernick criticizes EUA's commercial forecast as based on unsound . , methodology (Exh. AG-232, p. 'n). Specifically, M r.. Chernick posits that the number of i i
- . , , e n - -
Page 55
.D.P.U. 1973P, 10743, 20055, 20109 &72 commercial customers is not a useful predictor of. commercial use; that EUA's data and I
' projections reflect subjective adjustments (Exh. M-20, IR-16, 13); and that the regression equations tested and selected are frequently inappropriate (Exh. AG-232, p. 30). Mr. Chernick posits that i commercial electricity use can vary widely-For this a cco rd i ng to business t y pe and size. reason, commercial customer number is not a " natural unit" (Exn. AG-32, p. 30) and, presumably, does not convey information reflective of commercial i " use. Mr. Chernick also asserts that EUA's choice of variable and functional specification has no logical or theoretical
~
Furthermore, foundation (Fxh. AG-232, p. 31). for tne commercial customer number model,.Mr. Chernick notes that for Blackstone, household size has a po s i ti v e coefficient; that for Brockton, this variable has a negative i r i coefficient; and that for Fall River, regression analysis produced no acceptable results (Exn. t i _ ~ _ . .
D.P.U. 1973P, 19743, 20045, 20109 &72 Page 56. 1 . 1 AG-232, p. 32; Exn. M-29, IR-13). We have examined EUA's commercial forecast carefully (Exh. M-14, pp. 19-19; Exh. M-10, pp. II-2-to II-25; Exh. M-20, IR-12, 13, 14, 15, 16, 17, 1P, 19, 21) and find that it suffers-from a number of methodological flaws which concern us. First we will address Mr. Chernick's concerns; then we will address our own. We agree with Mr. Chernick that i the number of commercial customers is not a
" natural unit" for conveying information r eg a r d i ng commercial consumption. We a re not persuaded, however, that this' variable cannot be i e
> used e f f ec tively' to predict cornercial , consumption, regardless of the methodology employed. Our concern, therefore, is with how this variable is used, not whether it should be used at all. We do not think the record supports the conclusion that there is so much variability a mo ng the various commercial
~ establishments'-yearly consumption that 'one cannot me ani ng f ully multiply average commercial i
- - - - - n.
D . P . II . 19739, 147d3, 20055, 20109 &77 Page 57 consumption. by number of commercial customers to derive average total commercial consumption. We a l so agree that EUA has employed numerous subjective adjustments to data M-29, IR-13, pp. 2, and regression results (Exh. 5, P, 11, 15, IR-16), but do not find these ina ppro pr ia te in every instance. Specifically, those adjustments made to residential customer counts (Fxh. M-29, IR-14) we find acceptable. Those adjustments made to regression results 16/ we find most unusual a nd of questionable theoretical (especially statistical or e co n ome t r i c) justification. In fact, these adjustments bear on the appropriateness of usirg EUA's econometric analysis as a general model for the commercial class. J Tnis brings us to Mr. Chernick's t hi rd criticism, which we will ex pa nd upon in 1 order to more fully address our own concerns. T37- wi TETii spicificalIy to utiTTiation of the upper and lower. limits of the 99 percent confidence interval in place of predicted values (Exh. M-29, IR-13, pp. 2, P, fn.1). i e
D . P . t! . 19738, 19743, 20055, 20104 &72 Page 59 E t1 A employs multi-variate regression analysis to estimate the number of commercial-customers as a linear function of population and family size (Exh. M-10, p. II-21). I T ne latter explanatory variable, family size, is the same variable employed in the residential model (Exh. M-In, p. II-22), where it is defined as the ratio of people (or po pul a t i o n) to number IR-13; Exh. of residential customers (Exh. M-29, M-10, p. II-5). Data from each service territory are regressed using this model (Exh. M-20, IR-13). We have examined the regression results for each service territory (Exh. M-29, IR-13) and find tnat they indicate the pr e se nc e of numerous statistical problems. First, we , l note that r. o acceptable results were obtained for Fall River (Exh. AG-232, p. 32; ' Ex h. M-20, IR 23, p. 13). Second, we note that the Durbin-Watson statistic for Blackstone 17/ f - - - - - - - - - - - -- - -- 17/
- d=.51004(,d =1.05 for N=18, k'=2, L,.05 where k'= Number of explanatory variables.
i h 4 L
D.P.U. 19738, 19743, 20055, 20100 &72 Page 50 (Exn. M-20, IR-13, p. 3) indicates the presence ! of positive autocorrelation, as does the Durbin-Watson statistic for Brockton. IP/ I Also, the Blackstone simple correlation coefficient for the independent variables 19/ is sufficiently high to i ad i ca te to us the existence of problematical multicollinearity, and the Brockton simple correlation coefficient 20/ indicates rather serious multicollinearity. We do not find th presence of mul t i colli ne a r i ty surprising, since botn explanatory variables, population and family size, or the ratio of population to number of residential customers, have the variable population in them, and there f o re are quite likely to be correlated. We interpret the existence of autocorrelation and multicollinearity as seriously oroblematical in that these phenomena bias the estimated 18,/ k'=2. d=.85336<dL, 05=1.02 for N=17,
-19/ r=.6116 (Exh. M-26, IR-13, p. 3).
-20/ r=.8421 (Exh. M-26, IR-13, p. 9).
l l l l m 9 w
I
)
Page 60 l D.P.U. 1973P, 19743, 20055, 20109 &77 . regression coefficients, a nd we d i s ag r ee with Mr. Marien that the existence of these phenomena is not of sufficient cause for concern to employ standard statistical procedures to correct for their presence. We are further disturbed by o ppo s i te signs for the family size variable in M-20, the Blackstone ecuation (positive, see Exh. IR-13, p. 1) Ja nd in the Brockton equation (negative, 1
! see Ex h . P-20, IR-13, p. 7). This result leads
' us to cuestion the plausibility of EUA's proposed model.
i FUA. also forecasts average per customer commercial use using multi-variate regression analysis. Commercial average use is 4 forecast as a linear function of population and the ratio of residential to commercial customers. Wnile the Blackstone ecuation exhibits satisfactory test statistics (Exh. M-?o, IR-13, ' pp. 5-6), we do not find similarly for the Brockton and Fall River equations. . E
- _ _ _-. , ,, ,. , - , . . . - .. ._ .,c.- - . _ , _ . _ _ , _ _r ,_-y..
1973P, 19743, 20055, 20109 &72 Page 61 _D.P.U. Specifically, the Brockton equation exhibits autocorrelation. 21/ In addition, the coefficients for the 1 residential /connercial customer ratios for both t he Brockton 27/ and Fall River 23/ equations a re not statistically significant. Finally, we note sign changes for the coefficient to tne residential / commercial customer ratio among the equations for the three M-29, IR-13, pp. d, 10, service territories (Fxh. 18). 24/ Tne problems we nave identified with the relatively sophisticated approacn in 21/ d=.51978<.d L,.05 =1.02, N=17, k'=2 (Exh. M-29, IR-13, p. 12). 22/ Tne tequation
*tatistic indicates for tne coefficient in tne Brockton that the coefficient is not statistically different from ze ro at the 33 percent sinnificance level (t ecuals -1.002; Exn. M-29, IR-13, p. 11).
23/ The t statistic for the coefficient in the fall River equation indicates that tne coefficient is not statistically different fron zero at the 42 percent significance level (t equals .P37; Exn. M-29, IR-13, p. 15). It is positive for Blackstone, negative for 24/ Brockton and positive for Fall River. As with the customer nunber model, this change in sign leads us to believe that the hypothesized model is not supported by the data, i l
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 42 FUA's commercial forecast are in themselves an indication of the complexity and intractability likely to be encoun te r ed in p r o j e c t i ng this component of demand. We laud, however, EUA's a t tem pt to employ such analysis, and encourage EUA to develop and refine its econometric f o r eca s ting capabilities further. Moreover, we find this sort of analysis, when properly performed,. informative and helpful for managing uncertainty. As a result of our observations co nc e r n i ng ~ technical deficiencies, we are hesitant to accept EUA's commercial analysis as a general model for commercial consumption. However, review of tne historical data relative to total commercial g rowth in the Brockton, Fall River and Blackstone service territories indicates that historical commercial consumption
-patterns yield compound arowth rates generally .
1973P, 19743, 20055, 20109 &72 Page 63 D P.U. in excess of those projected by FUA. 25/ In 4 fact, of the twe n ty-e ig ht total commercial growth rates which can be d e r iv ed for the total system and tne three service territories by using 1970 to 1976 actual da ta f or the base i period and 197P actual data for the end period, only the 1976 to 1979 total commercial g rowth for Brockton ir less than the rate utilized by i 15/ Utility companies have traditionally relied on extrapolations of data describing the historical use of electricity to predict future power needs. Piacara Mohawk Power Corp. (Mine File Point), ALX503577~1UFC 377 at 373 7T975). XTtnougn tne compound growth extrapolations we examine are pe r ha ps the simplest form of trend analysis, the state of tne record precludes us from a t t e m p t i ng mo re so phi s tica ted approaches in a number of instances. Our concern ~i s r. 3 t that this t y pe of analysis is inade qua te because it is simple, but rather, that ~ we prefer growth projections t,o be ba sed upon explicitly stated theoretical considerations of the underlying causal r ela t ion s ni ps which deternine growth. Accordingly, we do not expect pe ti tione r s to revert to t he whole sale ' ado ption of this t y pe of trend analysis; indeed, we expect them to j further refine their present efforts. i i ( I k _ ,
, m _ ._ - . _ _. _,
s I i f D . P . tt . 10738, lo7e3, 20059, 20100 &72 Page 64 i ( 4 EUA in its projections; 26/ and, in any event, 4 the total sys tem commercial growth r a te for this ! t period is still greater than tne growth rate i utilized by EUA. 27/ Conseouently, despite our reservations'about t he u tili ty of-EUA's commercial model, we do not find the compound growth rates employed by the Company to be unreaconable.
! 26/ We would no te tnat such a historical trend analysis was utilized by the Attorney General for this very example in an effort to refute EUA's commercial growth projection. Tne ;
Attorney General focused on tne growth .r a te in average consumption per commercial customer and found that average consumption increased by only l 7 percent for the period 1976-197P (Exh. AG-232,
- p. 31). Reliance solely upon average consumption growth data is, however,. misplaced -
since the information tells us nothing about ~ gr.owtn in total commercial consumption, i.e., t te commercial consunption variable in which we
' are ultimately interested.
IV-3, V-3. > 27/ See Exh. M-10, pp. II-25, III-7, 1 1 5 1 i
l 1973P, 19743, 20055, 20109 &72 Page 65 D.P.U.
- e. W h_o _l _e _s _a _l e __C _o _n _t_r _a _c _t _s i
EUA has forecast sales for resale to non-affiliated customers based on existing contracts and on estimates of contracts which will be-negotiated in the future, FUA asserts that, "In all cases, p r o j e c t .i o ns were made based i l 1 on conversations with these customers on their 1 r e spec tive. f o r e ca s ts" (Exh. M-10, p. II-28). j
' Mr. Cnernick asserts that the. Town of Middleboro i
i "does not need, does not want, and does not intend to take" a 6 MW denand contract which EtI A has forecast (Exn. AG-232, p. 37). We . f i nd no ,. evidence in the record to support this assertion a nd consequently reject this claim.
- 5. Street _ Lighting _and
$1sgellaneous_ Forecast 1
FUA's street lighting and miscellaneous forecast was not conte sted in 4 these proceedings. After careful review, we i accept t he forecast as projected by FUA in Exhibit M-10. . N b i l
~e --
n.- - , . + + - - , . , -
,, , - , , -v -
l D.P.U. 1973P, 10743, 20055, 20109 &72 Page 46 i i i 6 Pggk _Qgmg n d EUA converti sales into peak demand 2P/ as follows. First, EUA weather-corrects by affiliated company the most i recent histotical year's winter peak demand (Exh. M-29, IR-24, 2 5) . Next, for the'same year, weather-edjusted load factors are derived from tne weathe'-corrected peak demands and the actual yearly energy consumption. Then, these load factors are applied to the previously derived 19PR energy forecast to derive company peak demands which entail no additional load management effects. This calculation assumes peak demand and energy will grow at the same r ,a t e . Next, to the 19PP unadjusted (for load management only) peaks, FUA applies a load management calculation (Exh. *-29, IR-26). This produces an aggregate load management result whien in 19PS translates in to an overall 12.8 MF reduction in the previously determined EUA peak (Fxn. M-79, IR-26). Finally, the 19PP weather 29/~~ Peak' demand'or Toad is~ the~ hignest~ demand
~
experienced by the utility during the year. 1 1
Page 67 D.P.U. 19738, 19743, 20055, 20109 &72 and load management adjusted peaks are ' translated into 19PP load factors and smoothed judgmentally back to the last historical year's load factors, and, using forecasted energy i values, intervening peak demands, adjusted for weather and load management, are derived. Mr. Chernick argues that EUA has inappropriately weather-adjusted peak demands (Exh. AG-232, p. 26). FUA uses 15 degrees. Fahrenheit as a winter peak temperature (Exh. M-10,
- p. II-30).
Mr. Chernick a rg ues that this value is too low and tha t EUA should use the service territories' 1970-1978 ave r age tempe ra tu res e.xperienced at winter peak. These values are 22 degrees Fahrenheit, 23 degrees Fa h r e n t.e i t and 22 degrees Fahrenheit for Blackstone, Brockton and Fall Biver, respectively (Exh. AG-232, p. 36; M-29, 19-24, 2 5 ,- 31). Using these values . Exh. would decrease the weather-adjusted 197P peak by about 13.5 MW, 20/ and because the 1979 weather-adjusted. load factors are the basis for the peak ~ demand forecast, Mr. Chernick claims See Exh. M-29, IR-24, 25. 29/ l l l 1
, 1
4 D.P.U. 19738,-19743, 20055, 70109 &77
.Page'6P
- that' this 2.7 percent 30/. reduction in the 107P peak reduces EUA's-projected 10PP peak b y 2. 2.
percent also, tnereby reducing E ll A ' s projected 1988 peak by about 19.MW. I EUA defends the use of 1% degrees Panrenheit as a winter peak base tempe r a tu re on the ground that i t a pproxima te s December's average tempe ra tu re at peak for the last several years (Exn. M-76, p. 71) . Specifically, EUA States tnat the " post-embargo (post-1974) peak temperature averages are in the 17-12 degrees l Fahrenneit range (and tha t) it was these latter averages which EUA used as the guide for its peak temperature ba se of 15 deg rees Fa hrenheit" (Exh. M-76, p. 21). We can see no causal rela tb.n shi p whatsoever between weather-and the 1973-1974 oil enbargo and, in fact, consider yearly variations in weather to be randomly distributed. In light 1 I 3_0 / Mr. Chernick derives 2.7 percent (Exb. AG-237,
- p. 36). We derive 13.5 over 678.P, eauals ?
percent. i I s
i .. .- i
- D.P.U. 19738, 19743, 20055, 20109 &72 Page 69 i of this likely randomness, a larger sample of weather values is more appropriate than the small sample obtained using only post-1974 4
weather values. We note that Mr. Chernick's sample contains e ig ht observations (1970-1977), Whereas FUA's has only three (1975-1077). v'e would in fact prefer to use a much larger data 4 base, but select the largest available in this t record. I Aside from statistical arguments for using a larger d a ta ba se to gene ra te a winter peak base temperature, we also see common sense reesons for doing so. It is more reasonable to assume that the predicted wi n te r i~ peak base temperature employed over the next
~
decade will approximate a long-term historical average rather than a short-term average or - particular historical value. We therefore reject EUA's short-term average winter peak i temperature base of 15 degrees Fahrenheit in favor of Mr. Chernick's lo ng e r-te rm values, and accordingly decrease the 197P weather-adjusted peak by 13.5 M v' . I i .
1 D.P.U. 1973P, 19743, 20055, 20100 &72 Page-70 Mr. Chernick also faults EUA's f curtailment of tne estimated effectiveness of
- load management efforts from 25 percent to only
'10 percent each for the residential ~ and commercial classes (Exh. AG-232, p. 3 4) . FUA explains tnat tnis reduction in effectiveness is d ue to the decreased saturation of electric space heating from the Second to the Third Supplement (Exh. M-29, IR-26). We find EUA's e x pl a n a t i o n satisfactory.
4 Mr. Chernick also faults FUA's exclusion of a load management effect for the industrial class. We ag ree with Mr. Chernick that the effect for this class may be more pronounced than for either the residential or commercial class, but believe EUA's o v e r a ll load management adjustment to this forecast to be reasonable. We would, however, urge EUA to incorporate into future fo reca st s s likely load management consecuence for the industrial class. We translate our findings regardinn EUA's demand forecast i n to a new 199F peak first by reducing EUA's 197F weather-corrected J 1
D.P.U. 1973P, 197d3, 20055, 20109 &72 Page 71 IR-74, 25, p. 7) by peak of 678.9 MW (Fxh. M-29, a 13.5 MW to.665.3 MW. Tnis yields a 197P load factor of 6335. 31/ We apply this adjusted, 1 weather-corrected load factor to EUA's adjusted 198R energy requirements of 4,704,862 MWF to derive a 19PP weather-adjusted peak demand of P47.9 MW. 32/ We then adjust this 19PP peak demand figure to reflect load management by s u b t r a c t i ng from it EUA's estimated 1989 peak demand reduction of 17.P MW (Fxh. M-29, IR-?#). Our calcula tions produce a 19PP weather-corrected and load management adjusted peak of P35 MW with an associated 1989 load factor of 6437. 33/ Our adjustments reduce EUA's compound growth rate in internal peak demand from 3.16 percent 3f/ to 2.33 percent. 35/ We summarize these adjustments in Table 3. 21/ 3692155 (1978 KWH) 665.3 x 8760 3_2,/ 4704862 /
.6335 x 8760
}3/ 4704862 B35 x 8760 "
~
34/ 663 MW in 1978 to 905 MW in 1988 (see Fxh. --- M-11; Exh. v-10, p. VI-7). as/ 663 vv in 1979 to e35 MW in 1998.
+, ..
4 1
- Page 77 10738,-19743, 20055,'20109 &72 D.P.U.
i TABLE 3 4
SUMMARY
OF EUA SYSTEM ENERGY AND PEAK AD3USTMENT 1988 1988 Compound 1978 , M- 10
. unadjusted unadjusted adjusted Growth
' Blackstone (MWH)
I' Residential 425,962
. Unadjusted 301,879 11 - 2 0 363,429 Adjusted Commercial 397,987 397,987 11 - 2 5 Unadjusted 278,944
' ll-26 Industrial 723,969 Unadjusted 532,747 653,109
. Adjusted 26,293 32,284 32,284 11 - 2 7 Streetlighting & Misc.
4,646 4.934 4,934 11 - 2 9 Internal use_ 11 - 2 9 Losses (5.55% of total 87,975 80,572 ~ sales plus internal use) 69,979 1,673,111 3.26 % Total 1,214,488 1,532,315 2.34 % Adjusted i Brockton (MW H) Residential 876,756 Unadjusted 627,687 11 - 2 0 770,023 Adjusted Commercial 730,073 730,073
$26,980
! !!-25 Unadjusted 1.. l 11- 2 6 Industrial 183,330 Unadjusted 137,303 j' 161,170 .
- Adjusted 17,118 24,772 24,772
! ' 11- 2 7 Streetlighting & Misc. 1,793 2,141 2,141 11- 2 9 Internal Use i 11- 2 9 Losses (7.37% of total 133,918 12'4,419 sales plus internal use) 96,763 4 I 1,950,990 3.32 % Total 1,407,644 1,812,538 2.56 % Adjusted f
1 D.P.U. 19739, 10743, 20055,'70109 &72 Page 73 1978 1988 1988 Compound M- 10 adjusted Growth unadjusted unadjusted i Fall River (MWH) Residential Unadjusted 194,874 272,251 11 - 2 0 229,787 Adjusted Commercial 260,732 Unadjusted 215,495 260,732 11 - 2 5 Industrial 11 - 2 6 Unadjusted 149,009 217,366 238,566 i Adjusted Streetlighting & Misc. 7,053 9,425 9,425 11 - 2 7 1,704 1,923 1,923 11 - 2 9 Internal use 11 - 2 9 Losses (6.05% of total 44,796 sales plus internal use) 33,584 46,083 601,719 807,780 2.99 % Total 783,229 2. 7% Adjusted Montaup (MWH) VI-2 Sales to Subsidiaries 3,223,851 4,431,881 4,130,142 Adjusted 401,598 488,808 488,808 VI-2 Contract sales 11 - 2 9 Losses & internal use (1.86% of sum of retail 85,912 and wholesale sales) 66,706 91,524 3,692,155 5,012,213 3.1 % Total Adjusted 4,704,862 2.45 % 663 905 3.16 % Peak MW 2.33 % Adjusted 835 i d 1 l l
*s se 19738, 19743, 20055, 20109 &77 Page 74
! D.P.U. J i i 7 _Efiflye_faggins_ang_tpg_yggp for_ Power We have reviewed EUA's demand forecast in great detail and made numerous adjustments to it. Our principal concern here is whether FUA will have adequa te power to reliably meet the future demand of its customers. 1 Pasic to this concern is the duty of EUA to meet this future demand when it becomes actualized. 4 In practice, EUA satisfies this duty by obtaining generating c a pa c i ty sufficient to meet criteria set by NEPOOL. T he focus of these j criteria is to ensure that petitioner has a minimum reserve margin 33/ greater than its 3 forecast annual peak load sufficient to ensure system reliability during routine maintenance, 1 unan t i ci pa ted forced outages and unexpected 4 increases in peak demand. FUA has adopted a 22 percent
' reserve margin in pr oj ec ti ng its system
- ~37-3 Wiiiive EirgTE Ts tEi HTTTiriEci Eitseen total system generating capacity and adjusted peak demand. When ex pre s sed as a percentage, tnis difference is divided by adjusted peak demand.
l i l l l
D.P.U. 1073P, 107t3, 20055, 2n100 &72 Page 75 generation needs for the power years 19P6/ lop 7 to 199n/1991 (Exn. M-11). In the hearings and i briefs subsecuent to our June 28th Order, the Attorney General did not address the issue of reserve ma rg i ns and, with the exception of updating Exhibit .M - 2 to Exhibit M-11, neither did EUA. 37/ Prior to our June 28th Order, however, the Attorney General conducted extensive cross-examination on this issue and argued t na t EUA's forecast of anticipated i~ reserve margins was deficient. 3A/ Tne Attorney General argues that the forecast is deficient because it is I dependent upon arbitrarily-inflated NEPOOL reserve. margin forecasts and because EUA's forecast produces greater reserve margins than NEPOOL's forecast. We do not agree with the Attorney General that'NEP00L's 1 percent bandwidth simply serves to inflate capability . I responsibility b'y 1.' ? percent a nd thereby 37/~~9i Hoti tnit- ExE7 F-11 Eii giniri!Ty lower estimated reserve margins than Exh. M-2. 38/ D.P.U. 19738/19743 AG initial brief, pp. 41-e6; riply'brief, pp. 26-32.
-l 0 i 1973P, 10743, 20055, 20100 &72 Page 76 l D.P.U. provides a market for large participants' excess capacity. For the purposes of this proceeding, we find that use of the 1 percent bandwidth mechanism to limit the effect of NEPOOL participants' incorrect f o r e c a s t i ng of demand on the reserve reauirements of participants who correctly forecast demand is reasonable and not arbitrary. 30/ Nor.do we agree that the forecasted 1984/1985 NFPOOL reserve margin is spuriously inflated by 1.P percentage points. 40/ Table 2 of Fxhibit AG-P3 predicts a decrease i n reserves due to load shape in 1977-197P; tnis prediction correspor.ds with the 4 deeper demand valleys experienced in 197P. e While the experienced 1978 valleys may be deeper than those predicted, the forec?st correctly predicted the direction of change due to load shape and tne attendant lessening of forecasted r e qu i r ed reserves implied by that change in 357~~DIPIET I5'3P7T5'iT3-TrT~ ppt 53525297 Exh.- KU-35, pp. 1-2. 40/ D.P.U. 1973P/19743 AG initial brief, pp. 43-44 _S _e _e Exh. AG-P3, cover letter,-Table 7. n , ,---7s p- -a - , ,, .y=, y
1073P, 19743, 20055, 20109 &77 Page 77 D.P.U. , direction. We f i nd that the experienced confirmation of this forecasted change tends to valida te the 19P4/19P5 predicted load curve reserve margin effects rather than, as the Attorney General suggests, i nd i c a t i ng that tnose forecasted effects are spurious. In any event, it is clear that Mr. Gmeiner did not depend solely upon Exhibit AG-83 (the January 1978 NFPOOL Capability Responsibilities Re po r t) for projecting EUA's 19P6 to 1991 reserve requirementa. We no te the report does not extend beyond 1985. Mr. Gmeiner's testimony indicates he used t ne pool estimates in tne exhibit as quides (D.P.U. 1073P/19743 j Tr. pp. 1377-9), a nd that he rejected the FUA specific estinates (ibid., Tr. p. 1376) as inappropriate since EUA had historically never ex pe r i e nc ed required reserves that low (ibid., Tr.
- p. 13PO). Mr. Gmeiner's testimony further indicates nis reserve requirement projections were ba sed on a combination of discussions with NEPLAN staff (ibid., Tr. pp. 246-24P), different schedules for nuclear' generating. units, his 1
I l l l l l l
. . = . . . . .. .
10738, 197t3, 20055, 20109 &72 Page 7P D.P.U. , professional judgment as an expert in the field i and EUA's actual reserve margin requirements of , 4 22 percent, 20.2 percent and 22.2 percent for tne last three power periods prior to his forecast. 41/ We find this combination of factors a reasonable basis for EUA's reserve U I margin projections. That the EUA system has I ex pe r i e nc ed recuired reserves in excess of 22 percent would in itself be a reason for caution in p r e d i c t i ng these requirements to be substantially ; ass than ?? percent. In addition, EUA's relativ .lat load curve (ibid., Tr. p 537) further tends to drive up EUA's required reserves. Fased on the recofd before us concerning reserve margins, we find FUA's utilization of a 22 percent reserve margin is a i reasonable upper limit for this critical index of system reliability. t By our calculations, with no 4 l additional power, Montaup will have a 19P9 : 4 T7~~5e e~g e n e~aTT[ D. P . UI 15 7 3 F /10 7 4 3 Tr. pp. l 270-2577 533-542, 1365-1400. i
~1 l
D.P.U. 19738, 19743, 20055, 2010o 672 Page 70 reserve margin of 15.? percent; 42/ tnis is clearly too low to ensure system reliability. Addition of 23 MW, tne power represented by the proposed PSCO accuisition, will increa se the reserve margin to IP percent. In light of our previous discussion, this reserve margin is clearly justified. Inclusion of the power r e pr e se n ted by the proposed UI and CL&P purenases (24.9 MW and 23.P1 FW) will increase Montaup's 19PP reserve margin to 21 percent and 23.P percent, respectively. This range brackets the 27 percer,t reserve margin we previously found a reasonable upper limit for system pl a n n i ng purposes. Tne Attorney G<neral has also argued that the Company's projected reserve margins are inflated by unrealistic nuclear construction senedules. We no te that EUA's projected 1988 generating capability assumes 71 MW from Pilgrim II and Millstone III (Exh. M-13). 32/ 962 = 1.15,4 g73
1 D.P.U. 1973P, 19743, 2nn5F, 2n100 &72 Page PO If this power is unavailable, 43/ EUA's 19PP reserve margin will range between 6.7 and 15.2 percent assuning no additional Seabrook to the full 71.3 MF Montaup proposes to accuire. Tne upper limit of tnis range is still significantly lower than the 17 percent NTPOOL Objective Capability based upon the inclusion of up to two imnature 1,1n0 to 1,200 MW nuclear units (Exh. AG-14n, p. E-3). Witn the deterrination of both future demand and the likely availability of supply to reet tnat denand, the calculation of an electric syster's reserve margin is straightforward. Due to the complexity of ev al ua t i ng supply and demand estimates, however, we find little comfort in being able to reduce these complex u nd e rl yi ng inferential chains to a single number. Seeing ten years into the future witn accuracy cannot be ex pe c ted . Forecasts of 73/~~Tndiid- ipart- from-unaviIlabTITty-dui to seneduling delays, Mr. Chernick believes there is a substantial probability tha t Pilgrin II will not be completed and that there is less than a 50 percent probability it will be on line by 1991 (Tr. 30, p. 130).
D.P.U. 1973P, 197A3, 20055, 2nloo &72 Page P1 demand, supply and reserve margins, however, cannot be avoided. As we stated above, our principal concern is assurance that EUA will have adeouate power to reliably meet the future d e ma nd of its customers. We have estimated EUA's growth in peak to be about 2.33 percent. Based upon this projected growth and upon Montaup's projected 19PP system capacity and capability responsibility, we find these projections reasonably support a need for a maximum additional interest of 56 PW in the Seabrook project.
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 92 C. F i t c hb u r g_ De m a n d _,Fo r e c a s t i F i t c hbu rg forecasts its prinary energy requirements in its Long-Range Forecast,
; Supplement Ic (Exh. FGF-7) by separately estinating tne energy demands of its residential, i
commercial and municipal, and industrial classes. 4 i These demands are summed for each year to produce a yearly forecast through 1999 i Fitchburg's peak load forecast is then derived from the energy forecast using 1
- customer class load curve informatior. (Exh. FCF-7,
- p. 5). Customer class load curve i
characteristics are taken from a 1973 J l transnission study performed for Fi t c hb u rg by
; United Engineers and Constructors (" United Eng i ne e t s ") (Exh. FGE-7, p. 5) .
i Fitchburg's energy denands for each custoner class are derived in a substantially identical manner. In each instance, Fitchburg examines known or l anticipated load additions and sums these I additions by class. For the forecast period I beyond the short term, Fitchburg relies 2 i 1 t
- . _ _ _ - , , _ , , _ _ _ _ .- , _.-.__._..m,-. , , _ _ _ _ , . . , _ , , , _ . - . . . _ _ _ _ . . . . . _ . _ _ ~ - - - . . _ - --,
a
- a. ..
? 4 D.P.U. 1973P, 19743, 20055, 20109 &72 Page P3 f I I t l principally in its forcasters' judgment to i I determine anticipated load additions. Fitchburg i also relies on suen judgment for numerous assumptions concerning short-tern growth. As , witn EUA, in assessing tne reasonableness of t i 4 Fitchburg's forecast, we will look to the < j reasonableness of the assumptions employed. j 1. -.esidential R --------- --------- Forecast ! Fitchburg separates its residential class into two categories -- those witn and tnose without electric space heating. Additions to these categories a re forecast f separately. j Fitchburg estimates it will have j j ten new electric space he a t i ng customers per i year over the forecast period, with co r r e s po nd i ng consumption of 150,000 KWH per year (Exh. FGE-7, p. 5-a). Non-space heating customer additions a re estimated at 200 per year. 3 Fitchburg finds this figure consistent wi th recent cons t ructi on tr end s, plans of various developers and independent agency po pula tion 1 i l
. . _ , . . .. . - - . . , . - . . , - - _ . . . . - , - . , - . _ . - . -. , , - . . , - . . . _ - . _ ~ . . . - - . - -- -.-.
4 1 19738,.19743, 20055, 20109 &72 Page P4 D~p.U. j . l projections. Average consumption is estimated 4 at 4,000 VWH per customer per year in-1990, fallir.g 5 percent per customer per year until < 1984, remaining at 3,700 KWH pe r customer per (Fxn. FGF-5, p. P; Exh. FGE-P, year thereafter Sch. 1) . Fitchburg incorporates tnis reduction in average consunption to reflect appliance efficiency improvements. Growth in consumption by existing customers is estimated at 1 million FWH in 19P0; j this g rowth is reduced 5 percent per year until 1994 to reflect a ppli a n ce efficiency I inprovements (Exh. FGF-P, Sch. 1) . In addition 1 to these estimated load additions, Fitchburg i i forecasts load recuirements imposed-by various i known. additions. 1 Attorney General witness Mr.
- ~
1 Chernick criticizes three aspects of Fitchburg's i ' residential forecast. Mr. Chernick finds fault i with the projection cf. growth in sales to existing customers for 1979 (Exh. AG-232, p. 3P), the projection of average electric heating energy use, and the allowance for appliance I
~l l
i
, . - , ,, , _ - . , , ,,- _m-, - ,_ . , , , . , . . . _ . - _- -, . _ . _ _ _ , _ _ _ , . _ . _,
,* e' D . P . tt . 1973P, 19743, 2nn55, 20104 A77 Page PS efficiency standards.
Mr. Chernick asserts that Fitchburg's g rowth in base use for 1979 (use by existing residential customers) is incorrectly u f calculated. Fi tenb u rg details tne metnodology used for tne growth calculation which is applied to the entire forecast period in Fxhibit FGE-P, Schedule 2. Fx hi bi t AG-201, IR-41 44/ estimates KWH sales to existing customers for 1979. Tne methodology employed in Exhibit AG-201, IR-4 wnich is used to c alcula te " actual
- growth in WWF sales to existing customers for 1979" differs substantially from the metnodology l in Exhibit PGE-8, Schedule 7, used to calculate i forecasted growth in residential ba se use for the forecast period. The methodologies in both exhibits project growth of approximately 1 l
million FWH per year.
- The first alleged error identified by Mr. Chernick's analysis of
! ~ TI7~ TnIE~exnibIt-was iupp! Tid in response to an Xttorney'Ceneral information reouest to explain the development of the last line of Exhibit FGF-9, i Schedule 2. i L
_m _. m . . _ - _ _ . _ _ _ _ _ _ _ _ ._____ . . _ _ s i D . P .~U . 1973P, 19743, ?nn55, 20109 &72 page ** J l Fitchburg's residential ba se use calculation is with respect to tne 1979 VWH estimate derived in , 6 Exhibit AG-201, IR-41. This calculation projects eleven new customers between December 1979 and May 1979. The consumption 45/ of these eleven ; l1 - ! customers for the first five months of 1970 is subtracted from the January to May 1079 D'H ! i n c r e a se over the same period in 197P. af/ Fi tc hb u rg then multiplies this value by 12/5 to I arrive at a yearly consumption of 1,ne7,192 KWH. Mr. Chernick claims that the appropriate custonar number to apply to the five month period KFF data employed by Fi tc hb u rg is j the number of new customers added between the a ! two periods, not t ho se added in the 1979 period alone (Fxh. AG-237, p. 39). Using an average i value of 204.5 new customers, Mr. Chernick
- derives annual growth of 273,192 FWH for l
e x i s t i ng customers. b (11) (1000) (h)=18,333 KWH EI Jan.-May 1979 37,512,842 KWH Jan.-May 1978 37,058,197 454,663
-la,333 436,330 KWH
.- , -. - . ~ . - . - - - -- . -. -_ . .- . - - - _ _ _
i P.P.U. 1973P, 19743, 20n55, 20109 &72 Page P7 i On redirect examination, however (Tr. 3d, pp. 42-4A), Fitchburg's witness, Mr. Bruce R. Garlick, Panager of Energy Flanning, 4 supplied actual 1979 residential consumption da ta and revised the 1979 line of Fxhibit FGE-P, Schedule 2, to reflect-actual rather than estimated data (Tr. 34, p. 43). Using actual data and the calculation methodology employed in
- l. Exhibit FGE-8, Schedule 2, growtn in consumption i due to existing customers totals 912,000 KWH fo r 1979. We prefer to use actual rather than estimated data when possible, and accept these ;
figures for 1970 This produces a 1975-1979 average yearly growth in consumption by existing customers of 999,000 KWH by Mr. Garlick's estimate (Tr. 34, p. ad). We find the method of calculating growth in base use by existing customers during tne forecast period as presented in Fxhibit FGF-9, Schedule 2, tc be reasonable. It enables one to use a longer time span to smooth out the irregularities exhibited by Fi tc hbu rg 's volatile customer growth data (a methodological
. , , , , , -, ,- - - , ,, .-..,c. ~+ ,n -.n- - - - , , - - - - - - . , - - . - - - , - - - - . - - - , , .
+ I D.P.U. 1973P, 19723, 20055, 20100 &72 Page PR l characteristic Mr. Chernick noted as desirable 47/ (Tr. 42, op. 30-311). In accepting the period 1975-1978 as relevant for our calculation, we do not accept Mr. Chernick's argument that post-1976 da ta is most relevant for the ba se u se growth calculation (Exh. AG-232, p. 43). We acknowledge that the calculation's sensitivity to starting year is not marginal (Exh. AG-237,
- p. 43), but conclude that 1975 is the appropriate year in which to start. We include 1975 d a ta specifically to smooth oat data
- fluctuations.
Mr. Chernick also finds Fitenburg's projection of constant use per electric heating customer unreasonable (Exh. AG-237,
- p. d3). Mr. Chernick notes that average use per heating customer has remained steady over tne
! last few years, while the weather.has become t 477- Wi dIsagrii UItE FrT ChirnIck7 hoUevir7 , tnat data separated by long time spans, rather
- i than back to back da ta , is more desirable or l necessarily smooths out data irregularities in a
< more desirable manner than does calcula t i ng an average uaing a long, continuous time span. I f f i I. , , . . _ _ . - - - - - .- , . - , . - ,
i t i i 19738, 19743, 200%5, 20109 &77 Page P9 D.P.U. 1 increasingly colder. The witness interprets the l relatively constant heating use over this period, ? especially in the face of the last three years' ;, consistently colder than average weather, as 4 evidence that customers a re r ed u c i ng tneir W heating use. The witness measures the extent of conservation by f oc u si ng on t he ra t io of heating use per heating degree day (HOP) (Exh. AC-237,
- p. 44).
In cuantifying his observation, Mr. Cnernick regresses post-1974 he a t i ng use per neating dearee day on time to derive a ti me trend eouation with which he predicts 19PF heating use of 6,141 KWH and 19PP total use of a 1n,756 KWH per customer. Mr. Cnernick's 19PP total use figure is 76 percent less tnan Fitchburg's 1988 v a l ue for consumption per electric heating customer. Although we have reason to believe tnat there undoubtedly has been sont conservation in heating use since 1975, we
'I cannot a cc e pt that the t r e nd in conservation is I
as pronounced as Mr. Chernick suggests or that i l r lf 1 . l l
- . - _ , . -- - ..-_ . . . . . ~_ - . _ - - . - -
t i 1 Page on D.P.U. 1973P, 10743, 20055, 2n109 &72 i l i i tne method he uses to quanti fy conservation is 4 appropriate. We find the data, and the conclusions drawn by Mr. Chernick from this data, I problematical. First, we are not at all sure now consumers' electric he a ti ng use responds to temperature, as measured by heating degree days (HDD). Second, we are not confident that the , decline in " Heating Use Per HPD" indicates that substantial conservation has taken place. The , I
' ostensible reason for the decline in this ratio is i nordinately la rg e HDD values for 1976-197P l
(see Exn. AG-232, p. 4d), and not a sudden drop 1 d in hea r i ng use. dP/ We do not know whether tne reduction in this ratio due to constant II/~~ Tne ~iverage~5DD~for~I97%~I?ii~is~7~50II wnereas for tne previous six years the average value is 6,712. Comparable average he a t i ng use averages are 9,911 KWF and 10,114 KWH; this is only about a 2 percent difference in. average
' heating consumption between tne two periods.
The difference in the averaga FWH/HDD ratios for tnese two' periods is 21 percent. These data. i m pl y to us that, whatever the actual underlying causal relations are, they are much more complex than the simple model the Attorney General uses to be relied upon for a ten-year projection (see ' Exh.- AG-232, p. d4). 3 d I 4 _m , , . , _ - -mm. , .._,,__e ,-.
. . . . , o--. -
D.P.U. 1973P, 10743, 2nn55, 20109 &72 Page 91 1 i ne a t i ng u se ' in t he f a ce of colder weather is tne result of physical conservation, higher electricity bills, sensitivity of he a ti ng use to 1 l HDD, sensitivity to weather' patterns, a 1 reduction in no n-he a t i ng use consurption, or a combination of these factors. What we do know is that total consumption has remained relatively constant. Mr. Chernick assumes that the
- sudden decline in this ratio of average heating use to HDD is due to conservation, and that tne j
1975-1978 trend will continue through 19P9 Ve i are neither willing to assume that a sirple tire trend regression analysis using d a ta as problematical as this can adequately nodel 4 future consumption trends, nor a re we wi ll i ng to assume that one can confidently attribute the t , precipitous decline in " Heating Use Pe r HDD" to conservation alone. We are thus unwilling to a cce pt Mr. Cherntek's results in place of Fitchburg's, and,'after review of the record, we . find Fitenburg's deternination regarding constant consumption per heating custoner over l l l-i l
_ _ _ _ _ _ _ _ _ . _ ~ _ _ _ l r
- ]
D.P.U. 19738, 197/3, 20055, 201n0 &72 Page 02 l tne forecast period reasonable. Fitchburg incorporates the ; effects of i m p r ov ed a ppli a nce efficiency i nto its forecast by reducing both the residential < ba se use i ncrease and tne load increase d ue to 4 estimated new non-space heating customers by 5 i percent per year, starting in 1991 and 4 continuing tnrough 19P4. These 5 percent pe r -I year reductions are an exercise of j udg me nt that approximate the consequenc' of an average i a ppli a nce efficiency impr.vement of 2n percent i (Tr. 29, pp. 119-120). On its face, we find this 4 reduction d ue to a ppli a n ce efficiency improvements reasonable. Mr. Chernick, however, asserts that Fitenburg neglects to include in its calculation the reduction in consumption f attributable to the replacement of worn-out appliances witn more efficient appliances (Fxh. AG-232, p. 45). Mr. Chernick estimates a 4.P GWH reduction in refrigerator usage'alone due to 42 percent more efficient replacements in the refrigerator stock starting i n 1981. As noted i
. ._ . - . , - .-c. ., , r- ,,,-y-r ,-- -m ~ - . -n . - . - , , ,, . , , , _ ,--+---w --,-e~>- -,v. .--w,
_. . . - . . - - ~ . - - . - _ - . - - . ) ' i 1 19738, 197e3, 20055, 20109 t, 7 2 Page 93 D.P.U. 3 in our discussion concerning EUA's treatment of ! efficiency improvements, su_pra, the record does , j not adeauately support the r a pid achievement of I efficiency improvements to the large extent that Mr. Chernick suggests. Accordingly, we decrease Mr. Chernick's refrigerator exarple tc reflect a frost-free refrigerator efficiency improvement of 21 percent and a standard refriger9 tor improvement of 15 percent, both starting in 19Pl. Tnese efficiency improvements are consistent witn t ho se used by EUA (Exh. M-10, p. II-9). Py our calculation 40/ one might expect, as an upper limit, an efficiency improvement less tnan I half that suggested by Mr. Chernick. , Nevertheless, this value (7.03 CwH) is nearly as S/ 1981 customer number - 19,383 19 3 8 3 ( . 5) (1. 0 5 ) =10,17 6 standard refrigerators 19 38 3 ( . 5 ) (1. 0 5 ) =10,17 6 frost-free refrigerators 10176(900)=9,158,400 KWH (standard) 10176(1400)=14,246,400 KWH (frost-free) i 23,406,800 TOTAL 9158400 = 641,088 ; (d) ( .15) 14,246,400 (h) = 1,39'6,147 2,037,235 KWH reduction l t _ l
\
t a l
. . . . . . _ - _ _ . ~ . - - _ _ . - . . . .
- = . .- .-- . . - _ . _ _ - - - -. -
1 1 19739, 10743, 2nr55, 20109 &72 Page 94 P.P.U. i 1 large as tne entire KWH reduction d ue to estimated appliance efficiency improvements, 4 exclusive of appliance replacement (.99 GWH M/ a 1 for new customers and 1.71 GWH 51/ for existing customers), whien we above found reasonable. Mr. Chernick also points out that consumption by e x i s t i ng and new electric space 4
- heating customers should be adjusted to reflect increased appliance efficiency (Fxh. AG-232, p.
d5). We find the example of I refrigerators witn respect to energy reduction due to a ppl i a n'c e replacement to be particularly relevant. We a cce pt t he p r e mi se that
' refrigerator saturation is 100 percent or greater. Also, b a s i ng our e s ti ma te on the proportion of FUA refricerator VWH to- to tal
- M-10, pp. II-13, II-16, II-1.2)
J residential KWH (Fxh. and tne refrigerator usage statistics we enpley I above for Fitchburg, re f rigera to rs in the i 1 3 a 50/ ( . 8) (9) -6. 21= . 99 (see Exh. FGE-8, Sch. 1) l S/ (1) (9)-7.79=1.21 (see.Exh. FGE-8, Sch. 1) i
- i i '
i i n
. . , , _. , , _ . . . _ . . - . . , . . . - . . . _ , _ . _ . . , _ -_m_. . . _ _ , , , . _ _ _ . , _ , . , . _ , - .
.. .. . . ._ - . . . ~ _ _ . - . . .-. . -- . . - . - _..-
- e. ..
l i
~
D.P.U. 1973P, 19743, 20055, 70109 &72 Page 95 i, Fi te nbu rg territory.may consume approximately 20.25 4 percent of total residential consumption. Even f without specific da ta on penetration, saturation i ' and replacement rates, we are confident that 1 I refrigerator efficiency improvements for all new { and existing residential consumers in Fitchburo's service territory will com Pr i se a 4 significant portion of the energy reduction t attributable to efficiency improvements. Tnese , 4 l considerations lead us to find tnat Fitchburg , i nas u nd e r e s ti ma t ed tne effect of appliance efficiency improvements. We will, tnerefore,
]
i furtner reduce Fitchburg's 19PP residential consumption by 75 GWH. This additional reduction, while modest, will adeauately account a for efficiency improvements.
- 2. Ippystrial_ Forecast Fi t c hbu rg forecasts its industrial energy demand by summing the r e s pe c.t i ve contributions from an e x i s t i ng base,
+
. known new loads, the expected yearly contribution from three industrial parks (Tr. 20, pp. 4-5), the expected demand from riscellaneous t
1 . h 4e.-- ,- s..m,, - ,. ._.n-- , , ---~~a -p , ,e . . - -~-p - - - - , ,- n, . ~~-7.,
i .. .. I i D.P.U. 1973P, 19743, 20055, 20109 672 Page 96 f
- small new customers and the i nc r e a se in demand from existing custoners (Exh. FGE-In, p. 1 of 2).
4 Fi t c hb u rg estinates that witn current j ; subdivision plans, there are 41 potential lots in the tnree industrial parks (Tr. 29, p. 5) , j five of which already have buildings on then. ! Pr. Garlick determined that d e ma nd fron these i parks will increase at the rate of four lots per year, each customer drawing 500 KW per year with a 50 percent yearly capacity factor (Exh. AG-201, , I IR-56; Tr. 29, pp. 1n9-110, 117-113). Tnis [ amounts to 5 cumulative contribution fron the , industrial park customers of P.76 GWH yearly. Tne "Other Srall New" customer category is i estimated to i nc r e a se consumption at the rate of 2 GWH per year (Exh. FGF-5, p. 10). The yearly increase in "Fxisting Customer" consumption is
- increased 3 GWH in 1979 to reflect known 4
l ex pan sions for'present customers, reduced to f GWH in 1990, and gradually reduced further to .2 GWH to. re flect conservation by existing custoners (Exn. FGE-5, p. 10). [ ! Exnibit FGE-10, p. 2 of 2, 1 i
.- - . . - . __ - -- = . ... . _ - . . --. . - . . . . - . - . .
o D.P.U. 14739, 19741, 20055, 20100 &72 Page 07 i t 4 presents historical da ta on to t al industrial , f growth. Tne 1975-1978 growth was 15.5 GWF, 1.6
- 1 GWH and 6.9 GWH, resulting in an average growth i
j of P GWH over the three-year period. i Fitchburg's total industrial growth for the ? period after 1991 is approximately 11 GWH pe r l; l year (Exn. FGE-10, p. 1 of ?) , a value l considerably greater tnan the average historica! growth in Exhibit FGF-10, p. 2 of 2. Ve - nav e 1 difficulty interpreting tnis historical ' information for. purposes of growth e x t r a pola t ion j into the future, especially in light of Mr. I Garlick's statement that he does not expect i industrial growth by existing customers to be as great in the future as it has been in tne past (Tr. 25, p. 114). Furthermore, we find no analysis in the r e co rd which separates this historical ! growth into g rowth due to new customers, and growth due to existing customers. We certainly see no basis in the record fo r exceeding the i average nistorical growth, and we have no l specific business or general economic ! information concerning Fitchburg's territory on 1 ( l l I !
}
l I _ ,. __ J
. . . . .. .. . _ - . . . . --- ~_ _. - - _ - . - - - - . _ - - - _ _ _ . . -
1 D . P . II . 19739, 1o743, 2nn55, 20100 &72 Page 08 ' t 4 i whien we can reasonably rely in' order to utilize I the historical average growth as an .i approximation of yearly growtn over tne forecast period. Consecuently, we will look to the reasonableness of the various components of Fitenburg's industrial growth, and tneir relation to total growth, in order to assess i this portion of the forecast. Fr. Chernick levels the general l criticism against Fitenburg's industrial , forecast enat the subjective derivation of tnose i . components whien are tne major contributors to
- i growth (industrial parks and otner small new I i
j c u s tore r s) is i ncommensu ra te with the importance j of these contributions to the industrial l forecast (Exh. AG-232, pp. d4-47). Specifically, ! F r .- Chernick charges that Fitchburg relied on } !. neither hi s to rical :da ta nor other sources to s determine tne rate at whien new customers would enter the industrial parks (Exn. AG-232, p. d 6) . l j Nor did Fitchburg ' provide sufficient evidence ! from which to conclude that four 500 KW
- customers are likely to move into the pa r < s each i
j i l _ _ -- _..__ , . . _ _ _ _ . -~. _ . , , . . - _ _ . __ . . . _ _ , ._ _ _ _ . ..
D.P.U. 19738, 19743, 20055, 20100 &72 Page 09 year, or tnat tne parks can accommodate 3n suen customers (Fxn. AC-232, p. 46). Additionally, Mr. Cnernick claims that Fi t c hb u rg forecasts industrial park consumption for loPP (70.2 GWH) wnien is inconsistent with the physical capacity of tne parks (30 custoners, by Mr. Chernick's estimate) and the yearly per custoner consumption assuned by Fitchburg (2.10 GWP pe r custorer per yea r) . Finally, Mr. Chernick estimates naximum 1999 industrial park consumption consistent witn F1tenbura's forecast assunptions to be <5.7 GWP, compared to Fitchburg's 19PP e s tima te of 79.2 GWH (Fxn. AG-232,
- p. 47).
We disagre? with Mr. Chernick's conclusion that Fitenburg's 1990 i nd u s t r i al park forecast is inconsistent with the forecast assumptions, vip., that it exceeds tne physical liritations of tne parks, based on a pe r customer yearly consumption of 2.10 GWH. While Mr. Garlick initially testified that there were only 30 industrial lots (Exh. AG-201, IR-56; Tr. 2P, p. 111), he subsequently modified his
D.P.U. 19738, 19743, 20055, 20109 &72 Page 100 I testimony to include one additional industrial park for a total of 41 lots as currently subdivided (Tr. 29, pp. 4-5). As we find no , r i evidence in the record which controverts Mr. 1 Garlick's revised te?timony, we acce pt the se
- figures. Furthermore, we note that the lots 1
identified by Mr. Garlick are subject to possible further subdivision (Tr. 79, p. 6), and that the estimated 2.19 GWH consumption per year per customer is likely to vary with lot size. Fitchburg's assumptions r eg a rd i ng consumption and the potential number of total industrial lots are sufficiently flexible to preclude a conclusion that Fitchburg's GWH predictions are inconsistent witn a likely maximum GWH amount. 52/ We do agree with Mr. Chernick, i however, that Mr. Garlick has failed to document adequately the basis for his judgment that four i 500 KW i nd u s t r i al .pa r k customers will be added 5 2 7~~in ~T a E t",'~ gIv e E~ t h eUncertiTEty~ surrounding th e maximum potential aggregate demand of these - l parks, no determination-of maximum demand is even possible. l
, , , ,- - . - , . . - . . _ , . . - - - ~ . - , _
D.P.U. 19738, 197d3, 20055, 20109 &72 Page 101 each year th roug ho ut the f oreca st period. As far as we can determine, Fitchburg has pe r f o rned no analysis, nor conducted any research, on either the feasibility or the likelihood of a d d i ng four such industrial park customers per year. Tne mere availability of real estate does not, in our opinion, cons ti tu te convincing I evidence that such industrial growth will occur. Nor do we believe that i n te rv ie wi ng just four industrial customers (Tr. 28, pp. 113-114), or the results of the se interviews (Fxh. AG-201, IR-1), is a sufficient basis for supporting i j Fitchburg's assumptions co nc e r n i ng industrial
- l park growth.
I Furthermore, Fitchburg's J historical industrial growth does not inform us as to the likely rate of. industrial park occupancy or size of occupant. Indeed, we see no reasonable way to rely on this aggregate historical information in assessing industrial park growth. We do not find sufficient evidence in the record to support as reasonable
. , _ _.. m . _ . _ _ ._. _ . _ _ _ _ _ _ _ _ . . _ . .- _ _ . _ . _ . _ _ __ . _ .
a D.P.U. 1973P, 197A3, 20055, 20109 &72 Page 102 ) i 4 Mr. Garlick's assumption that industrial parks within Fitchburg's electric service territory l will add four 500 KW. customers per year to i < Fitchburg's load. We consider a growth rate of I two 500 VW industrial park custoners per' year throughout the forecast period a more reasonable - e s ti ma te in lig ht of the scant information'in the record on tnese industrial pa r k s , and accordingly, so adjust Fitchburg's industrial forecast. i Fitchburg's growth for its "Known
; New Load" category is projected to increase only through 1981 and is held constant thereafter. We ! find.it reasonable to accept the short-term growth l
l Fitchburg has projected for this industrial cate-i i gory. Likewise, we accept Fitchburg's forecast of a constant base throughout the forecast period.
- Mr. Chernick criticizes
! Fitchburg's lack of substantiation for its "Other Small New" industrial growth of 2 GWH pe r year. We ag ree that Fi tchbu rg has failed to document l I i i i j i
-4 . _ , . . _ ,, - - , _.- . . .
f j D.P.U. 1973P, 19743, 20055, 20109 &72 Page 103 l r L adequately its growth assumptions for this 1 i industrial category. Lack of both detailed and i general economic information, da ta on long-term
- consumption trends, and an industrial sector
] analysis commensura te with such da ta and information, complicates our finding as to the { reasonableness of p r o j e c t i ng growth for these I y customers at 2 GWH per year. We prefer to i resolve this issue by examining the final l industrial category, growth in existing ] customers' consumption, and total yearly .i j industrial growth. Fitchburg forecasts significant (3 GWH) growth for e x i s t i ng customers in 197 9 d ue to known expansions in production schedules, and reduces this growth substantially (to 4 GWH, .3 GWH and then .2 GWH) toward the latter years of j the forecast (Exh. FGE-5, p. 10; Exh. FGE-10, p. 1 of 2). This reduction i ri growth is intended , to reflect conservation by existing customers (Exh. FGE-5, p. 10). We note that Mr. Garlick
- em p! o yed no calculations to support his judgment in arriving at the .? GWH g rowth employed after i
i
l *. . .; D . P . t! . 1973e, 19743, 20055, 20109 &72 Page 104 t 19PO (Tr. 2P, p. 114), a fact which disturbs us. Although Mr. Garlick asserts that the growth in r e x i s t i ng customers allows for normal growth in all industries, including new customers that c o me on line after 1980, and that it also
- reflects the potential for cot.servation (Tr. 34,
- p. 41), there is a lack of analysis, or even 1
1 data, in the record to support this claim. After a careful review of the i evidence, we find that the growth projected for a tne "Other Small New" category is, mo re likely than not, too large, but that the " Existing customer" category growth is too small to include customer expansion growth from all of the other categories. We have already reduced the l
" Industrial Park" growth by half. To ta l yearly
- growth after 1980, with our adjustment to the industrial park growth, is approximately 6.6 GWH i
per year. This total fig u re is reasonable and, i therefore, we make no further adjustments to t i Fitchburg's industrial forecast.
! i
! 3. Co mme r_ c i a l _ a n d _ M u n i c i pa l 2 This portion of Fitchburg's 4 1 i 4
, . - - i, _..,-.,y + , _ . , e r - _ .,_.--,- ,, _ _ . .- - . . , . - - ~ , , . , _ . , , . _ - , - - , . , y
i D.P.U. 19738, 19743, 20055, 20109 &72 Page 105 f o reca st was uncontroverted by the Attorney General. After carefully reviewing this section of Fitchburg's forece find it to be reasonable. We there : cept Fitchburg's projections of commec ,d municipal growth. We s u r.. ,e our adjustments to Fitchburg's energy demand forecast in Table 4.
=
'.3
*C C
W 4 T A ta t E 4 y AD 7fi%TMT PJi% 181 FOlit.C AST
."o 5 strhtweg T we g y Gu te w
-D 85 y A1 36 87 32 41 24 a 80 El freegy 17.69 87.69 w A7.69 R7.69 87.69 =
pesutential . w/o efer er se trat 8 7. f.9 R7.69 R 7. 8.9 .75 7% 87.69 7% 75 .7% .7) fus* .59 7% .75 4.26 4.95 1.16 6.?! St. Joseph Arts. 2. 9e. 1.61 7.79 M
.50 1.46 2.2%
5.95 6.8% 6.97 200 e mt. per year 1.70 4.11 3 I.00 1.95 2.34 (.42) ( . 50) ( . Y* ) (.67) (.74) 3 E n nt. cmt. grow th f (.08) ( 17) (.25) ( . u) 190.) 10 8 . e.9 f iler seuw y A<tentment 94.76 96 14 97.95 93.9 W 19.60 98.78 9 1.92 11.1 11.5 I ) . e.
- 12.9 11.0 11.2 12.4 12.6 12.7 60.1 61.4 62.2 62.9 ,
Pesidential w/ teat 17.2 59.4 59.1 35.9 14.9 Ccwnmercial a meanicipal' 249.2 249.2 249.2 249.2 1rwtsste sal 249.2 249.2 249.2 18.9 g 2'i9.2 249.2 18.9 13.9 18.9 pase 18.9 18.9 18.9 79.2 o 16.I 18.9 44.0 12.8 68.6 10.4 Kew>wn New Loads 26.4 35.2 (15.2) (19.61 3 8.8 17.6 (??.0) (26.4) (30.8) IrwAntrial Parks (8.8) (13.21 (11.61 18.0 20.0 lev $ntrial l'm k Adpntinent (4.4) 10.0 12.0 14.0 16.0 e, 6.0 8,0 6.7 7.0 7.2 4.0 6.5 6.1 6.1 4 ooc Wall New 1.2 1.6 4.9 121.6 123.) ))4.9 E anting nest. 288.) 29).2 VJ f . 8 102.4 11 5. 0 48.7 o 278.9 44.2 o.4 46.5 47.6 40.2 45.1 42.0 41.8 isi T iVEV El.79 sirect lighting a losses2 / sit.N) 09:ih fixF.O iii.E i}Ef4 51U41 is Eii- sh q uc.ned toia 4)Q 491;y ~ iii;9- s}Q jij.Jf }i Q _s7 q original tatat!# _ 4.ss s.4
- 6. n. 6.7s
- n. i .ns 2.61 us 4. is s ,e t,,,n II .7 3 sp,ca .. , 9 ,ca, s 2# FGE.2. Table E-R. P.2
@jd; e
as
- isnadrested 40 tb w
O
.h
.* .= l D.P.U. 1973P,'19743, 20055, 20109 &72 Page 107 j
4 Fitchburg's_ Peak _ Demand Fitchburg's peak d e m a nd forecast is derived from its energy forecast. Load factors consistent with customer consumption patterns at system peak are applied to each class' yearly energy forecast to derive a peak load forecast for the Company (Exh. FGE-5, p. 11; Exn. FGE-7, pp. 5-6; Exh. FGE-11, Sch. 1-5). Besidential customer load curve information was taken from a 1973 transmission study performed
, for _itchburg by United Engineers (Exh. FGE-7,
- p. 5-b). Our interpretation of Mr. Garlick's j
testimony indicates tnat the coincidence factors for new residential-loads we re estimated to be 50 percent of the residential peak load in the summer and 100 percent in the winter (Tr. 29, p. 10). Additional load attributable to 4 , commercial g rowth 'is a l so derived from the , United Engineers study (Exb. FGE-7, p. 5-b), as well.as from customer specific analysis (Tr. 24, PP. 11, le). Similarly, the additional contribution to peak attributable to the
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 108 industrial class is calculated u s i ng customer specific analysis and load information derived ! from the United Engineers' study (Exh. FGE-7, p. 5-c; Exh. AG-200, IR-14; Tr. 29, pp. 13-21). These peak load additions are then summed across customer class to derive a seasonal, cumulative forecasted contribution to peak (Exh. FGE.ll, Sch. d). The contribution to peak values c re then added, by season, to the 1979 summer peak and the 1979 winter peak to derive forecasted internal peaks (Fxh. FGE-ll, Sch. 5-) . Next, estimated transmission losses a re added to the yearly internal peaks to derive Fitchburg's forecasted peak demands (Exh. FGE-11, . Sch. 5) . Finally, NEPOOL reserve requirements are added to the forecasted peak loads to derive Fitchburg's yearly ca pa b ili ty responsibility (Exh. FGE-5, p. 11, Exh. AG-201, IR-39; Exh. FGE-22, Revised). On cross-examination the Attorney General challenged Mr. Garlick on the appropriateness of using class coincident load factors developed in a 19'<3 transmission study
)
\
- H l
l
--- - - -_ D
i D.P.U. 1973P, 19743, 20055, 20109 &72 Page 109 to forecast peak load through 198P (Tr. 29, pp. 20-21). Mr. Garlick replied that although load shapes may have c ha ng ed since 1973, in his opinion, the load factors utilized in the forecast were still valid for load forecasting i purposes (Tr. 29, p. 21). The issue raised by t he Attorney General is whether future load management efforts are satisfactorily included in Fitchburg's load forecast. We no te that althoug h. Fi tchbu rg has not analytically
- estimated the consequences of load management, the, system-wide forecast nevertheless exhibits an improved load factor over the forecast period (Exh. FGE-7, Table 11, p. 2; Tr. 29, p. 29).
While we would prefer an analytical derivation of how Fitchburg's load factor will improve due to conservation and load management, and the a ppl i ca t i o n - of this analysis to Fitchburg's . forecast, we acknowledge that a lack of appropriate data makes such analysis difficult, if not completely impracticable. We accept the manner in which Fi tchbu rg relied on historical load factors to , i l i i l
D.P.U. 19738, 19743, 20055, 20109 &72 Page 110 i '
- forecast pe'ak load. We do so not because Fitchburg has adequately forecast the effects of load management, but because the forecast period exhibits a steadily improving load factor which may adequately c a pt u re the load management effects we anticipate. 53/
As we have adjusted Fitchburg's energy forecast, we must now adjust i ts peak load forecast by a commensurate amount. In total, we make three adjustments to Fitchburg's forecast, two to the residential forecast and o ne to the industrial forecast. Tne sum total of our adjustments, however, only reduces the 1989/1989 vinter peak from 95.6 MW to 92.9 MW and the 19P8 summer peak from 49.3 MW to 97.2 MW. We discuss the reasons for this rather marginal reduction below. The first correction we make to the residential peak load forecast is the St.
~]7~~In~aEy S future-proceedI5gs~in ~hIch-thIs issue may prove relevant, we will expect the collection of load ma nagement 'd a ta a nd the analytical integration of this data into the Company's load forecast -in order to ca ptu re the effects-of load management.
i l i
4 5 D.P.U. 19738, 10743, 20055, 20109 &72 Page 111 4 J o se ph Apartments double-counting error (Exh. FGE-II, Sch. 1; Exh. AG-200, IR-lo a, Sheet 1 of 4 3), conceded by Mr. Garlick on examination by the hearing officer (Tr. 30, pp. 70-72). Reducing the 19PP residential j peak in order to reflect our 75 GWH reduction d ue to increased appliance efficiency is more problematical than the previous straightforward elimination of double-counting. The actual load factors ~Fitchburg used to develop the residential peak load a re not in evidence. However, even if tney were, we are not confident that they wo u ld be the a ppro pria te load factors to use for this adjustment. Some of the appli-ances for which we expect efficiency improve-ments, such as refrigerators, have a high load f a c t o r .- 5d/ Others, such as ovens, air 4 conditioners and miscellaneous appliances, are used only intermittently. Further analysis concerning actual efficiency improvements, 547-"But- even so, the poser drawn ~wilf vary ~as the compressor kicks on and off.
., o D . P .18 19738, 19743, 20045, 20109 &72 Page 112 saturation, conversion and penetration rates, and intensity and time of a ppli ance use, is needed to determine the true load factor commensurate with the energy reduction attributable to appliance efficiency improvements. In the absence of such data, we have emplo yed , a 50 percent load factor. This is a reasonable 55/ estimate which, by our calculation, 56/ produces a 19PP reduction of 171 KW. Applying this to the 1988/19P9 winter residential peak reduces the peak by .2 MW, after rounding. In all, we reduce the 19PP/10Po residential contribution to peak by .4 MW.
l Our adjustment to the industrial peak reflects a halving of t he estimated growth 1 in capacity requirements which Fitchburg has attributed to industrial park customers. [j/~~I~high-load-fact 5r would-produce a~ Tower FW reduction than would a low load factor. A good portion of Fitchburg's additional KWH efficiency reductions may be due to large appliances such as refrigerators and freezers. The 'high load factors of these appliances will be offset by numerous miscellaneous low load factor appliances. i N/ 750,000 KWil
= 171 KW
(.5) (8760) i 4 l 1 l
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 113 However, whereas Fitchburg's energy forecast reflects 50 percent of the maximum non-coincident energy requirements of four new 500 KW custemers pe r yr a r , the estimated capacity requirements of
, t he se new' customers is based on only 25 percent of maximum non-coincident demand (Exh. AG-201, IR-14a, Sheet 3 o f 3, line 31; Tr. 29, p. 15).
Instead of projecting demand from these customers to increase by 2,000 KW per year (which would be consistent with assuming 100 percent ca pa c i ty factor and 100 percent industrial park coincidence with system peak), Fitchburg projected industrial park demand to i nc r e a se at only 500 KW per year (which is consistent with assuming 50 percent capacity factor and 50 P percent industrial park coincidence with system pe a k) (Exh. AG-201, IR-14a, Sheet 3 of 3). When asked on cross-examination about the development of forecasted industrial park demand, Mr. Garlick responded that the figure employed 'was a figure that I had a s s ig n ed to those industries going into the industrial park" (Tr. 29, p. 15) a nd that the f ig u re employed was a total fig u re
e <? ? , .Tf
'f v 'i n
$ f>; ,
.. ~..
D . P . tl . 1973P, 19743, 20n55, 20109 &72 '
..' Fo g e*11[Ad%c ' ?
. &xe%c3, .-
-; . ~.
k r
'l (Tr. 29, p. 15). We interpret Mr. Garlick's 9 7t ,
v.> r -. statement on cross-examination, 57/ the w s Vt I correspondence of the column totals of the exhibit referred to by Mr. Garlick with Ex h i b.f t O~ . 7~
*,? ~.y;. m. qa FCE-ll, Schedules 3-5 and Exhibit FGE-7, TableEhl;f g ~.'*
LMy
- p. 2 (Fitchburg's Third Supplement f o r e c a s t ) , a - i jfgg ;
, .. -J yMEL $
and Fitchburg's failure to a dd r e ss these " u n d e r s t a. t e d. " . 41 figures either on redirect or by submission of b' revised testimony or exhibits, to i nd i ca te that the 500 MW was a figure deliberately assigned'to'q l <
^-
those industries going i n to the i nd u s t r i al park.', We conclude from this that Fitchburg believes di industrial park d e ma nd at system peak will only *
- 1. i :
be 25 percent of maximum non-coinciden* ,4 f)' lc d industrial park demand, a nd accordingly adjust m :n
, M, n n:
u #C* v, . cc " industrial park peak growth to reflect the @ 4 addition of only 250 KW per year, or 125 FW per., ; half year, a figure which represents 25 percent; #
?
0 -'. of our estimated maximum non-coincident demand ' attributable to the industrial parks. , __________________________ - - - . _______ = 5, r
"The estimated four industrial customers H;
--57/ j s 500 "W per customer.
, The figure here in column 5, line 31 of Exh. AG-201, IR-14a, Sheet 3 of 3 for the 500 in reality should have been 2,000. So this is understated" (Tr. 20, p. 15). ,
=
(* e= ) D.P.U. 19738, 19743,-70055, 20109 &72 .Page 115 We summar'ize our adjustments to ! Fitchburg's peak forecast in Table 5, noting , that our energy reduction for the industrial class i's proportionally greater than our demand reduction for this class. We a t t r ibu te this in small part.to routine rounding errors in converting kilowatthours i n to kizowatts and in large part to tne fact that whereas the industrial park energy projection uses only a 50 percent c a pa c i ty factor, the industrial park demand forecast further assumes a 50 percent coincidence (with system peak) factor. i I
,w y- - --
O
*c TABIE 5 c FI'IGIRIIPG PFAK ,NTTUS1NDTIS (FW) w w
I tcttnl Acttnl Pmjectol Projected Projected Ccrnpound j Sirmer Winter Winter Stanor Winter Growth to 78 78/79 87/88 88 88/89 Rate - w e Sch. I Residential 2,122 4,291 j origina1 tota 1 4,014
-St. Joseph dbl. count 200 150 200 w
-ef ficiency at .5 IF 171 171 171 New 'Ibtal 3,643 1,801 3,920 y o
0 6,400 6,400 6,900 Sch. 2 Cemnercial & Munic. tn Sch. 3 Irriustrial 4,300_ 4,500 4,800 y origim1 Irul. Park 2,125 2,250 2,375 o new Iru!. Park P New 'Ibtal 13,700 14,700 15,000 , x .7 winter & .9 sismer 9,600 13,200 10,500 e Sch. 4 'Ibtal Contribution tn [ 20.5 21.4 22.3 w Peak (MW) Sch. 5 Internal Peak (PH) sismer 93.6 winter , 89.1 90.9 transnission losses 2.0 3.5 2.0 75.33 97.1 2.57% New Staner Peak 'Ibtal New Winter Peak 'Ibtal 70.0 91.1 92.9 2.871 99.3 2.80% Old Stsmer Peak 'Ibtal 7', 33
'o Old Winter Peak 'Ibtal 70.0 91.1 95.6 3.17%
o, d3 tD w w
.h
- - . _ - - - . - _ _ _ _ _-r ' - _ _ _ _
.o ,.
I D.P.U. 19738, 197A3, 20055, 20109 &72 Page 117
- s. The_gggget_gg_}929_Actug}
Data The Attorney General argues in his initial brief, p. 53, and in his reply brief, pp. 6-9, that 1979/19Pn actual data (Exh. FGE-23, S.E.C. Form S-7, Table E-8) demonstrates Fitchburg's forecast is significantly overstated and unreliable a nd that, therefore, it cannot justiry the company's proposed Seabrook purchases. We do not agree. With any forecast, one would expect projected values to va ry wi th actual data. The focus is not on one particular year, but rather the reasonableness of the forecast as a whole. The Attorney General's argument, without more analysis, is not persuasive. For example, Fi tc hb u rg projected an annual 3.17 percent growth in wi n te r _ peak over the forecast period. Our adjustments reduce this rate to 2.87 percent; actual growth in peak for winter 1979/1980 was 2.7 percent (AG reply ,
- l brief, p. 7). The magnitude of deviation is simply not sufficient to undermine the validity of.the forecast as a. planning document. This is ;
l i 1
t D.P.U. 19738, 19743, 20055, 20109 &72 Page 118 not to imply we do not consider the adjusted growth rates to be somewhat optimistic, but rather tnat we find them reasonable upper limits for estimating Fitchburg's likely growth. 6. R e s e _r ve _M a r c i ns_a nd _ t h e_ N e e d fer_Pgwir Without fully reiterating our general discussion co nc e r n i ng reserve margins and the need for power which we developed in the context of Montaup's need for power section, we l note that those concerns apply ecually to Fitchburg. Most fundamentally, we find it imperative that Fitchburg have sufficient power to reliably supply the continuing demands of its customers. We have found that fo r planning purposes it is reasonable to ex pe ct Fitchburg will experience an annual growth in its summer peak of 2.57 percent. 58/ This growth rate 1EE11.8.s _ a _19 9 R sggggg_pe ah __g f 9].l_fW. Withgyt 58/ We no te that this g ro wth ra te is very close to the 2.5 percent ~ rate the Attorney-General suggested may-b-e more reasonable for Fitchburg in his initial brief for the proceedings prior to our June 28th Order (D.P.U. 19738/197d3, AG initial ~brief, p. 80).
19738, 19743, 20055, 20109 &77 Page 119 D.P.U. the power represented by the proposed Seabrook acquisitions, Fitchburg will have a re se rve margin of 7.9 percent; this margin is clearly inadequate to ensure system reliability. With an additional 16 MW of capacity, Fi tc hbu rg would have a re arve margin of 19.4 percent. 59/ We find this margin reasonable. The choice of a pa r ticula r year with which to make these calculations.is mo re a matter of convenience generated by the u nd e rl y i ng necessity of making the calculations, rather than a matter of auguring some future moment with_cer ainty. We are particularly concerned with Fitchburg's situation in the power years 1991/1997 when the 40 MW Boston Edison Company contract will expire. In the hearings prior to our June 28th Order, Fitchburg had included this power in itr system mix only through the power years.1985/1986, since that is when the contract expires. In the present
-~
5 97~~The se calculation 5 have assumed full p wer ivailability from both Seabrook units, Millstone III and Pilgrim II (see Exh. FGE-22, Revision 1) . l l
D . P . tl . 19738, 19743, 20055, 20109 &72 Page 120 proceedings,_the Company has indicated that the contract can probably be extended another five years, and-consequently, has included this power in its revised exhibits. We have no reasor. to believe, however, that the contract can be extended beyond 1991/1992 and find it imprudent to believe so for planning purposes. As a result of this loss of contract capacity, Fitchburg's reserve margin in 1991-1992 will be 5.1 percent if we assume no growtn in peak for those three years a nd include the proposed 16 MW of Seabrook in the company's generation mix. If we were to further assume an additional 10 MW from the conversion of Unit 7 . to combined cycle operation, Fi tchbu rg would have a reserve margin of 15.4 percent. Based upon our findings, we conclude that Fitchburg has thus demonstrated an intermediate to long-term need for additional ca pa ci ty e q u a l i ng at least 16 MW. l I l I
00 s '. D.P.U. 19738, 19743, 20055, 20109 &72 Page 121 D. New_Bedford_ Demand Forecast New Bedford, a retail gas and electric company, is a subsidiary of Ne w England Gas and Electric Association ("NFGEA"). NrGEA also owns another electric retail subsidiary, Cambridge Electric Light Company (" Cambridge"), and a wholesale subsidiary, Canal Electric Company (" Canal"). NEGEA forecasts the electric demands of these three ~ affiliate companies in its Third. Supplement to its Long-Range Electric Forecast (Exh. NP-3). Because New Bedford's demand forecast and ca pa c i ty requirements are determined on a basis which considers the combined needs of the NEG EA affiliates (Exh. NB-P,
- p. 2) , we snall consider New Bed f o rd 's requirements within the context of its affiliation with NEGEA and NEGEA's participation i in NEPOOL.
NEGEA's Third Supplement se pa ra tely forecasts the electric requi.rements of New Bedford, Cambridge and Canal (Exh. NB-3). To the r e s u l t i ng combined peak demand of its subsidiaries, NEGEA adds contract sales to the t
D.P.U. 19738, 19743, 20055, 20109 &72 Page 122 4 ) Ci ty of Belmont (Tr. 2P, p. 10). Our evaluation of NEGEA's forecast will, as in the case of Montaup and Fitchburg, consider the appropriateness of the f o r e c a s t i r. , methodology employed and the reasonableness of the assumptions _made. 60/
- 1. New_Bedford._Rgsidential Forecast NEGEA relies heavily on an interview methodology to forecast energy and load requirements over the fo reca st period for New Bed f o rd (Exh. NB-8, pp. 12-22). New I
customer projections were based on interview findings and historical d we ll i ng unit permit data (Exh. NE-8, p. 14). The resulting new i customer estimates were then converted into I population projections and compared fo r accuracy Wo7 5Ee I'o the manner in wETcE TEi HIGEI----
.T recast is derived, ' class by class schedules of l our- adjustments a re extremely difficult to produce separately. Consequently, all of our adjustments to the forecast have been incorporated in Tables 6 through 11 which immediately follow the text of-our analysis.
l l l t I
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 123 against population projections d ev elo ped by the Massachusetts Office of State Planning and various regional planning agencies (Exh. NB-8,
- p. 14).
New customers were then divided i n to two groups: those with electric he a ti ng ' a nd those without (Exh. NB-8, p. 15). New and existing general residential customers were forecast to increase average yearly consumption at the same ra te the existing general residential customers have exhibited since 197A. NEGEA adjusted tnis increase downwa rd by 5 percent per year in the latter three years of the forecast to reflect conservation (Exh. NB-P,
- p. 15). Existing electric heating customers we re forecast to increase their non-weather sensitive use at the same rate as the general residential customers' use (Exh. NB-8, p. 15).
Based on information collected from interviews, the weather sensitive portion of the existing electric heating customers' use wa s held constant at its 1978 level througbout the forecast period (Exh. KB-8, p. 15). The
1 D.P.U. 19738,.19743, 20055, 20109 &72 Page 124
! non-weather sensitive portion of new electric heating customers' use was assumed to be similar to that of ex isting customers and therefore forecast similarly (Exh. NB-8, p. 15 ) . The weather sensitive portion of their use was assumed to be greater than the average weather sensitive u se of existing customers. This assumption'was based on an interview derived judgment t ha t. d u r i ng the forecast period, new electric heating customers will occupy larger,
, mo re expensive homes than those occupied by existing customers (Exh. NB-8, p. 16) . NEGFA a l so relied on billing analysis da ta to support 1 this assumption (Exh. AG-197, IR-73; Exh. AG-199, IR-1). Off-peak wa te r heating penetration for the forecast period is based on post-embargo-data. Average use per customer is held constant throughout the f o reca st period (Exh. NB-8, p. 16). All other residential customers, compored primarily of seasonal customers, increase their use at the same rate as the
D.P.U. 19738, 19743, 20055, 20109 &72 Page 125 average KWH use per customer for the general residential customer class (Exh. NB-8, p. 16). NEGEA then summed these components of residential consumption to arrive at residential requirements by division and for New Bed f o rd as a whole.
- a. Customer Number NEGEA's forecast is challenged by SEA witness John K. Stutz and Attorney General witness Susan Geller. We examine Dr. Stutz's criticisms first.
Dr. Stutz first notes that NEGEA has ex plained its forecast methods in insufficient detail for one to reproduce NEGEA's t calculations (Exh. SEA-35, p. 9). Dr. Stutz claims that a forecast that cannot be evaluated with respect to its embodied premises and procedures is inadequate (Exh. SEA-35, pp. 6, 9). Specifically, Dr. Stutz criticizes the presumption of a constant population per customer ratio over time, as is evidenced b 'f NEGEA's check on customer number reasonableness. NEGEA uses 1970-1975 new i
. _ ~- .-
D.P.U. 19738, 1 9'7 4 3 , 20055, 20109 &72 Page 126 customer only da ta concerning the number of persons per customer to convert the customer number forecast i n to a population forecast (Exh. SEA-35, p. 9). Dr. Stutz asserts that the number of persons per household has not been
~
stable since l 's 7 0 and is expected to change in the future (Exb. SEA-35, p. 9). Using the regional agency 1 population forecasts which were employed by NEGEA as a eneck on the reasonableness of its customer forecast, Dr. Stutz d e v e lo ped yearly population growth rates. To these growth rates 1 Dr. Stutz a ppli ed da ta on yearly changes in per-person electricity consumption. Data on per-person consumption was derived from a demand forecast for the Long Island Lighting Co m pa n y ("LILC0") of New York, co-authored by Dr. Stutz. Dr. Stutz derives a compound growth rate fo r [ residential usages of 1 percent per year. There is insufficient evidence in the reco rd to support the use of LILCO per-person consumption data in place of such data fo r New Bed 'o rd . We fi nd that- the dissimilarities
DrP.U. 19738, 19743, 20055, 20100 &72 Page 127 between LILCO and New Bed f o rd elicited on cross-examination (Tr. 37, pp. 36-50) are 4 sufficient to preclude our reliance on the similarities asserted by Dr. Stutz (Tr. 42, pp. 93-104). Given the importance of this purported similarity in per-person consumption between LILCO and New Bed f o rd in the derivation of New Bedford's growth rate in residential consumption, we would expect a more d e ta il ed analysis of the two service territories than that provided by Dr. Stutz. We now turn to Ms. Ge11er's analysis of NEGEA's forecast. Ms. Geller levels the general methodological criticism against NEGEA's forecast that it is the product of largely unsubstantiated judgment (Exh. AG-237,
- p. 4). She asserts that the open-ended interviewing methodology employed by-NEGEA is deficient (Exh. AG-237, p. 6). Interviews were conducted unsystematically and wi tho u t standardization (Exh. i.G - 2 3 7 , p. 6; Tr. 27, p.
140); results were often undocumented (Exh. AG-237, pp. 6-7); no documentation of s ta nd a rd questions l
D.P.U. 19738, 19743, 20055, 20109 &72 Page 128 4 3 asked was kept (Exh. AG-237, p. 7; Exh. AG-197, IR-7); and interview responses, as distinct from ' t he interviewer's interpertation of those responses, was also undocumented (Exh. AG-237,
- p. 7; Exn. AG-197, IR-8; Exh. AG-198). Our ,
careful review of the evidence confirms Ms. Geller's criticisms. These methodological failings are serious for a fo reca s t based solely on interviews. In brief, it becomes almost impossible to verify the obj ec tivi ty of the interview results proffered. In the behavioral sciences, decisions pertaining to the appropriateness of sample size, sample selection, cuestionnaire design, standardization of questions, and other aspects of statistical t e s t i ng are of paramount importance in minimizing the possibility of interviewer bias in the interpretation of the outcome and in ensuring the possibility of independent duplication of the survey and its results. The existence of these methodological flaws does not, however, lead i
\
l I
l I D.P.U. 19738, 19743, 20055, 20109 &77 Page 129 inexorably to the conclusion that the end product of NEGEA's forecast is without merit. The experience and judgment of NEGEA's forecasters, as expert witnesses, are entitled to we ig ht in their own right. Moreover, we can evaluate NEGEA's forecast by examining the forecast's constituent parts, se a r c hi ng for independent corroboration of key results, and, in the absence of such corroboration, ultimately applying our own expertise in evaluating the reasonableness of pivotal exercises of judgment. Ms. Geller criticizes NEGEA's forecast of new customers on two basic counts. She asserts that insofar as the customer number projections are based on interview results, the values actually derived are based on unsubstantiated judgments made by the interviewer (Exh. AG-237, p. 9). Second, d e s pi te the fact that new d w e l l i ng unit permit data are used to project new customers, there has been no simple historical relationship between the number of new dwelling permits issued and the number of new customers (Exh. AG-737,
I l l 1973P, 19743, 20055, 20109 &77 Page 130' r D.P.U. f
- p. 11) and, Ms. Geller implies, the use of new dwelling permits as a proxy for new customers is therefore 'nappropriate.
i Ms. Geller also claims that NEGEA's method ignores demolitions and vacancies (Exh. AG-237, p. 10) and that data inconsistencies in the yearly change in customer number cast doubt on NEGEA's entire da ta base (Exh. AG-237, p. 12). We share Ms. Ge11er's concern that the customer number projections derived from tne interview process and detailed in the interview summaries (Exh. AG- 19 8 ) cannot be easily reviewed. We find no record of the questions asked to elicit these responses, do not know on what premise each respondent based his answer, do not know if the responses can be aggregated and interpreted in a consistent manner, and do not know how or to what extent the interviewer subjectively consolidated the interview responses. Furthermore, our review of the interview notes (Exh. AG-198) confirms Ms. Geller's contention that interview responses concerning the projected number of dwelling (
19738, 197d3, 20055, 20100 &72 Page 131 D.P.U. units covered only_the near-term future (Exh. AG-237, p. 10). NEGFA claims, however, that forecasted new customers are also based on historical new dwelling unit permit data (Exh. AG-197, IR-8; Exh. NB-8, p. 14; Tr. 29, p. 39). NEGEA equates new permit data (see Exh. NP-R, Sch. F3, pp. 7, 19, 32) with new dwelling starts (Tr. 38, p. 40). Mr. Robert Fox, Director of Systems Planning for NEGEA, testified during cross-examination that NEGEA tested the reasonableness of this assumption by comparing new dwelling unit permits issued to NEGEA's change in customer count (Tr. 29, p. 42). On redirect examination Mr. Fox supplied such an analysis (Exh. NP-10), s ho wi ng that during the period 1971-1978, 95.2 percent of the dwelling permits issued resulted in new residential customers (Tr. 33, pp. 22-23). We find the result of NEGEA's check of permit data against new customers to be sufficient to allow the u se of permit d a ta as a proxy for new customers. 61/ 61/. With a caveat, however,. which we discuss later.
~ D.P.U. 19738, 19743, 20055, 20109 &72 Page 132 We do not find Ms. Geller's criticism concerning demolitions and vacancies. convincing. We would expect vacancies in the existing housing stock to fluctuate randomly and to have minimal effect over the forecast period. We find no evidence to indicate the existence of , demolitions, either historical or planned, and accept the premise that demolitions do not affect the forecast. NEGEA provides no testimony as to how the actual new customer figures employed in the forecast are derived, other than referencing interviews and permit da ta , but it does check the reasonableness of the figures employed by converting them to population estimates and comparing these po pula ti o n figures to state and regional pl a n n i ng agency population e s tima te s (Exh. NB-P, p. 14). Mr. Fox asserts that NEGEA's, population estimates show results similar to those estimated independently by these s ta te and reg ional ~ planni ng agencies (Exh. NB-29; Exh. NB-8, p. 14). Ms. Geller faults NEGEA's
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ee e0 D.P.U. 19738, 19743, 20055, 20109 &72 Page 133 corroborative check on a number of grounds. First, she argues that the independent population projections used by NEGEA are old (Exh. AG-237, p. 13) and that the comparison made by NEGEA is wi th evidence on which the Second Supplement is based, not the Third (Exh. AG-237, p. 13). She argues that the comparison check does not even support the Second Supplement customer number forecast (Ex h . AG-237,
- p. 13). Fo c u s i ng on the population increase over the forecast period rather than the population totals, Ms. Geller estimates that NEGEA ovecestimated New Bedford's increase in population by 20 percent (Exh. AG-237, p. 14).
Ms. Geller further contends that NEGEA employed incorrect 1985 population figures for the Town of Dartmouth ("Dartmouth") and the City of New Bedford (Exh. AG-237, p. 15). Ms. Geller revises NEGEA's forecast of new customers for 1976-1995 to be consistent wi th the Third Supplement; she revises NEGEA's 1995 population forecast to be consistent wi th the Third f
D.P.U. 19738,_ 19743, 20055, 20109 &72 Page 134 Supplement customer number forecast; a nd she revises the Dartmouth and the City of New Bed f o rd population forecasts to be consistent with the Southeastern Regional Planning and Economic Development District ("SRPEDD") i forecasts as evidenced in Exhibit SEA-31 (Exh. AG-237, p. 15). Ms. Geller estimates that the Third Supplement overestimates the po pula t i o n i nc r ea se in New Bedford's service territory by 20.3 percent in 1995. On rebuttal, Mr. Fox responded that the consistency test performed for the Second Supplement was reduced to writing (see Exh. AG-197, IR-12 and Exh. AG-23P), while the consistency test for the Third Supplement was not because it was, in NEGEA's judgment, " plainly evident...that the population projections determined from the Third Supplement would display a greater degree of consistency with i nd e pe nd e n tly derived population sstimates because the Third Supplement forecasts contained lower projections of new customers than the Second Supplement" (Exh. NB-29, pp. 2-3). l l 1 1
19738, 19743, 20055, 20109 &72 Page 135 D.P.U. Mr. Fox also sugg e s ted on rebuttal that comparing population totals is at least as useful as examining changes in population (Exh. NB-29, p. 5). Mr. Fox points to the +15 percent variation in 1990 population projections for Cape Cod made by various pl a n n i ng agencies (Exh. NB-29, p. 6; Exh. AG-107, IR-ll) as evidence that population totals are not necessarily " bo u nd to be similar" (Exh. NB-29, p. 5; Exh. AG-237, p. 13). Finally, Mr. Fox presented an explanation for the population figures of 26,600 for Dartmouth (versus 25,600 in Exh. S E A-31) and j 98,650 for the City of New Bedford (versus 91,650 in Exh. S E A - 31) employed in Schedules 7-), 7-2 and 7-3 of Ex h i bi t AG-238. The SRPEDD population figures in Exhibit SEA-31 were published in 1975 (see Exh. NP-19). These figures were used in a Draft Water Qu al i ty Report published by SRPEDD in 1977 (see Exh. NB-27). The Final Water Quality Report as published in 1978 and containetl new,
l Page 136 D.P.U. 1973P, 19743, 20055, 70109 &72 higher population figurcs for Dartmouth cnd the Mr. Fox City of Ne w Bedford (see Exh. Nf3 - 7 3 ) . claims that NEGEA personnel obtained these revised population estimates fo r the municipaliti3s and incorporated them into Schedules 7-1, 7-2 and 7-3 of Ex h i b i t AG-23P, NEGEA's " population consistency check." After careful ,eview of the evidence, we find Mr. Fox's explanation of the population discrepancy fo r the City of New However, ve Bedford and Dartmouth satisfactory. agree with Ms. neller that the implied new-population increases r e s u l t i ng from N EG EA 's Customer forecast are more informative about the consistency of NEGEA's results with SRPEDD population forecasts than are comparisons of population totals. We have examined the record with respect to this issue and find that the figures in Schedule C of Mr. Fox's rebuttal thstimony, Exhibit NB-29, are the most a ppro pr ia te figures to use for ev al u a t i ng population increases. We note that Mr. Fox has revised the population estimates for Duxbury and
19738, 19743, 2d055, 20109 &72 Page 137 D.P.U. Marshfield in this Schedule, and find this revision acceptable (Tr. 49, p. 16). While the population increases for each of New Bedford's three divisions vary rather significantly from the independently calculated population increases, the aggregate variance is on the order of 4 to 6 percent (Exh. NB-29, Sch. C) . We find this margin of error acceptable, especially in lig ht of the admittedly s u b j e.c t i v e judgment exercised by SRPEDD in distributing Massachusetts Office of State Planning population totals among southern SRPEDD communities (Fvh. NB-19, p. 11) . We would encourage NEGEA, however, to employ a more rigorous method of c alc ula t i ng new customers than that employed in the Third Supplement.
- b. Electric He a t__ Pene t r a tion NEGEA forecasts electric heat penetration separately for each service division based on interviews and historical data (Exh.
AG-197, IR-8). For each division NEGFA projects that penetration rates will increase a percentage point per year over most of the
D.P.U. -19738, 19'd3, 20055, 20109 &72 Page 13P NB-8, Sch. F3, pp. 1, 13, forecast period (Exh. 25). The Attorney General argues that while service division penetration rates forecast for 1979 are similar to penetration rates of the most recent past, the projected increases cannot be derived from the historical da ta (Exh. AG-237, p . ' l '7 ) . The Attorney General further argues that the i n t e r '. i e w summaries imply penetration rates nearly 50 percent less than those forecast by NEGFA (Exh. AG-237, p. 17). 1 The discrepancy between NEGEA's forecasted penetration rates and those implied i i by the interview summaries renders NEGEA's interview results inadeauate to rely on as the sole source of NEGEA's forecast. An examination of both the interview results and the historical penetration rates causes us to find the actual penetration rates forecast by NEGEA reasonable. In addition, they are consistent with those forecast independently by EUA and we find the reasons stated in E x h'i b i t AG-197, IR-20 sufficient to support this aspect of the
\
I i I l
Page 139 D.P.U. 19738, 19743, 20055, 20109 &72 l ( forecast.
- c. Average Residential Egg-yeathgI_pensitive_Use Average non-weather sensitive use, or average yearly use by general residential customers, was calculated by Mr. Byrne by d r a wi ng a line through 1974-1978 historical data and extrapolating the linear increase out to 1973P, Tr. VIII, p. 1121). Mr.
19R8 (D.P.U. Byrne drew this line "by eye" through rolling twelve-month average consumption d a ta (D.P.U. 19738, Tr. VIII, p. 1121). Plots of these lines are in Exhibit NB-8, Sch. F 3, pp. 8, 20, 33. Ms. Geller contends these lines are too steep to be consistent with available d a ta points (Exh. AG-237, p . 19 ) .
D.P.U. 19738. 19743, 20055, 20109 &72 Page 140 We have examin:d the evidence and find that the lines drawn oy Mr. Byrne are indeed too steep. 62/ We have adjusted 1979-1089 average KWH use to correspond to the equations
$_27~~9i checked ~ t Ee aEcuraEy of MrI~Byrne-~ s eye-drawn lines by regressing, fo r each New Bed f o rd division, the average annual KWH use of non-heating customers as found in Exhibit AG-197, IR-9, Ex hibi t 9-B, p. 2 against time for 1974-1978.
We 'hink that in this instance, the use of linear regression is the most a ppro pr ia te method to extrapolate a linear trend into the future. Our r e s u l t i ng equations p rod u c ed a 1998 estimate of 5,865 KWH for the Cape and Vineyard division, a fig u re approximately 1 percent less than New Bedford's forecasted, conservation-adjusted v a l ue of 5,912 (see Exh. NB-8, Sch. F 3, p. ;'. We derived 6,072 MWH fo r the Plymouth division, a 1989 value approximately 3 percent less than Pl ya a u t h 's conservation-adjusted forecasted value of 6,240 KWH (see Exh. AG-197, IR-23, 2d for an explanation of NEGEA's conservation adj uatments) . Our regression results fo r New Bedford indicate that the 1998 KWH value of 5,142 (versus our 4,641) is nearly 10 percent too large. Our equations were as follows: 2 Cape and Vineyard: KWH=67.9(Yr)-121.6; r = .95 2 Plymouth: KWH= 9 4.1 (Yr) -22 0 9 ; r = .98 New Bedford: KWH=56.l(Yr)-295.4; r = .77 Where Yr=74,75,76,77,78 Applying the F test, we reject at a 1 percent level of significance the hypothesis that the coefficients equal ze ro for the Plymouth and Cape and Vineyard divisions, and at a 5 percent level of significance for the New Bed fo rd division.
D.P.U. 1973P, 197d3, 20055,-20109 &72 Page 141 presented in the previous footnote. 63/ These 19PR average KWH values per general residential customer do not include any con se rva tion adjustment. 64/
- d. Average _ Residential _ Weather
; Sensitivg_psg Weather sensitive use by existing electric he a t i ng customers is forecast to remain constant at 197P levels (Exh. NB-P,
- p. 15). Such use for new electric he a ting customers was assumed to be greater than for e x i s t i ng electric he a t i ng customers a nd was held constant throughout the forecast period (Exh. NB-P, pp. 15-16). NEGEA based this assumption on interview information which informed its forcanters that only the new, larger a nd more expensive homes would install electric heat
~
63/ T heline drawn by'Mr7 Byrne for~the Ne Bedford division excluded data for 1075 which we F3, feel should be 4 neluded (see Exh. NB-P, Sch.
- p. 33). We see no reason to exclude these data.
1 64/ We will address conservation separately, Infra. i I
l l l l l 19738, 19743, 20055, 20109 &72 Page 147 D.P.U. d u r i ng the forecast period, a nd on an analysis of monthly billing data fo r new electric heating customers (Exh. AG-197, IR-8(e); Exh. AG-197, IR-23 (d) , ( e) ) . Ms. Geller challenges NFGEA's assumption that new electric he a t i ng customers will have a higher annual weather sensitive use I than e x i s t i ng electric he a t i ng customers, claiming that this assumption is unsubstantiated and unreasonable (Exh. AG-237, p. 21). She claims that the interview responses contain only isolated references to the prices of new i electrically heated homes and only one reference to the attitude of expensive home buyers toward i electric heat (Exh. AG-237, pp. 21-27). ' Consequently, she claims there is no support for this assumption in the interview results. Ms. Geller finds numerous faults with the billing analyris performed by NEGFA. 4 She claims that the Trout Farm analysis is unrepresentative of Plymouth division electric he a t i ng customers (Exh. AG-237, p. 23). NEGEA's l use of the Cape and Plfmouth samples, she
l .. . D.P.U. 19738, 19743, 20055, 20109 &72 Page 143-l asserts, overestimates he a t i ng use. Rather than applying the results of the Plymouth sample (21,637 KWH per customer per yea r) to the Plymouth [ division, and likewise for the - Ca pe division (17,621 KWH per customer per year), NEGEA averaged the billing analysis results and held the result as representative for each division l 1 (Exh. AG-237, p. 24). The resulting forecasted electric he a t i ng usage for the Ca pe division, which has three times as many electric heating customers as the Plymouth division, is thus asserted to be targeted to a spuriously high average consumption value a nd thereby an overestimate of Cape heating use. Ms. Geller also claims that since NEGEA projects off-peak l hot water use separately, NEGEA's failure to subtract off-peak hot water use from the billing ( analysis data results in double-counting (Exh. i AG-237, p. 25). Finally, she claims that NEGEA l l failed to weather-adjust the 1979 billing data; I ! a nd consequently, new he a t i ng customers' forecasted use is targeted too high. We have reviewed the evidence l I l l i
D.P.U. 19738, 197d3, 20055, 20109 &72 Page 144 o concerning weather sensitive u se for new and existing electric heating customers carefully a nd find NEGEA's assumption concerning "erential weather sensitive use inappropriate. After examining the interview results (Exh. AG-198), we can find no reliable, documented evidence or 3 sufficiently substantiated judgments to support the conclusion that electrically heated homes built d u r i ng the forecast period will be larger and more expensive than those built in the past, or that o ners of larger, more expensive homes will be insensitive to electricity prices. We agree that the Trout Farm billing analysis is unrepresentative of New Bedford's Plymouth division a nd deen it inappropriate to draw inferences concerning future average consumption from this single sample. We also agree that the weather sensitive portions of the Ca pe and Ply, mouth billing analysis figures should be weather-adjusted if they a re used as a basis for estimating the weather sensitive use of new electric he a t i ng customers. We no te that f v - e -,
.. .. )
l 1973P, 19743, 20055, 20109 &72 Page 145 D.P.U. . wsather sensitive use by existing electric heating customers is weather-adjusted (see Exh. Sen. F3, pp. 2, 14, 26, line 19), and NB-8, believe it. appropriate to base use fo r new electric he a t i ng customers on commensurately adjusted '; . g u r e s . Finally, examination of each New Bed f o rd division ene rg y forecast in Schedule F3 of Mr. Fox's testimony confirms Ms. Geller's allegation that NEGEA has improperly used the billing analysis data for the Cape and Plymouth divisions by n e g l e c ti ng to consider the water heating use component of the derived average yearly consumption values. The billing analy,is in Exhibit AG-199, Schedule IR-1, produced an average yearly use for Plymouth division new electric heating customers of 21,367 KWH and 17,621 KWH for C a pe division new electric heating customers. NEGEA averaged these figures to derive a consumption e s tima te for the Ca pe and Plyme th divisions of 20,000 KWH per year per new electric he a t i ng customer (Exh. AG-199, IR-1-1; Exh. AS-237, p. 24). NEGEA estimated
D.P."1 19738, 19743, 20055, 20109 &72 Page 146 6 average annual use for new electric heating customers to be 18,000 KWH per year fo r the New Bed f o rd division (Exh. AG-199, IR-1-1). If we assume, exclusive of a weather adjustment allowance, that these values are repre sen ta tive of average yearly electricity consumption for new electric he a t i ng customers in 1979, then we would expect near-term fo rece nted average consumption per new electric hea ti ng customer to approximate these figures fo r the three divisions. However, we find that 1979 consumption for these customers is 24,050 KWH 33/ for the Ca pe divisien, 24,300 $$/ KWH for the Plymouth division and 22,750 KWH 37/ for th? New Bed f o rd division. S! 5,175 line 15, Exh. NB-8, Sch. F3, p.1 14,825 line 17, Exh. NB-8, Sch. F3, p.2 4,050 line 30, Exh. NB-8, Sch. F3, p.3 24,050 b! 5,150 line 15, Exh. NB-8, Sch. F3, p.13 14,850 line 17, Exh. NB-8, Sch. F3, p.14 4,300 line 30, Exh. NB-8, Sch. F3, p.15 24,300 E/ 4,120 line 15, Exh. NB-8, Sch. F3, p.25 13,880 line 17, Exh. NB-8, Sch. F3, p.26 4,750 line 30, Exh. NB-8, Sch. F3, p.27 22, .3 i l l
D . P . II . 19738, 197d3, 20055, 20109 &72 Page 147 Although NEGEA claims to forecast average annual use for new electric heating Cape and Plymouth division customers at 20,000 MWH and New Bedford customers at 18,000 KWH, we find forecasted average annual per customer consumption values for these divisions which are higher by an amount equal to the average annual water heating consumption for each division, respectively. This leads us to believe that NEGEA has double-counted wa te r heating consumption for new electric he r t i ng custamers. For each divisicn, fccecasted average anni al consumption for electric heating customers is substantially greater in 1979 than in 1978: 1978* 1979** Difference Cape division 14,834 24,050 9,216 N.B. division 13,574 22,750 9,176 Ply. d' vision 18,547 24,300 5,753
- Exh. AG-197, IR-9, Exh. 9-B, p.1
** derived supra.
D.P.U. 19738, 10743, 20n55, 20109 &72 Page IdP ' Even if we were to accept NEGEA's assumption that new electric heating customers will have greater consumption than existing customers, there is insufficient evidence in tne reco rd to support the average u se figures employed in NEGEA's forecast. We therefore adjust average weather sensitive energy use of new electric heating customers to be the same as that of e x i s t i ng electric he a ti ng customers. Specifically, we adjust line 17 of each division's forecast in Exhibit NB-8, Schedule F3 to read 9,676 6P/ fo r the Cape division, 12,617 64/ fo r the Plymouth division, and 9,193 70/ fo r the New Bed f o rd division. 6A/ (5929 HDP) (1. 6 3 2 RWE7hDD7Cust. ) . Sii line 19, Exn. NB-8, Sch. F3, p. 2. 69/ (5764 HDD) ( 2.18 9 KWH/HDD/Cust.). See line 19, Exh. NR-8, Sch. F3, p. 14 70/ (5305 H DD) ( 1. 7 0 4 MWH/HDD/Cust.). See line 19, Exh. NB-8, Sch. F 3, p. 26. l l
- i. .. ..
Page 149 D.P.U. 19738, 19743, 20055, 20109 &72
- e. Seasonal _ Customers NEGEA includes u se attributable to seasonal customers in the "All Other Residential Classes" category (Exh. AG-197, IR-15, 16,17). NEGEA assumes this class will increase consumption at the base load ra te of growth (Exh.
NB-8, Sch. F3, line 34, p. 3) . Ms. Geller faults NEGEA for failing to consider separately the differential consumption of seasonal and ye a r- ro u nd new customers (Fxh. AG-237, pp. 25-26). By Ms. Geller's estimate, seasonal customers occupied 30 percent of the Cape civision dwelling units and 20 percent of the Plymouth division dwelling units in 1978 (Exh. AG-237, p. 25; Tr. 46, pp. 37-34). Although Mr. Fox testified that he did not know the proper portion of seasonal customers in the Cape and Plymouth divisions (Tr. 28, p. 59), he assumed that seasonal customers purchased homes in proportion to their l representation in historical data (Tr. 28, p. 60). j i l We agree with Ms. Geller, and Mr. Fox, that a portion of new homes purchased in the Cape and l
D.P.U. 19738, 19743, 20055, 20109 &72 Page 15n Plymouth divisions a re purchased by seasonal customers. We find that the record lacks comple te historical da ta on seasonal customer rtoresentation in these two divisions; Exhibit AG-197, IR-15, Exhibit 15, however, contains data on the peak number of seasonal customers (correctly defined by Ms. Geller as the maximum number of seasonal customers recorded in a single month (Tr. 46, p. 34)). The peak number of seasonal customers is the best indication of seasonal customers in the record. Consequently, we accept Ms. Geller's estimatcs and adjust 11 E G E A ' s figures by r ed uc i ng the projected number of non-seasonal residential customers by 30 percent in each year of the forecast for the Cape and Yineyard division and by 20 percent for t3e Plfmouth division. We do so because the distinction between seasonal and non-seaeonal residential customers is important in making accurate forecasts of future consumption for the se two service territories. In order to complete this adjustment we also adjust the category "All other Residential Classes" by I l l l
l Page 151 D.P.U. 19738, 19743, 20055, 20109 &72 e qua ti ng the growth rate for this category to the growth rate for the general residential class and by a s s umi ng that consumption for all seasonal customers is reflected in this growth rate. 71/
~~~
~
[l/ NEGEA clearly 5eeds~Eo~ collect more accurate and more detailed data on the use This characteristics of its seasonal customers. type of data can and should be collected 5y NEGFA in its ordin?ry course of business; and, accordingly, we will expect thi- refinement in future forecasts. l
]
.. .o D . P . tl . 19738, 19743, 20055, 70109 &77 Page 152
- 2. New B e d f o_r _d __C_o _m_m e r c i a l Forecast NEGEA's near-term commercial sales projections are based on interview results and its long-term projections are based on its judgment that the commercial and residential growth rates will converge, exhibiting a pa t t e r n 9
it feels is the " natural" long-run relationship between these two classes (Exh. AG-197, IR-41). We accept NEGEA's judgment that short-term commercial growth will be slow, and find its interpretation of interview results reasonable (Exh. AG-197, 18-42, IR-43; Exh. NB-8, p. 17). However, the growth rates for the New Bedford division for the 197R-1988 period and the other two divisions for the 1981-1988 period are founded on assumptions of a purportedly known proportional relationship between commercial and residential consumption which has not been properly documented. Dr. Stutz criticizes NEGEA's assumption of proportional growth as inferior to an independently derived commercial forecast (Exh. l
Page 153 D.P.U. 19738, 19743, 20055, 20109 &72 , s SEA-35, p. 12), but accepts this assumption in his adjustment to NEGEA's forecast. As with the r e si d e n t i al sector, Dr. Stutz bases hi s adjustment on the LILCO demand fo recast , lowering commercial growth to 1.3 percent per year through 1985 and 1.6 percent per year thereafter (Exh. SEA-35, p. 12). Ms. Geller criticizes NEGEA's u nd e rl y i ng assumption that there exists a
" natural" long-term linear rslationship between residential and commercial consumption as having no basis in fact (Exh. AG-237, pp. 29-30). Ms.
Geller asserts that NEGEA's assumption that commercial growth will return to its long-run linear relationship with residential growth entails the following nypotheses: (1) the linear relationship has existed in the past, (2) there are theoretical reasons to explain the relationship and (3) recent commercial growth can be explained as a temporary departure from the " natural" r ela tions hi p (Exh. AG-237, p. 30). Ms. Geller finds that none of these hypotheses is adequately supported (Exh. AG-237, p. ? O) . e , ,
- a. ..
- 19738, 197A3, 20055, 20109 &72 Page 154 D.P.U.
We concur with Dr. Stutz and Ms. Geller that the evidence presented by'NEGEA tells us n o t h i ng about any u nd e rl yi ng causal relationship or about the existence of any " natural" relationship. We conclude the re is insufficient analysis of commercial growth by NEGEA to rely on its conclusions with an acceptable level of confidence. Nor, as previously explained r eg a r d i ng the residential sector, can we accept Dr. Stutz's adjustment to the commercial class based on LILCO data. We agree with Ms. Geller that NEGEA's ratio analysis (see Exh. NB-8, Sch. F3, p. 44) is inadequate, and rely on her analysis of Plymouth and New Bed fo rd ratios for , this conclusion (Exh. AG-237, pp. 31-32). Her graphic analysis (Exh. AG-237, pp. 33-34) as well as that presented by NEGEA (Exh. NB-76) leads us to acknowledge a downward change in the rate of g rowth of consumption since approximately 1973 for both the residential and commercial classes for all three New Bedford Company divisions (see Exh. AG-237, pp. 33-34; i i
19738, 19743, 20055, 20109 &72 Page 155 f D.P.U. Exh. AG-241) . We have calculated the commercial compound growth rates for t he period 1973-1978 (1.47 percent for Plymouth, 3.8 percent for the fo r New C a pe and Vineyard and .25 pe r c e .it Bedford) and used these rates to replace those in the forecast that are founded on the commercial / residential relationship propounded by the Company and disputed by both Dr. Stutz and Ms. Geller. As noted earlier, our use of these compound growth rates is not to be considered as a precedent; however, we believe that they are the only justifiable rates that can be d rawn from the evidence presented. In order to ensure more satisfactory results, we urge the . Company to take more care in detailing its assertions of causal relationships in the future.
- 3. New Bed fo rd Municipal Fo re ca s t NEGEA holds municipal consumption constant for the near term and increases the rate of consumption in the tatter years of the forecast based on residential consumption rates l
i ,
Page 156 D.P.U. 1973P, 197d3, 20055, 20109 &72 . i 5, 17, 17; Exh. NB-8, Sch. F3, pp. (Exh. NB-8, p. 30). The only new customers added were those I NB-8, p. 17). found through interviews (Exh. No intervenor contested NEGEA's We find forecast of municipal consumption. NEGEA's method of forecasting municipal consumption reasonable and, for each division, adjust municipal consumption to reflect previously sdjusted r e s id en t i al consumption.
- a. New Bedford Industrial _
[g5egast NEGFA's industrial fo reca st is based on interviews with i nd u s t r i al customers (Exh. NB-8, p. 17) and NEP00L's long-range fo reca st for industrial sales in Massachusetts and New England (Exh. AG-197, IR-54). The industrial energy consumption forecast for the Ca pe and Plymouth divisions was based solely on judgments drawn from interviews Judgments made concerning (Exh. AG-197, IR-53). New Bedford industrial growth were based on NEPOOL's Report of the NEPOOL Lo a d_Fo re ca s t i na Forecast of Task Force on the NEPOOL,Model-Based 6
e i 19738, 19743, 70055, 20109 672 Page 157 D.P.U. New England El e c t r i c_ En e rgy_a nd _P e a k _ Lo a d 1079-19P9 (Exh. AG-197, IR-54) ac yell as interview results. Dr. Stutz made no adjustment to NECEA's i nd u s t r i al forecast. Ms. Geller claims that the industrial interview notes contain inadequate information on which to base the individual industrial customer forecast (Exh. AG-237, p 38). She also claims tha t NEGEA made no attempt to ensure that the assumptions u nd e rl yi ng the NEPOOL forecast for Massachusetts and New England, on which the New Bed fo rd division forecast was based, a l so hold for the New Bedford division. The record with respect to the industrial forecast contains insufficient support for the Department to judge the appropriateness of certain aspects of the forecast with the degree of confidence we would i prefer. We u rg e NEGEA to analyze industrial consumption wi th g rea te r thoroughness in future j demand forecasts, but find the growth rates utilized reasonable and, therefore, accept the forecast for the purpose of this proceeding.
Page ISP D.P.U. lo73P, 107d3, 2nn55, 20109 &72 s
- 5. gambridge_ Forecast NEGEA forecasts Cambridge residential consumption to grow at .5 percent yearly. This is due entirely to increased consumption by existing customers. No increase in consumption is attributed to new customers (Exh.
NB-8, p. 18). The existing commercial, municipal and industrial customers a re forecast to maintain their current use (Exh. NB-P, p. 19). The only growth forecast for the se classes is that due to anticipated new customers. This growth is based on information gathered from interviews (Fxh. NB-8, p. 18). The Cambridge forecast was not contested in the se proce ed i ng s . We find NEGEA's Cambridge forecast reasonable and accept the f ig u r es pr e s e n t ed by NEGEA.
- 6. Conservation NEGEA accounts for conservation in its New Bed f o rd forecast by ad j usti ng the l
average per customer consumption growth rate of l general residential customers downward 5 percent l l l
.. .. l I
l l Page 159 ; D.P.U. 10738, 19743, 20055, 70109 &72 yearly in t he -la t ter years of the forecast (Exh. NB-8, p. 15). NEGEA's forecaster based this adjustment on his judgment, and conceded that no systema' tic, mathematical methodology had been i developed to i nco r po r a te the e f f ects of conservation into the forecast (Exh. AG-197, IR-23). I Conservation attributable to increased appliance i
^
efficiency was taken into account by using a time lag formula which forecast new general residential customer average use at a level equivalent to the average u se of the previous year's general residential customers (Exh. AG-197, IR-24). Ms. Geller described NEGEA's i conservation adjustments as minuscule, stating they comprise only a 13 GWH reduction by 1900 (Fx h . " AG-237, p. 41). She suggests this 13 GWH 1 reduction is so small as to be the result of l round-off error. In his initial brief, the Attorney General points out that the time lag formula was also developed to capture the effects of " immature" customers, i.e., new l I l i l
19738, 19743, 20055, 20109 &72 Page 160 D.P.U. . customers on-line for less than an e n t i re year. This further diminishes the net effect attributable to conservati,n. In the preparation of a demand forecast, we consider it reasonable to assume that all customers, both new and existing, will engage in conservation th roug ho ut the forecast period. De ta iled inspection of the record indicates, however, that NEGEA has failed to adequately reflect conservation. The Attorney General is essentially correct when he categorizes New Bedford's conservation adjustment as minuscule, a nd we concur with his assertions that virtually no adjustment was made for conservation and that what little there was could easily be attributable to round-ofd error. While informed persons may differ on the amount of conservation which may be expected to occur over a given forecast period, it is unreasonable to assume in effect that there will be no conservation. Although we do not accept New Bedford's conservation adjustment, tne record
l D.P.U. 19738, 19743, 20055, 20109 &77 Page 161 contains evidence which nevertheless enables us to assess to some degree the po t e n t i a l impact of conservation efforts on New Bedford's future demand. SEA's witness, Dr. Stutz, testified at great leng th on a wide range of conservation measures that could be vigorously promoted in order to lessen consumption. He determined a level of residential conservation using methodologies similar to t ho se he employed in studies carried out in other states. In utilizing these methodologies, he estimated the amount of electricity a ttributable to the different end-uses by mu l t i pl y i ng the saturation rate for the reepective end-uses by the annual unit KWH use per year a nd by the current number of New Bedford's residential customers. The saturation rates .snd the annual unit KWH use per year figures are largely drawn from the Energy Systems Research Group's 1979 New England Study referenced in his direct testimony. To estimate the percentage savings attributable to efficiency gains for each end-use, he multiplied the unit en e rgy savings which he claimed are
b.P.U. 1973P, 10743, 20055, 20109 &72 Page 162 ex pla in ed in his prefiled testimony by the fraction of replacements and new units introduced during the target period. He implicitly assumes that the fraction of replacements a nd new additions (Exh. SEA-35, Sch. JS-7, Sheet 1 of 2) utilized will be valid by the year 1985. Unfortunately, Dr. Stutz did not ind ica te the derivation of the unit energy savings nor of the replacement fractions used. With no d e ta il ed knowledge of the composition of the appliance and housing stock energy consumption character stics in the New Bed f o rd area, or at least knoPledge of the assumptions Dr. Stutz made with respect to their composition, it becomes extremely difficult to estimate potential energy savings. This problem is further compounded by a lack of data to support , his supposition that the replacement stock will be as efficient as he claims. In addition, the three divisions that constitute the New Bed f o rd service area are diverse enough to warrant e s ti ma t i ng conservation levels for each division i i l
D.P.U. 1973P, 19743, 20055, 20100 672 Page 1;3 separately. Finally, as we have previously expressed, we have serious reservations about the wholesale application to . the .? e w Bed f o rd area of estimates calculated for other service territories. Dr. Stutz estimates that 100.5 GWH of electricity can be conserved in the residential sector during 1985. Success of such a vigorous residential energy conservation i program involves well-aimed publicity drives to make consumers aware of more efficient apoliances and requires that they in fact pu rcha se these a ppl i a tice s . Dr. Stutz also suggests the free distribution of inexpensive energy saving devices such as showerhead flow restrictors, the offering by the company of cash rebates against the cost of the mo re expensive major appliances and/or helping to arrange financing for customers pu r c ha s i ng these appliances. He further cites the significance of a rigorous implementation of the Residential Conservation Service Program by New Bedford s u g g e s t i ng that in order to maximize the
I D.P.U. 19738, 197d3, 20055, 20109 &72 Page 164 effectiveness of the program petitioner should offer free energy audits and small interest-free loans. Dr. Stutz describes an overly ambitious residential conservation target. We see this as an extremely optimistic upper limit unlikely to be attained by 19PS, although possibly by 1988. With respect to the commercial sector, Dr. Stutz assumes that its savings will at least equal those in the residential sector. There is no basis for this assertion and the witness admitted the absence of adequate local or national da ta on commercial end-use, which data are crucial for calculating commercial savings. Consequently, we cannot a cce pt his proposal for commercial sector savings. In s pi te of our belief that the 9.8 ' percent or 100.5 GWH savings in the residential sector by 198R are very optimistic, we shall incorporate these estimated savings into the forecast, bearing in mind our in a bili ty to 2 account for commercial and industrial savings
D.P.U. 19738, 19743, 20055, 20109 &72 Page 165 i i d ue to the pa uc i ty of d a ta for t he se sectors and the lack of any estimate regarding them by Ne w Bedford. 7 Peak Lo a d _ Fo r e c a s t NEGEA develops its peak load forecast by a ppl yi ng historical l o ad f acto rs to the energy requirements of the New Bedford divisions and the Cambridge division (Exh. NB-8, pp. 18-20). The Cape and Plymouth divisions, which are primarily residential, have load 4 factors historically 2 to 3 percent below that of the more industrially intense New Bedford division (Exh. NB-8, p. 19). NEGEA does not expect these division characteristics to change over the forecast period, and thus anticipates , that their respective load f acto rs will continue in the same relationship (Exh. NB-8, p' . 20). Because NEGEA anticipates faster growth in the low load factor Ca pe and Plymouth divisions than in the high load factor New Bedford division, absent any offsetting influences, NEGFA would expect New Bedford's f 4
, , , - - . , ,. - ,n ,- -
, r , - -- ,, - , - - -
a 1973P, 197d3, 20055, 20109 &72 Page 166 D.P.U. , l NEGEA, however, overall load factor to fall. forecasts New Bedford's load factor to remain constant at 65 percent in anticipation of positive load factor consequences from the
' implementation of load management techniques and from expected rate reform initiatives, toch as time of use rates (Exh. NB-P, p. 20).
Cambridge is a summer peaking company with a heavy air c o nd i t i o n i ng load (Exh. NB-8, p. 20). The annual load factor has ] decreased markedly since 1974, from 59.5 percent j to 55.7 percent in 1978 (Exh. NB-P, p. 71). Ow i ng to load management a nd time-of-use rate benefits, NEGEA slows this historical load ]; factor erosion, forecasting a 1980 load factor I I of 56 percent which decreases only 1.7 percent over the ten-year forecast period (Exh. NB-8, p. 21). NEGEA forecasts peak load c a pa ci ty requirements based on normal peak loads (Tr. 29, p. 9) . NEPOOL requirements are forecast u s i ng summer peaks (Tr. 28, p. 10). The coincident peak load of the d i s t r i b u t !, n g y _- - - ~ .
i D.P.G. ??738, 19743, 20055 20109 &72 Page 167 4 companies is based on the sum of the peak loads of the individual companies multiplied by a diversity factor (Exh. NP-8, p. 21). The diversity factor a ppli ed is 90 percent of the Cambridge peak added to 100 percent of the New Bedford peak (Exh. NB-8, p. 22; Exh. NB-8, Sch. F3, p. 4 3) . Our review of Schedule FS p. 43, f however, is at variance with NEGEA's ass'rtion i concerning the a ppropr ia te system diversity factors. We simply cannot find any clear support for the percentages utilized and, in this instance, we find the average historical diversity factors of 96.5 percent for Cambridge and 99 percent for New Bedford more appropriate. NEGPA forecasts New Bedford's l normal summer peak to grow at 3.3 percent during the forecast period (Tr. 28, p. 65). The Cambridge peak is forecast to grow at 2.3 percent, including sales to Pelmont (Tr. 23, p. 10). The combined companies' peak is fo reca st to grow at 3.3 percent, using normal summer peak loads for the period 1978 to 1988 (Tr. 29, p. 10). Ms. Geller does not address 4 l
J D.P.U. 19738, 19743, 20055, 20109 &72 Page 16P i NEGEA's me t h od of c a l c ul a ti ng peak growth. Dr. Stutz translates his ene rgy ad j ustments into peak g ro w th using a constant, ex t r eme weather load factor of 57.1 percent (Exh. SEA-35, p. 14). He terms this calculation conservative, ] disagreeing wi t h Mr. Fox that the effects of ra te reform initiatives will be offset by shifts in the relative size of New Bed fo rd 's customer classes (Exh. NB-8, p. 14). Although we agree with Dr. Stutz that ra te reform intiatives may r ed u ce peaks more than they reduce total energy consumption, we are concerned about the d e te r i o r a t i ng load factors exhibited by Cambridge, and the i i po ten ti al for deterioration in New Bedford. Given the present state of knowledge in this 4 area, we find that for the purposes of this proceeding, NEGEA has adequately taken into consideration both ex pec t ed i m p r ov e me n ts in load factors due to anticipated rate re fo rm initiatives and load management, as well as the observed and potential deterioration of load factors for its d i s t r i b u t i ng companies. i.
.-% ,.e.
.o ..
19738, 19743, 20055, 20109 &72 Page 169 D.P.U. Consequently, we find Mr. Fox's application of judgment with respect to.these diametric influences reasonable. We a l so find the use of summer normal peaks in estimating peak growth rea sor a ble . Using NEGEA's method of c a l c u l a t i ng peak sales, t he total effect of our adjustments to NEGEA's forecast reduces normal summer peak load growth from 3.3 percent (Tr. 28,
- p. 10) to 2.2d percent, including sales to Belmont.
R. The Need for Power No question has been raised concerning the appropriateness of New Fedford's utilization of a 22 percent reserve margin for pl a n n i ng system reliability. Ba s ed on the record in this proceeding, we find this reserve margin reasonable. Based on our adjustments to NEGEA's forecast, we find that without the additional capacity represented by the proposed Seabrook acquisition NEGEA will have a system
I
- D.P.U. 19738, 19743, 20055, 20109 &72 Page 170 reserve mar'... of 13.0 percent. y/ We find this margin tea low. Inclusion of the l ca pa c i t .. presented by the proposed Seabrook i
! acquisition would increase the N EG EA system loRR t , reserve margin to 19.6 percent. B/ Thi s margin , is within the range supported by the evidence j in this case. Consequently, we find that MEGEA has demonstrated a need for the 50 MW of ; Seabrook capacity.
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1982 1981 19R4 1995 ]9R6 1987 1989 1978 1979 1980 1981 y
. 6a Emident ial Arwwwil ' N #,
1 Tntal omt(sners f actisal) 3146 M c> ' 920 970 9fJ) 4(.0 960 960 960 900 960 960 'o
- 2a) (2X.R). forcrast of rxw 3 h ebcIlirvis 1.M 7 10 13 17 il 14 15 16 17 l 3 fvmtrat iosi rate (t) 9 64 96 106 Ils 125 1 14 144 154 161 '
4a) New electric heat 81 M custoners (3x2a) R17 R%6 R64 R54 R45 R IS R26 Al6 806 797 Sal teew clwelliasts (2a-4a) forfrast 35059 15923 16777 17672 1R457 19281 40099 40905 41702 6a) Total ostuners (fortrasil 31106 1420) 7a) Avg. kwh/ctmtcwr 5150 5225 5119 5413 5507 5601 5695 5790 5884 5978 6072 h 19787R 205988 214257 222666 211141 219712 24817*, Energy-caristirst oestreers 174117 181926 189774 8a) I (Previcies yrwr's custenners X 7a) 7441 4471 4596 4653 4677 4704 472% 477'. 4741 4764 9al Millioral crergy exw 4110 custrumrs (5a X previrmas 7a) 1R6199 194170 207481 20665 73 ra61 227191 71'>8t66 24445% 251117 10a) 1btal resittential anrust 171128 178647 j' (Ha + 9a) 4.2R 4.17 4.04 3.94 1.05 1,71 3.64 .1.51 4 rarwth lute (1) 4.27 4.11
.g Crugrural lute 3.98% 0F 4
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6J i o D-- Y $35) ' m'w , Pigmth tiivisim-twvisol t)rrytberga ,t, fa 1981 1984 1995 19R6 1987 19H4 y
'b 1978 1919 19RO 1981 19!!2 _
tw;idential Arusial ~ 7g 1 1btal oestuners (actual) 11166 970 960 960 960 960 %0 960 960 960 2al (2X.P; formast of rxv 920 o , < etweilirvis tn b 17 11 14 15 16 17 m IWw'tiat im rate (t) 9 7 10 Il 3 64 96 106 115 125 l 14 I44 154 16i 4a) Nrw electric hnet 8) M l custoners (3x2a) O i
- R% A64 854 R45 R)5 R26 R16 R06 797 Sal Ntw thellievis (2a-44) formast 917 15059 15923 36777 376?? 1R457 19281 40099 40905 41702 1btal ostewrs ( ormast) 14201 6a) 11166 7a) Avg. kwh/custruer 5150 5225 5119 5413 5507 5608 5695 5790 5884 5978 6072 h 1R1926 1R9774 197878 205988 214257 221666 211141 219712 248175 8a) Dw'rryy-existirvj omtrunts 174137 (Frevirms year's custrners '
X 7a) 7441 4596 4651 4077 4704 4725 4725 474) 4764 Arktitional errrgy ruw 4110 4471 9a) custrumrs (5a X prcGrus 7a) 1R6199 194170 20?4R] 210665 2tH961 227 M1 2 rA6ts 24445% 253139
; 10a) 1btal residrmtlal anrmal 171128 17R647 (Sa + 9a) 4.2H 4.17 4.04 1.94 1.85 3.71 3.64 1.51 Gemte, flite (1) 4. 27 4.14 Crsquint !? ate 3.981 b !
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m (c o_ ) PIYM arril DIVISit tJ-IYVISIV 77JETCY TY451Mr (Ccmtirnwil) = {w] ND EE@ 1978 19RI 1982 1981 19H4 198% 19.R6 1987 19.RR
-- 1979_- _19R0 4
le_s._i..le_ntial with r,lmt ric_ II_ cat h w b-h 12 1ntal <mterers (actual) l' 14 M I l la) PJrv cimts ic feat oistewrs 84a) RI 64 96 106 115 12% 1 14 144 1%4 161 g hh i 1 Ida) Tntal castruers (12a 6 ) Li) 3717 1/RI 38 17 19R I 4rnR 4221 4157 4%O1 4655 4RIA foretast . 5225 5119 54 I l 5507 %0) %'85 %790 %PR4 597R 6072 y IJ 15a) t& c wr'atler snsilive Sl%G aves ay= ainml uw (kW) o w 17767 17R42 17916 19010 1R124 1R21R 18112 1R407 18501 1R595 O 16a) Avy. me of tww clmtric tu'at o tettwrm (19R0 4 = lvrevic.en 15a + 17a) to 1%I7 12617 12617 12617 12617 12617 12617 12617 4 17a) Watter sensitive tortion of 12617 12617 M avg. areal um of ruv elmt ric-trat oistrwrs (bA) 18a) tann watter sensitive crergy- IR9RR 19771 20467 21151 22.109 2111R 2445) 2%17 26907 2P265 existirvI amtcwr tase (previrun year 's ctr,trwts X 1 41) (Pk11) 19a) Wr'atter sensitivr= crergy-cuist irvl 45R52 46899 47705 4R917 '0254
%08R7 515R7 521%0 51184 54090 ansttwr lase 1979 e argony's firpare (1980 & = prevics:s 19a
- 21altlWe 20a) hHiticn11 trin wswitter snmitive 427 1 14 Sll %74 fill 700 76 1 B l4 906 974 crergy-irw cust. (lla X previens 15a) *O op d3 O
W 4 h
-. - -- - ~ _ . _ . - _ . . . .-. _ .. . _ . . _ . . _ . _ . ~ _ . -~. ~ .- - . _ _ - . -~ . - . - . ..~.--.n. .
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M
=
o p ,) 4 P!YMaffla .D_I.V_ISt%IG.N_IS_ID_I?43_8W fuGIAST (Cheit inum.i_l_). 1978 1919 19RO 19RI 1992 19R) 39H% _g regg 19p(, l9gy 39nR g J I It sidemtial With I'Irrtric thit 2la) AMitirmal etkr mmitive 1047 807 1211 1147 1451 1577 1(.91 1811 1941 *n57 ctw ryy-trw ctistrerers il An X 17a) tt41 [ 67438 66114 67R)) 69894 72119 74647 76502 7R492 Rf% 18 R2940 o i 22a) Total sales forecast - 8%18G clectric twaat ossttwrs b (ira + 19a e 20a + 2[a) 4 Crrn, th Rate 4 -1.67 2.26 1.07 1.21 1 42 2.49 2.6 2.7) 2.R% 2.95 y o Ongun1 Crtseth 2.19% e o Of f-Peak ikit Wter e 26 Total osstravyn 6471 e5 4 27 Twsstratirm rate 1 14 14 14 14 34 14 14 14 34 14 M l 2Raj Nrw castcwer rs (2a X 27) 311 311 126 126 126 126 126 126 )?6 126 29a) 1btal osstrwrs (forreast.) .67R4 ~1094 7423 7749 ROF5 R401 8727 905) 9379 9705 30 ; Aw3. eme of swme nestancrs 4300 41n0 4 3n0 4100 4ino 4100 4 ino 4 ino 4100 4 }no 315) 1btal of f-pnsk sales fran 1346 1146 1402 1402 1402 1402 1402 1402 1402 1402 ruv risstaur rs (28a X .30a) Mel 321) 1btal rif f-peak sair s 26044 27190 2R716 30338 18540 12942 14144 1574e. 1714R in550 199%2 (31a e previcam 32a)
'tf Grrneth Rate 1 5.17 4.98 4.88 4.65 4.45 4.26 4.08 1.92 1.77 1.64 m dl (begrant Rate 4.17% 4
; W J
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' Pl.YPtimi titVIStfN-PfVISF1s I?e?tN F1EGUN7r (Omtirmanl) ,
, 4 _1 _978 197_9 19R. O 190_1 1980 19R.I l'I.R.4
. 1. 9R_5 19.R6 _19_ .R_7 19. .R_R All Ot f r=s Mitirmtial Classr n
, r.rrwt h Rate == resirirmtial arwnul qstwth rate (%) 4.27 4.34 4.28 4.17 4.04 1.94 1.85 .1.71 1.64 3.55 O h i
- WJ 1btill all oOv=r (Ptol) 6859 7152 7462 77R2 R106 R414 R766 9101 ',4 4 ) 97R7 1n134 W Crugruard hto 3.981 14'sirlential Stourary (Ptoll O
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D.P.U. 19738, 197A3, 20055, 20109 &72 Page 185 IV. ALTERNATIVES A. Introduction Petitioners assert that, given their d e mo n s t r a t ed need for future power, Seabrook is the least costly available alternative. They point to the inc*usion of conservation adjustments in their demand forecasts and a v a r i e ty of particular efforts to encourage consumer conservation. Pe ti tione r s a l so a rg ue that load management, by flattening their load curves, will increase rather than d ec rea se the need for base load capacity. With regard to particular generation technologies, petitioners limit their direct cases to the economic comparison of oil, coal, gas and nuclear fueled units. 74/ This limitation of alternatives is essentially based on petitioners' assertions that there are simply no other realistic alternatives. We will assess petitioners' and intervenors' claims concerning alternatives in the f ollo wi ng sections. 74/ FItchburg's planned inclusion of 2 ME of Base load hydro, a notable exception, is discussed in section C belov. I
D.P.U. 14738, 19743, 20055, 20109 672 Page 186 B. Con s e rva t i on_a nd_ Lo ad fagagegegj i Mr. Chernick categorizes conservation and load management techniques as supply options in the " Alternatives" section of his testimony (Exh. AG-232, pp. P7-105), stating that they a re superior to the construction of new generators for providing equivalent amaunts of energy and capacity (Exh. AG-232, pp. 87-R8). Mr. Chernick asserts that additional insulation of residential structures is cost effective, as is wa te r heater tank insulation (Exh. AG-232, p. 90). Mr. Chernick also identifies the Nola Power Fa c to r Controller 75/ as an electricity savinq device with wide and effective potential application (Exh. AG-232, p. 90). Mr. Chernick further discusses ra te reform,' conversion of master-metered a pa r tmen t s and businesses to 75/ This is a device which can reduce the energy consumption of electric motors in certain applications.
19738, 197d3, 20n55, 20109 &72 Page IP7 D.P.U. individual meters, voltage control a nd the utilization of controlled storage hot wa te r and space heating as p r om i s i ng conservation techniques (Exh. AG-232, p. 92). Dr. Stutz, as does Mr. Chernick, categorizes conservation and load management techniques as supply options superior to the construction of new generating capacity (Exh. SEA-35, pp. 15-23). He further discusses particular residential and commercial conservation strategies as well as recent federal legislation and finds energy consumption by t he se two classes could be cut by at least 9.P percent for New Bedford by 1985. We agree with Mr. Chernick and Dr. Stutz that conservation and load management techniques have an important role to play in capacity planning. We recognized this some time ago in D.P.U. 18810 and have taken s te ps to implement this order via administrative proceedings with respect to each investor owned Massachusetts electric utility. Our recognition of the 1
'a ,,
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 1P8 contribution of conservation a nd load management is evidenced in this proceeding by our attention to t he se issues in each company's demand foreeast. We have taken into account adjustments in each petitioner's demand forecast to reflect what we consider reasonable reductions in demand and shifts in load attributable to conservation and load management. Although the intervenors view conservation and load management techniques as capable ot providing similar amounts of capacity as can the construction of new generating capacity, we presently see successful conservation efforts by consumers as a reduction in demands and successful load management efforts by utilities as an alteration in consumer demand patterns, viz., an improvement in load . f ac tor. Although we realize that an investment which reduces demand may be functionally equivalent (with reg a rd to energy and capacity necessary to meet demand) to an investment which increases supply, we feel that there is a distinction in emphasis between demand and supply. l 1 i
D.P.U. 19738, 19743, 20055, 20109 &72 Page 180 [ The d i f f e r ence on the record before us is one of planning. Investments in new supply require concrete planning capable of producing a cl e a r l y identifiable amount of firm capacity. T he same sort of planning is necessary to treat a likely reduction in d ema nd as the equivalent of firm supply. Although the proceedings emanating from D.P.U. 18810 have begun, the se proceedings are still inchoate; at present, utility conservation and load management plans are insufficiently formulated, and consumer responses to these conservation and load management efforts are not sufficiently certain to treat the potential r e s u l t i ng reductions in d e ma nd as the equivalent of firm supply. We fully expect such conservation and load management plans to result from the. a d m i n.i s t r a t i v e hearings required by D.P.U. 1P810 for every investor-owned Massachusetts utility.
D.P.U. 19738, 19743, 20055, 20109 &72 Page 190 We a re firmly committed to realizing all potential benefits from conservation er3 load management. 76/ Once such plans a re fully articulated 1]/ and we have more information with which to gauge consumer responses, we will consider plans for conservation and load management the equivalent of plans for additional capacity. 78/ 76/ We-a l so realize, however, that the re is considerable disagreement over the most equitable and efficacious means of achieving these goals. 77/ Recent passage of the Residential Conservation Service Act, Chapter 465, Acts of 1980, will further ensure such plans a re indeed developed. 78/ We realize that traditional regulatory review, which allows a return for utility investment in ca pi t al equipment but no such return for expense items, provides utilities with a disincentive to make investments in
- t. c n s e r v a t i o n and load management which do not con t r ibu te to ra te base. We would ex pe ct such a situation to inhibit the expeditious development of efficacious conservation and load management plans. To correct this regulatory equivalent of a m6rket failure, we are u t ili z i ng our D.P.U.
18810 proceedings, Chapter 465 of the Acts of 1980 as well as various provisions of PURPA.
l l 1 l Page 191 1 . D.P.U. 19738, 19743, 20055, 20100 &72 ,: With particular reference to voltage control, the Attorney General suggests that it is a significant source of potential energy savings in terms of both cost and peak reduction. Petitioners c o n t e nd that the ! implementation of voltage control would be too expensive, that present information about the ; benefits of voltage control is inconclusive, and that their systems are not a ppro pr ia te candidates for voltage control. We ag ree that it represents a potential for e ne rgy seeings; the evidence before us is, however, simply insufficient to conclude that voltage control is an appropriate strategy Tar petitioners to pursue. Nevertheless, we urge pe ti tione rs to fully inform themselves about its applicability to their systems. l l l i 1
D.P.U. 19738, 19743, 20055, 20109 &72 Page 192 I C. Alternative Power Sources I 6
- 1. I n t r o_d _u c t i _o _n
-- It is g i essential that the public be provided an adequate supply of power in the future. As we found in earlier sectons, petitioners have clearly demonstrated a future need for significant quantities of power. T he issue before us now is what sources of power can reasonably be ex pe c ted to be available to meet this need. Our concern is not what steps petitioners might have taken in the past to develop alternatives, but what they should do now a nd in the future.
In evaluating the competing claims of intervenors and petitioners about part 'r alternatives and classes of alternatives, we are repeatedly required to decide the sufficiency of the evidence concerning these alternatives. Much of the evidence presented is by nature forward looking and therefore predictive. In a s s e s s i ng whether an asserted alternative is preferable to Seabrook, we must first question whether that l l
\
D.P.U. 1973P, 19743, 20055, 20109 &77 Page 193 al te rn a t ive is even likely to be available. Given our prospective viewpoint, a pa r ty a dv oca t i ng a particular al te rna ti ve should show that the alternative is sufficiently particularized and d e fi n i te to permit its use for supply planning purposes. We believe that this minimum t h r e s ho ld requirement is reasonable; to accept less would be to enter the reFlm of speculation and wishful thinking. 79/ 797 With~ rec a rd to that class of alternatives which is dependent upon direct utility investment, we no te that utility investment-decisions are largely a matter of managerial discretion. The positive e x e rci se of this discretion can in itself significantly affect the likely success of an alternative. We are well aware of the danger of circular reasoning: wherein the lack of management support for a promising alternative may in the future prevent its development; then, this lack of development is asserted as a reason for rejecting the alternative. We believe, however, that petitioners will need every alternative economical kilowa tt they can find and believe that this need will in itself accelerate petitioners' development of alternatives. l
D.P.U. 19738, 197a3, 20055, 20109 &72 Page 194 ii
- 2. Ind epe nd en t __ Powe r Pro-duction _and Cogeneration Intervenor arguments concerning non-utility power production as an alternative to Seabrook focus principally on the petitioners' general pessimism about both the usefulness and the potential for independent production, their failure actively to encourage or pursue it, the low rates offered to existing independent producers and.the disincentives such low rates c r e a te for po ;.e n t i al independent producers. We find these criticisms are, to a large extent, valid. With few exceptions, however, the actual implementation of non-utility sources of supply is a relatively recent phenomenon. This newness creates several g problems which are unresolved on the record 't before us, s
For example, we have no present basis on which to a cce pt the suggestion of Dr. - Stutz that 25 to 32 MW of cogeneration po te n ti a l in NEGEA's service territories will in #act be developed. ,' I ; We also do not have a sufficient evidentiary basis upon }.I) i b-
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- D.P.U. 19738, 19743, 20055, 20109 &72 Page 195 which to assess the reliability, availability or cost characteristics of this potential were we to assume its timely development. That is not to say a non-specific argument of this type is wiinout merit. Given a demonstrable pattern of cogeneration development, with an attendant.
specification of its characteristics and a showing of further development po te n ti a l , we would have been willing to infer that for present planning purposes, specific amounts of power with particular characteristics would have been forthcoming. We do not, however, have this type of evidence i before us. We view investment in independent power production as a competitive r e s po n se to utility rates over which petitioners exercise no con t r ol with respect to the decision to- i nve st . If all investment of this type were solely for 5 -the internal needs of the producer, utility involvement with the producer would be limited to the provision of back-up service. There are, however, a large number of possible situations where the
D.P.O. 19738, 19743, 20055, 20109 &72 Page 196
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economics of the investment decision d e pe nd upon production for sale. As purchasers of this
, power, pe ti tione rs are in a mo no pso n i s t i c position which places sellers at an extreme disadvantage in ba rg a i n i ng over price. As a result, independent development has been largely r e s t r i c t ed to industries where power production could easily be incorporated as a joint product in an o ng o i ng production process a nd whe re the power produced has been principally fo r internal consumption.
Recent passage of PURpA, however, has a r ticula ted a national policy to encourage the non-utility development of economical power sources. Various provisions of this legislation have been specifically designed to restructure what has heretofore been exclusively a monopolistic market by introducing a competitive element. Mandatory interconnection of independent producers and the delegation of small power producer buyback ratemaking authority to the Department are the principal means of i m pl eme n t i ng this policy in
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D.P.U. 19738, 19743, 20055, 20109 &72 Page 197 Massachusetts. We are committed to the design of fair back-up rates, interconnection c ha rg es and buyback rates which will encourage the independent production of power. Given the diversity of potential independent producers and the attendant diversity of their production characteristics in terms of supply availability a nd reliability, we do not see the problem of , designing these rates as a simple process. We
- are, however, c u r r e n tl y d e v i s i ng regulatory procedures which will reduce the uncertainty surrounding the potential independent producer's investment decision. On the other hand, the process of d e s i g n i ng the se buyback rates raises a substantial number of identification and control problems which will require time to resolve.
We recognize the po te n ti sl for alternative power sources in Fitchburg's service t area represented by the Civic Center, General Electric, Great American Chemical and Siminds Saw and Steel plans. We also recognize the
D.P.U. 19738, 19743, 20055, 20109 &72 Fage 198 potential in New Bed f o rd 's service areas for the proposed Rochester trash burning facility and that there are presently several of New Bed fo rd 's industrial customers who are studying the potential for cogeneration. De s pi te the intervenors' comments about petitioners' lack of enthusiasm for t he se possible power sources, we see the decision to invest in them as essentially independent of petitioners' attitudes or c o n t r o'l ; we also see the responsibility for i nvo k i ng our jurisdiction to establish buyback rates resting initially with - thos_ who would sell power to petitioners in accordance with such rates. We simply do not know when or if these investments will be forthcoming; nor have any potential producers pe ti t ion ed us to establish buyback rates. Consequently, while independent power production and cogeneration may well represent a significant future potential, we do not find sufficient articulation of this potential on the record before us to use it for present planning purposes, nor do we find petitioners' actions concerning independent l l l
)
l D.P.U. 19738, 19743, 20055, 20109 &72 Page 190 producetr unreasonable.
- 3. Solar and Wind _ Power Solar space heating, solar hot water he a ti ng and wind power may well become significant future sources of energy.
Implementation of t he se alternatives, however, is largely dependent upon consumer investment decisions which are be yo nd petitioners' c o n t r o.l . The po te n tia l impact of these types of investment is i n h e r e n tl y dependent upon the cumulative effect of a large number of I independent investment decisions. We do not have sufficient experience or evidence upon which to judge the extent to which these types of investment may be forthcoming. The record be f o re us leads us to view t he se technologies as emerging, but insufficiently developed to be utilized in p r e d i c t i ng quantifiable e f f ects on petitioners' systems at this time. 4 Canadian Hydroelectric Powe r Discussion in the record 4 indicates the possibility of the future purchase
D.P.U. 19738, 19743, 20055, 20109 &72 Page 200
?
of substantial amounts of Canadian hydroelectric (" hydro") power. At this time, however, we are 1 unable to conclude this source is other than a potential source. Petitioners have demonstrated a long-term need for firm uninterrupted power. The evidence before us indicates that past contracts for Canadian power have been on a short-term, interruptible basis. That this s ta te of affairs may change in the future gives us no assurance it in fact will change. Consequently, we a re unwilling to find that Canadian hydro potential is presently a realistic planning al te rna tive to beabrook. 80/
- 5. Hydroelectric Power We believe the development of hyd ro power has significant potential, and consider it to be a highly im po r ta n t economic source of future supply in New England. General Laws c. 164, sec. 97, serves to remind us that 807 Petitioners should, however, more actively Inform themselves on the progress of these l projects and on offers for sale which may be l forthcoming. l
<+ v -
I D.P.U. 19738, 19743, 20055, 2 0.1 0 9 &72 Page 201 I hyd ro technology was once the region's major source of s u p pl y . The teennology is'well understood and hig hl y reliable. The scale of plant is available to fit virtually any feasible commercial, industrial, residential or utility applications; and the markets for plant and equipment are highly competitive. We recognize that most major sites in the region are . presently utilized and that this utilization thereby i m po se s a severe limitation on the additional absolute magnitude of hyd ro power available for direct utility investment. This limitation does not, however, preclude ' he development of sites which have historically been considered small scale a nd which may provide " low head" hydro power. From an economic standpoint, the variable costs of hydro production are virtually non-existent; the region's flow of water, as a s e l f- r e n e w i ng natural resource, is essentially free relative to fossil and nuclear sources of fuel. Fitchburg's HYPROD hyd ro simulation is
- a. ..
Page 202 D.P.U. 19738, 19743, 20055, 20109 &72 . the only evidence in the reco rd which assesses the variable cost impact of a hydro plant on a petitioner's system Jeneration mix. 81/ In performing its cost simulations, Fitchburg assumes a constant load s ha pe and a fixed set of generation mix characteristics. The base cane simulation of the variable energy costs associated with an additional investment in 10 MW of Seabrook and 5 MW of hyd ro demonstrates a present w 'th of total system variable energy costs (PWTSVEC) over a fifteen year planning horizon equal to $374 million. This cost is comparable to a $404 million PWTSV EC for the ba se ca se with an additional 10 MW of Seabrook and no hydro. This represents a potential system savings in variable costs with a present worth approximately equal in magnitude to the Company's projected capitalized book costs for its total proposed additional 16 MW investment in the Seabrook venture. [l/ Exh. AG-202; see base case wi th 10 MW Seabrook and 5 MW hydro.
D.P.U. 1973P, 10743, 20055, 20109 &72 Page 203 i While the re a re some problems both with the Company's assumptions and wi th i i g i v i ng a full interpretation to the significance of this cost differential, the magnitude of savings this simulation identifies is substantial. An estimated $2.6 million capital investment 82/ will potentially reduce PWTSVEC by 8.02 percent. While a full analysis would account for the operation and maintenance expenses associated wi th these savings, Fi tc hb u rg d id not model the se costs in any of its simulations. We no e, however, that the magnitude .. the identified savings is comparable to the Seabrook savings relative to-other alternatives Fi tchbu rg has simulated and submitted in response to our June 2Pth order to justify the cost effectiveness of t he proposed Seabrook acouisitions (Exh. AG-207, Computer Runs). Although we expect Fitchburg to pursue and aevelop hydro, there a re several []/-~5E'1982 dollars as estimated by Mr. Garlick, Tr. 3, p. 46
1973P, 19743, 20055, 20109 &72 Pace 20d D.P.U. a l l problems which raise substantial barriers to concluding that hydro can replace Seabrook I capacity rather than complement it. Hyd ro is not always a constant source of base load power. This result follows from ceasonal variations in regional water supplies; depending on water flow characteristics, the se supplies may be at their lowest during the winter and summer system peaks. Additionally, much cf New England's large scale hydro potential is presently utilized. Unfortunately, the evidence in the record is not detailed enough to allow us to assess realistica3.ly either the magnitude of the region's unutilized potential or the characteristics of other than a few sites. Moreover, the potential for the statutory preclusion of all New Hampshire sites from regional participation in their development for regional benefit further compounds the problems associated with the l 1 1
D.P.U. 19738, 10743, 20055, 20100 &72 Page 205 timely development of the region's hydro potential, and directly reduces the known options for Massachusetts utilities. 83/ Despite our determination that hydro power does not provide a source for petitioners capable of supplanting Seabrook capacity, we consider complete examination of the hyd ro potential to be a necessary feature of each petitioner's future capacity planning. Given the substantial savings to consume rs that a relatively small amount of hydro can generate, the addition of hyd ro to the petitioners' system mixes snould be given a high priority in their search for future supplies. We will, therefore, expect these companies to inform themselves fully as to the region's hydro potential and to begin the immediate identification and development of feasible sites. Fitchburg has already begun the process by pl a n n i ng a 2 MW addition of hyd ro to its I 83/ See New Hampshire R.S.A. ~ 377T35 and 36. 1 We note that the NHPUC recently applied this l s ta t u te to i m po u nd the interstate transmission l of approximately 419.8 MW of hydro capacity. I
, D.P.U. '19738, 19743, 20055, 20109 &72 Page 206 system mix. We a ppla ud this decision and encourage Fitchburg to continue its examination and move on towa rd the development of the 5 MW of hydro which it simulated in its HY PR OD runs.
We cannot agree with various contentions raised by petitioners regarding substantial barriers to their involvement in hyd ro projects. Montaup and New Bed f o rd claim that hydro power is not a realistic source of supply for them because the re is little or no hydro potential in their service territories. Assuming arguendo that this may be true, we do not consider it to impose serious limitations. Re s ta ti ng the obvious, we would no te the location of Seabrook. In fact, were the non-local argument persuasive, there would be scant justification for the existence of NEPOOL. Furthermore, implicit in the language o f G . L. c. 164, sec. 97, is the recognition that hydro sources may well exist outside an individual utility's service territory.
l I , D.P.U. 19738, 10743, 20055, 20109 &72 Page 107 l f Nor can we agree wi th Fitchburg that 12 U.S.C.A. sec. 800. which gives i preference to states and municipalities in the issuance of preliminary permits or licenses for the purpose of d e v e l o pi ng water resources, is a valid reason for a private utility not to pbrsue the development of available hyd ro power vigorously. The preference prevails only if the p r i va te and public plans for development are equally well suited to conserve and utilize the water resources of the region. Preliminary estimates indicate a commercial 3y viable regional hyd ro potential of 534 MW to 753 MW. 84/ To remove a major potential source for the private development of these sites clearly conflicts with the present overriding regional interest in their expeditious development. Although states and municipalities may have a sl i g h t competitive edge over priva te utilities, the latter BI/ Exh. ~A52233, p. 2; 'fr. 17, p. 1007- We-note j that Fitchburg's proposed total percentage ' interest in seabrook when a ppli ed to this number j would yield approximately 5 MW of hydro. ! i
D.P.U. 19738, 19743, 20055, 20109 &72 Page 209 pr e s e n tl y have a competitive advantage over all other private developers. The design of I interconnection charges a nd buyback- rates is only in the plannir.g stages. Private utilities know the price they will receive for power; potential non-utility private investors do not. Until these buyback rates a re established, non-utility private investors face substantial uncertainty in evaluating the investment value of these sites. This uncertainty and the transaction costs a s socia ted with ha v i ng to negotiate price on an an hoc basis prior to the commitment of funds raise investment barriers with which petitioners do not have to contend. 85/
- 6. Coal Conversion Conversion of existing generating ca pa c i ty to coal in itself is not an alternative source of supply for anticipated future demand; I
1 557 Indeed, tnis problem is not confined to potential independent hydro producers. These barriers confront all potential priva te non-utility ) power producers who would rely on buyback rates to ev al ua te the economic attractiveness of a particular investment. 1
l i I l l I D.P.U. 19738, 19743, 20055, 20109 &72 Page 209 rather, it merely substitutes o ne fuel source 1 for another. There are, however, several ways in which coal conversion could impact on the l least cost solution to each petitioner's optimum generating mix. Plant dispatch is ba s ed on continuous system minimization of variable costs over time subject to the plant ca pa c i ty factor, plant availability and system demand charactyristics. The variable costs are 1 typically fuel and O&M expenses with fossil fuel costs occupying by far t he largest portion of total variable costs. To the extent coal is less expensive-than equivalent units of fuel oil, l l it is possible the conversion of existing oil-fired units to coal in combination with either the reactivation and renovation of oil-fired units or the reactivation, renovation and conversion to coal of oil-fired units could l result in a system generation mix who se total ( fixed and variable costs are less than the total l costs associated wi th the inclusion of the l l Seabrook units i n.. t he system's generating mix for the demand forecast period. l i
1973P, 19743, 20055, 20109 &72 Page 210
- D.P.U. .
I We note that reactivation, with conversion possibilities, does not I With respect presently exist for New Bedford. to both Fitchburg and Montaup, although these possibilities a rg ua bly exist, t he re is insufficient evidence in the record to indicate either a feasible in t e r me d i a te term realization of the prerequisite conditions for coal conversion or that the relative economics of this alternative possibility would with any reasonable degree of likelihood in fact lead to smaller total system costs. The recent passage of the Coal Conversion Act, Chapter 464, Acts of 1980, and the accelerated capital recovery provisions contained in it, however, creates a situation in which the reactivation or renovation and conversion possibilities deserve serious consideration by petitioners. P6/ 857 We will exFeet an analysis of this possibility should petitioners appear be fo re us in the future.
l
.. .. I l
D.P.U. 1973;, 19743, 20n55, 20139 &72 Page 711 1 D. The Seabrook Alternative
- 1. Capi _ ta l jo s t In the June 28th order, we addressed our concern about the lack of an o ppo r tun i ty to question the lead participant with respect to the Seabrook project (June 28th Order, p. 8). After the joint application in D.P.U. 20055 was filed (May 18, 1979), we ordered PSCO to prefile direct testimony. Mr.
David Merrill, Executive Vice President with r e s p o n s i b i l ' ' '. e s in the areas of engineering, production and power supply, and Mr. Robert J. Harrison, Financial Vice President, presented testimony and were cross-examined on the status, costs and f i n a n c i ng of the Seabrook project. Mr. Merrill testified that the cost of the project was estimated to be $2.8 billion, including AFUDC and nuclear fuel. This e s tima te was comple ted in January 1979 and may be broken down as follows: ($ millions) i i Nuclear Production Plant 1,825.0 ) Plant Related AFUDC 785.0 Nuclear Fuel 175.0 Fuel AFUDC 67.0 Total 2,852.0
D.P.U. 19738, 19743, 20055, 20109 &72 Page 217 On March 28, 1980, the intervenors filed a motion for certain updated information and the return of PSCO's witnesses for further cross-examination. The motion requested in part that PSCO provide the most recent itemized construction budget for the Seabrook project, documentation that the recent reduction in work force would not cause a delay in the projected in-service dates, and that witnesses Merrill and Harrison return fo r further cross-examination. On April 7, 1980, we announced our decision concerning the motion (Tr. 48, p. 6). In effect, our ruling required the Company to provide the information which it had readily available and which we felt was necessary for a comple te and thorough re co rd without prolonging the proceeding interminably. We had previously announced our desire to close the re co rd by April 15, 1980. We believe our decision on the motion struck a balance between the interests of the public in creating as complete a record as possible, the interests of the petitioners and
19738, 19743, 20055, 20109 &72 Page 713 D.P.U. . the obvious need for an expeditious resolution of the matter. The record presently includes ,. the most recent cost e s ti ma te for the project;
- this estimate as of March 1980 is as follows
($ millions) Nuclear Production Plant 2,085.0 Plant Related AFUDC 1,075.0 Nuclear Fuel 175.0 Fuel AFUDC _ 81.0 Total 3,416.0 PSCO's construction cost schedules are derived initially by its architect-engineer, United Engineers. The estimates are based upon the summation of detailed engineering specification of the l particular labor, materials ano equipment costs required for each aspect of the project. These estimates are reviewed by both PSCO and the
D. P.fl. 19738, 19743, 20055, 20109 &72 Page ?ld Nuclear Services Division of Yankee Atomic Electric Company (" Yankee"). PSCO then calculates both an inflation ra te of 8 percent and AFUDC 87/ associated with the timing of the construction expenditures. While the accuracy of this method of estimation is subject to future price changes and general inflation, its main virtue is that it is specific to the unique circumstances of the project and not dependent upon analogy to other projects. Further, as the project progresses toward completion, the estimates become less subject to error. We find this methodology and the estimates produced by it to be reasonable; indeed, it is the preferred methodology. The Attorney General's witness, Mr. Chernick, also presented testimony on the cost of the Seabrook units. Mr. Chernick claims tha t PSCO's estimate of the capital cost for the Seabrook project is understated. To support wit AFU3E is of course dependent upon the rate and manner of calculation utilized by each participant.
1 I D.P.U. 19738, 19743, 20055, 20109 &72 Page 215 this claim, Mr. Chernick relied upon two econometric studies and on recent historical i ex pe r i e n ce which he asserts de mon s t ra te a tendency by architect / engineers to understate i the capital costs of nuclear plants. , Mr. Chernick first utilizes the so-called NERA " study" (Exh. M-24) to support , i his claim. Mr. Chernick took a re g r e s s ion ! equation derived by the study, substituted his own inflation rates 88/ and resolved the i equation. The result of the recalculation of the formula is a ca pi tal cost of $2,203/KW for
- Seabrook I and $2.347/KW for Seabrook II, and a 1
total project cost of $5.3 billion. With a four year delay in Unit II, he projects a to tal project cost of $8.0 billion. He then concludes 4 that the capital costs provided by PSCO are j understated. i 88/ The study assumed a 5.5 percent general Inflation rate and.a 6 percent real inflation rate for nuclear units. Mr.-Chernick a substituted a 10 percent inflation rate for both i general inflation and real inflation for nuclear i units. 1
d i Page 216
- D.P.U. 19738, 197d3, 20055, 20109 &72 '
E t our review of the " study" and of i Mr. Chernick's testimony based on it i r.d i c a t e s a I ! sub s ta n t i al number of problems from which we conclude that we simply canno t rely on this testimony. Our revir4 of Exhibit M-24 indicates that the document is a copy of a speech pr e se n ted at a seminar with a number of tables appended and that it is essentially an abstract of a study. During cross-examination Mr. Chernick stated that he could not verify certain assurrtions 80/ which he had made concerning the
" study". In addition, there is no basis in the r eco rd for his assumptions concerning the inflation rates he used; in fact, he was not wi ll i ng to testify that these rates were appropriate. 90/ Were we to assume his inflation rates correct, the fact that his 89/ Tr. 38, pp. 7-9.
90/ Tr. 36, p. 166 l l 4
i 4 D.P.U. 19738, 19743, 20055, 20109 &72 Page 217 d testimony is fased on an understanding of the
" study's" assumptions which he was not able to verify 91/ renders his testimony unreliable. 92/
Mr. Chernick also relies on the
" Rand" 93/ econometric study as support for his assertion that the Seabrook project capital costs are understated. In order to reach this conclusion, Mr. Chernick took a reg ression equation derived by the study, substituted Seabrook data, resolved the equation, applied an inflation rate to the result and derived a capital cost for Seabrook Unit I of $2,1P9/KW and $2,489/KW for Seabrook II; these results imply total project costs ranging from $5.4 billion to $6.4 billion.
91/ Exh. AG-232, p. 55; Tr7~38, p. P. 92/ We expect at a minimum that Mr. Chernick would have read the actual NERA study from which i this document was derived or that, in the absence of the actual study, he be able to co r robo ra te his u nd e r s t a nd i ng of its assumptions with the authors. 93/ Exh. PSC-6, William E. Mooz, Cost Analysis of Light Water Reactor Power _ Plants, R-2304-DOE. 4 l
D.P.U. 19738, 19743, 20055, 20109 E72 Page 21P We reject Mr. Chernick's findings that rely on the Rand study fo r the following , reasons. First, the regression equation in the Rand study which Mr. Chernick used identifies time (i.e., date of construction permit issuance) as the chief variable to explain changes in real price per KW (1976 d oll a r s) of light water reactors (" LWR"). Economists are generally loa th to posit such a simplistic model for forecasting purposes, because it must be i m pl i c i tly assumed that a stable relationship l between the real price of a good and the passage l 1 I of time exists and that this relationship will continue in the future. In fact, real price j increases in a LWR are caused not by the passage of time, but by changes in the quality of the product (e.g., sa f e ty a nd reliabili ty) , 1 changes in production techniques, changes in the real . prices of raw materials a nd intermediate products and similar phenomena. Second, we feel that the use cf the Rand study to estimate the final cost o-Seabrook is i na ppro pr i a te because the da ta are
D.P.U. 19738, 19743, 20055, 20109 &72 Page 219 4 extremely stale. The thirty-nine plants which were analyzed in the Rand regression equation were granted construction permits between 1966 and 1971. In contrast, Seabrook's construction 4 permit was issued in mid-1977. In a forecast that uses time as an explanatory variable, the uncertainty of an e s ti ma te increases dramatically as the estimates go beyond the dates in the d a ta base. PSCO notes that the 95 percent confidence interval around Mr. I Chernick's estimated cost of Seabrook is plus or I minus $1,000 per KU (PSCO initial brief at 19). Finally, we reject Mr. Chernick's analysis using the Rand study because we believe that the inflation rates which Mr. Chernick used to translate the costs of Seabrook, as stated in 1976 dollars, i n to final construction costs are without substantiation or merit. Mr. Chernick also analyzes historic cost increases associated with four New Eng l a nd nuclear units (Connecticut Yankee, Millstone I and II, Pilg ri m I) and concludes the l experience with these units demonstrates the j
,. . ., - ~ -
r
D.P.U. 19738, 19743, 2 0 0 .*,5 , 20109 &77 Page 220 Seabrook project may cost between $5.RP billion and $11.48 billion (Exh. AG-232, pp. 59-61). He does not, however, present any analysis or evidence that would indicate the same factors which contributed to the cost increases for any , of these units are substantia 1'y the same. 9f/ We re we to assume such an identity of factors causing the cost increases for these units, there is still no analysis or evidence which would indicate those factors are also responsible for the experienced cost increases in the Seabrook project. The analysis is simply insufficient and absent additional evidence and analysis, we can find no logical or theoretical reason to believe Mr. Chernick's projected increases in Seabrook construction costs are justified. . In general, the intervenors did not analyze or dispute the e ng i n e e r i ng based 9I[ FEr example, his analysis give3 no c-nsideration to the time periods in which the plants were built, the architect / engineers or types of reactor; nor has there been any disaggregation of the cost d a ta into construction costs and AFUDC costs.
! D.P.U. 19738, 19743, 20055, 20109 &72 Page 221 methodology PSCO used in deriving its i construction cost estimates; nor did they inquire into the basis for PSCO's revisions of its cost estimates or PSCO's belief that its present estimates are reliable. Rather, as just 1 noted, they utilized analyses based upon j reinterpretations of industry-wide economettic ] studies and on coat histories of four New England nuclear units. We have found these analyses inadequate to support total project cost estimates of the magnitudes asserted. This is not to say that we necessarily c o n s'i d e r PSCO's March 1980 estimate to be the final cost figure. We have no doubt that the cost of the project will increase due to money market conditions, inflation and sc h ed u l i ng changes. We do, however, find PSCO's most current estimate reasonable fo r planning purposes. Nevertheless, because of uncertainty concerning the project's completion dates, we will consider a range of total costs within which the final cost will most likely i
D.P.U. 19738, 19743, 20055, 20109 &72 Pa g e ??2 fall. At one end of the spectrum is the March 1980 estimate of $3.42 billion, or a per KW cott of $1,487 At the other end is an amount of $4.28 e billion, or $1,860 per KW, M/ which PSCO j estimates will be the total project cost should the in-service date of Unit II be delayed four years. 96/ In concluding this section, we would note that the $880 million difference between the March 1980 estimate and the cost we will utilize as an upper limit was identified in a scock prospectus issued by PSCO (Exh. PSC-12,
- p. 7) which only became available at the close f
of the hearings. The evidence in the record does not, however, enable us either to precisely determine the composition of the $880 million f ig u re or to d e t e r r. i ne how it was derived. We i 957 We note-that this upper limiE is still-less Han the estimated per KW cost for the proposed Burlington wood b u r n i ng project. 96/ As a result of recent decisions by the New Hampshire Eblic Utility Commission which may result in a delay in j the in-service dates of the units, we consider soue increase in PSCO's March estimate a likely occurrence. See NHPUC Reports No. DR 79-187, June 7, 1980, and September 18, 1980. i I l
D.P.U. 1973P, 197d3, 20055, 20109 &72 Page 223 would note that in our experience, estimates of this kind found in SEC filings tend to exhibit " worst case" assessments. Ba s ed upon the project's j present state of completion, M / much of the i nc rea se is probably attributable to AFUDC 1 accruals which a re cost elements that are not a l cash requirement of the petitioners d u r i ng the construction period. As a consequence, we have difficulty in determining the additional amount which should be considered as a cash require-ment when analyzing the petitioners' financial forecasts.
- 2. Capacity _ Factors i -
The average ca pa c i ty factor of a nuclear plant which can be expected once the unit comes on line is an o pe r a t i ng condition that has a direct bearing upon the cost of the 9_77 As oY the end of 1079 approximately P7 percent of the basic engineering design was complete; 95 percent of the equipment was on order (portions of this equipment, however, are subject to escalation clauses); 91 percent of the construction work was under contract; construction of Unit I and the facilities common , to both units was 31.1 percent complete; Unit II was 6.5 percent complete; and the whole project was 22.6 percent complete (Exh. PSC-10 at 2; Tr. 32, pp. 109-10). 1
~_ _ _ _ _ _ . . -
4 D.P.U. 19738, 19743, 20055, 20109 &72 Page 22d power g ene ra ted by the facility. T he parties have, consequently, dealt at some length with the question, each a t tempti ng to predict the output of the Seabrook units over time. Careful review of the historical da ta c o n c e r n i ng results for nuclear units nationwide and of the various analyses of this da ta conducted by the parties reveals, however, that there are tremendous difficulties in making definitive statements as to probable output. Based upon a number of circumstances, not the least of which a re that total nuclear experience is very limited and that there a re virtually no ma t u re units the size of the Seabrook units, historical data simply does not reflect a range of operating , experiences useful for predictive purposes. Furthermore, as stated by the Attorney General's l witness, the historical data on capacity factors i shows "large year-to-year random variations" (Tr. 38, p. 98; emphasis added) a mo ng plants and even from year to year for a given plant's
- - - - - - - - < - - -r - - -
-n , -r- ,
r- - ~ - - y
- D.P.U. 19738, 19743, 20055, 20109 &72 Page 225 i
operation. ,9,R / In light of this range of i variation, we must concur with the Attorney B General's assertion that "some set of plants and ! years can probably be found that will support any position" (AG initial brief, p. 331 . Indeed, the capacity factor characteristics of a l given nuclear plant are more likely sui generis 3 1 to that plant than predictable with a precision that is based upon any statistical analysis which has insufficient da ta to begin with. l I Nevertheless, the record before us tends to suggest a few generalizations. New i England units collectively have a higher average c a pa c i ty factor than the nation as a whole; and Yankee units, with an average capacity factor slig h tly greater than 69 percent, are
~
9P/ Indeed, a ~pl a n t can experience a low capacity factor for reasons as diverse as the Three Mile Island incident or merely be c a u se a particular utility has excess hydro capacity which it must use. r -~. _r- --+- - m. - - - - . ~ + , - - -_e-, e- -- - n, - - - n .,,
i e* ee D.P.U. 19738, 19743, 20055, 20109 &72 Page ??6 significantly higher than both the na t ion al and New England averages. Pressurized water reactors ("PWR") tend to have hig her average capacity factors than boiling wa t e r reactors ( " BWR ") ; and We s ti ng ho us e PWR's tend to have higher average capacity factors than other PWR's. Average capacity factcrs also tend to be affected by age or maturity, size of unit and possibly vintage: with larger units tending to have lower capacity factors than smaller units; with ma tu re units, in operation six years or longer, having higher average capacity factors than i mma tu re units; and wi th more recent PWR units possibly having higher capacity factors than other PWR units due to improved construction and design resulting from technical innovation or experience. The Seabrook project's un i ' s ace 1,150 MW Westinghouse PWR plants which can be fairly characterized as 7ankee units. 00/ Thus 99 7 Yankee provides e ng i n e e r i ng~~ services, construction management services and nuclear fuel services management for the project (Tr. 35, p. - 99; see Exh. M-67, M-76, App. C; Exh. , PSC-8, 9, 10, pp. 2-3).
19738, 19743, 20n55, 20109 &72 Page 227 D.P.U. l the re are four factors which would te nd to i increase the Seabrook units' expected average capacity factors and one which would tend to decrease them. None of the Yankee units, however, exceeds P25 MW. Based on a 28-year life, Montaup's worst case assumptions imply an average lifetime c a pa c i ty factor of 59 percent, wnile New Bedford and Fitchburg utilize 69 percent. Petitioners support t he ir projections by pointing to the role of Yankee, and by utilizing a combination of modified PFCO projecions, NEPOOL data, historical data, and judgment. Of all the pe ti tione r s , Montaup conducted the most t't .ough examination of this issue. The Attorney General criticizes pe ti tion e r s' choices of capacity factors and suggests that the results of three studies demon s t r a te the likelihood of average capacity factors for the Seabrook units to range between 55 and 65 percent. Our review of Mr. Chernick's testimony concerning the Ea s te rli ng study leads us to conclude that the re is simply insufficient
1 d i D.P.U. 19738, 19743, 20055, 20109 &72 Page 229 i d e ta il in the r e co rd about the reliability of the study to utilize its results. 1n0/ We do find that the Komanoff study ---101/ tends to 4 j l suggest the existence of an inverse relationship j betweeen plant size and ca pa c i ty factor as well as direct r ela tion shi ps between age, vintage and , . manufacturer. The R2's associated with the regression equations derived by the study, 102/ however, are too 'ow to utilize the equations for predictive purposes and we consequently decline to do so. 103/ The low R2 and detail 100/~~ Statistical Analysis of PoUer Plant Cipaelii Yictors7~~YiitirITEg7 Wi57rtHT7 , RDRY57CR2h3F27 Yebruary 1979. In addition, we would point out that we consider the u se of the reg re ssion equation in this study to predict
- ca pa c i ty factors for other than the second,
- third and fourth years of a pl a n t 's operation,
- without careful qualification, to be misleading.
101/ Exh. PSC-7, Nuclear Plant Performance Update 2, Ko m a r.o f f , Charles, Council on Economic Priorities, June 21, 1978. 102/ Ibid., e.g., pp. 36, 45; R2 equals.25,.24. d 103/ While re,ecting the reliability of this study, it is interesting to note that the average ca pac i ty factor for a 1,15n MW DER q Westinghouse PWR unit built after 1973 and wi t h 3 a useful li fe of 2R years generated by equation No. 4.2 of the ctudy (Exh. PSC-7, p. 54) is 68 percent. 4 m l l
- l
- , e - -- .-. -, - - . , - - - . - ,,n, -. -,--...n, , , . , , -- - - . . .
i
.e ..
l 1 1 1 D.P.U. 1973P, 19743, 20055, 20109 &72 Page 229 problems apply equally to the so-called NERA
" study." 104/
l Faced wi th the difficulty in this area and v i e w i ng the reco rd aefore us, we do not d consider the average capacity factors utilized by Montaup, New Bed f o rd and Fi tc hb u rg to be unreasonable, and we accept their projections for the purposes of this proceeding. However, in o rd e r tnat we may more fully analyze the sensitivity of alternative system generation mix economics to downside revisions in capacity factors, we will in the future expect petitioners to " bracket" their base case simulations by varying their ca pa c i ty factor assumptions in increments from .2 to 5 percent. Il_T7 Eih!~F-227 Va5Ie A .1 , p.1, R) ehuals 728. See. also Tr. 38, pp. 70-115. +
5 i i Page 230 D.P.U. 19738, 19743, 20055, 20109 &72 i i
- 3. Operation and Maintenance 1,
f _C _o _s _t _s Petitioners' estimates of ] f operation and maintenance costs ( " O& M") are l principally based upon a 1974 study by PSCO for i ! the predecessor of the Nuclear Regulatory Commission and upon information provided by i i i Yankee. Petitioners co n te nd that in their judgment, these estimates are reasonable and that, in any event, O&M expenses a re relatively unimportant. We, however, must consider the j total costs of the project. That petitioners i have submitted no source documents which would 4 j enable us to verify the manner in which they derived their O&M estimates causes us to question the r eli ab ili ty of t he se estimates. The fact that petitioners judge these estimates 'l to be reasonable coupled with t he participation i of Yankee, whose experience we recogn'ze, entitle t he se estimates to be given some weight. In light of this, despite reservations about the l, adequacy of the analysis offered, we will accept i petitioners' O&M estimates as setting the _ _ _ , _ . - . . _ _ . , - . . _ , _ . _ _ , . . . - . . - . . ~ . ._. _ . _ . __ _
\
1 D.P.U. 19736, 19743, 20055, 20109 &72 Page 231 ! extreme lower bound for likely O&M costs. Mr. Cherni.- asserts that Seabrook O&M expenses will be substantially higher than the estimates utilized by petitioners. 105/ To derive his result, Mr. Chernick takes historical O&M costs cssociated wi th the seven New Eng l a nd nuclear plants, regresses the costs for each plant with time as the independent variable and then averages the costs predicted by each regression equation to derive a New England average O&M ex pense . Using this process, Mr. Chernick derives both a geometric a nd linear time trend. Implicit in this analysis is the assumption that annual O&M e x p e n s' e s can be modeled ae a function of time. Mr. Chernick, however, o f .i e r s no justification for this
. assumption. While we are willing to accept a simple regression against time for variablec that are relatively insensitive to error, we have no basis in the r e co rd on which to infer 105/ For example, his-199Festimite is 5 .37i times larger than Montaup's 1998 O&M ex pe n se .
t D.P.U. 19738, 19743, 20n55, 20109 &72 Page 732 t he sensitivity of O&M, as derived by Mr. Chernick, to error. Mr. Chernick does not offer us a causal analysis of which variables drive O&M: there is no explanation of why we should a cce pt his model. Annual O&M e x pe n se is a phenomenon too complex to be predicted by a simple time trend analysir absent a s h o w i ng that time in <3 e is the major determinant of O&M e x pe n se . 106/ IO6/~~For~ex5EpliI~we Eigh~~ expect O&M to vary
~Ith plant age as do capacity factors in the ,
Komanoff study, or that O&M might vary with , plant size, or with industry design experience. The se possible causal variables, however, are simply not addressed in other than a conclusory fashion. l 1 l i
- l l
l I
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 733 i .
; Were we to a cce pt the assumption that yearly O&M is a f u n'e t i o n of time, we are
)\ still confronted with a lack of explanatory j statistics for the regressions Mr. Chernick i j derived: we do not have the t or F k statistics. 13]/ Before we can accept this type of analysis, we need at a minimum some s ho w i ng that the analysis has been subjected to 3 and has withstood the indicia of reliability a s soc i a ted with the utilization of regression analysis. We do not find this showing and consequently do not find the analysis credible. i While we have rejected Mr. Chernick's. analysis of O&M and while we do not 3 believe O&M will increase at rates approaching i those derived by Mr. Chernick, inspection of his Iy]/ We riiTTze the siitTitTes presenteH Tn . -Table 20 (Exh. AG-232) are, for this particular analysis, the most informative te st statistics that the regression program on the calculator utilized by Mr. Chernick is capable of generating. We find, however, that the
- additional statistics mentioned above are i necessary to assess the statistical significance of. the ex pla na to ry variable and to inform us of j the margin of error exhibited by the predicted
- dependent values.
i i 4 y , , _ , ,yn.m, _ _ r-. e . w . , - - , o- , - , , .my- y ,..w,--- , - - , - - - - - - * - - y-
)
l D.P.U. 19738, 19743, 20055, 20109 &72 Page 234 tabulation of historical O&M costs for othe r New England nuclear units (Exh. AG-732, App. A) suggests Seabrook's O&M costs may well be j significantly higher than those costs utilized by petitioners. We will examine the sensitivity of Seabrook's economics to increases in O&M in section E.
#- IEtglig Rgplagggggt Costs Petitioners have f a iled to address interim replacement costs in projecting total project costs. In tabulating these costs for other New England nuclear facilities (Exh.
AG-232, App. A) , Mr. Chernick, in our opinion, has r ig h tl y identified a cost component which is not insignificant. Ouantitatively analogizing the experience for the se other nuclear plan ts to Seabrook, however, is extremely problematical. In particular, we have no basis upon which to accept that t*a simple discounted New England average computed by Mr. Chernick has any relationship to Seabrook; these costs vary widely from year to year and from plant to plant. The extent of this expense could easily be plant ! I i 1
D.P.U. 19738, 19743, 20055, 20109 &72 Page 235 i i specific as it could be generic to New England j nuclear plants or to all nuclear plants. In I fact, we would expect the former, particularly in light of increased industry experience in Moreover, d e s i g n i ng and b u i l d i ng t he se plants. interim replacements attributable to ordinary wear are not specific to nuclear plants only, and none of the offered alternatives has been evaluated in terms of this cost. We would also note that to the extent the interim replacement costs identified by Mr. Chernick have resulted from design problems, we find petitioners' contention that these problems have been corrected in the design of Seabrook reasonable. We also find petitioners' inclusion of an additional amount in the cost of Seabrook for future safety design modifications as the result of the Three Mile Island experience to be reasonably based. We will, however, address the sensitivit.
- Seabrook's economics to the inclusion -
ce rim replacements in the following section.
i k I D.P.U. 19738, 19743, 20055, 20109 &72 Page 236 E. Hgrst_ _ _ Case _ Simulation _of , _A_l t e r n a t i v e s . j Petitioners have simulated the , economic impact of including a number of 1 l
-alternatives in their system genera'. ion mixes, l
f i Comparison of these simulations i r:d i c a t e s that i the inclusion of Seabrook power in their systems has a decided economic advantage over the other J
' available alternatives. The se simulations, however, are dependent upon the assumptions J
petitioners have utilized. We will now examine 6 a composite of Montaup's simulations (Exh. M-72) i and substitute our own " worst case" assumptions. Simultaneously setting the capital cost, ca pa c i ty factor and O&M variables to values that we consider unfavorable in the extreme will give us a com po s i te worst case indication of the relative cost effectiveness of the project. 10P/ 1057 We note that nuclear fuel ex pe n se values Ea e generally not been disputed (AG initial brief, p. 18). t 4 i i I l I i
.o .
D.P.U. 19738, 19743, 20055, 20109 &72 Page 237 Fo l lo w i ng the analysis the Attorney General utilizes in his initial brief (pp. 89-95), we first identify net annual savings of $19,037,000 associated wi th Mon ta u p 's ba se case when utilizing an average capacity
- factor aot greater than 58 percent for Seabrook.
This .ca pa ci ty factor is in the lower half of the Attorney General's estimated capacity factor range discussed above. Next, we adjust Montaup's base case to reflect the upper limit of our previously determined ca pi t al cost range for J Seabrook. Including O&M and interim re pl a c e me n t costs at the full value suggested by the Attorney General yields a net annual savings attributable to Seabrook of $3,064,790. 109/ Were we to su bs ti t u te Montaup's $2,360/KW simulation into this example and thereby l increase the capital cost by 25 percent above 1 our estimated upper limit of $1,R60/KW, Seabrook 109/~ $11,511,000/1,180 equals $9,755 additional system cost'per additional dollar of Seabrook l per KW ca pi tal cost. $9,755 x ($1,P60 -
$1,1P0) equals $6,243,200. $19,037,000 -
$6,2A3,254 -
l
$9,728,956- equals $3,064,790. '
l 1 o
Page 239 D.P.U. 19738, 19743, 20055, 20109 &72 I would still be the least c o s tl y alternative as long as the combined O&M and interim replacement ' costs we re less than or equal to 76 percent of the Attorney General's combined figures for C&M and interim replacements. This number is at least 4.6 times larger than the O&M expense modeled by Montaup. We must reiterate that we simply do not find Mr. Chernick's estimates of O&M to be credible. Has linear regression is methodologically i ncomple te and unconvincing, and his geometric regression is simply beyond belief. On the other hand, we find petitioners' estimates of O&M ecually unbelievable for other , reasons; further, as we poir ted out in the previous section, petitioners did not account for interim replacements. In our judgment, these two factors, while important, are not pivotal. In our preferred composite worst case, the project
D.P.U. 19738, 19743, 20055, 20109 &72 Page 239 is d e mo n s t r a bl y 110/ economical when f'u ll weight is given to the Attorney General's O&M and interim replacement estimates. Our second composite worst case also demonstrates the cost effectiveness of Seabrook. Indeed, we fird it highly unlikely the combined effects of O&M and interim replacement costs will even a pproa c h 76 percent of the Attorney General's estimates. We find it also unlikely that t he ca pa ci ty factors and capital costs associated with the pr o j e c t will approach the extreme values simulated. A worst case analysis does not represent the ex pec ted result; rather, it re pre sen ts exposure to the combined occurrence of remote possibilities. We note that the cost effectiveness of the project d e mon s t r a ted by the above examples is understated. Petitioners are largely dependent upon fuel oil as their major
~
IIO7-~IIe., within the limitations of-the model and its assumptions; the utilization of which we in fact find an a ppro pr ia te a nd reasonable manner in which to address the convergence of many interdependent, but he r e to f o re se pa ra tely addressed, issues.
__- . . _ _ _ . . . ..= _- .__._- ._ __ .. _._
- i f
I f D.P.U.- 19738, 19743, 20055, 20109 &72 Page 240 l source of energy; this fact makes the l l simulations very sensitive to the fuel costs + utilized. We find the fuel oil cost escalation assumptions very conservative. Further, the ] simulations demon s t ra te total system savi ng s I attributable to the project for only fifteen l yea rs or approximately half of the project's ! useful life. And while a delay in the in-service i dates of the units will increase the capital cost of the j project, the cost effect of which we have taken a i n to account above, we also find it likely that < the relative fuel cost advantage of the project will, in itself, co n t i n ue to offset the capital cost increases associated with a delay. The above analysis is not perfect; nor is it ideal. It is, however, based upon the , best analyd.is of Seabrook's relative economics a ppe a r i ng in the record. Montaup's simulations model a large number of cases, are technically complete, are susceptible to adjustment and l fairly represent the economics of the project. 3 4 i
,-% - -- . , - m .h - - e -- ..-_,._t,,_--.m , e . . _ _ - ,- ,, _ , , - , . _ - - ,
D.P.U. 19738, 19743, 20055, 20109 &72 Page 741 The pe a k i ng unit modeled by New Bed f o rd and the combined cycle 111/ unit modeled by Fitchburg would not be expected to be more economic than ba se load power; a nd we find their simukations reasonably demonstrate this con 1usion. With respect to coal as a ba se load alternative, the results of New Bed fo rd 's simulation tend to confirm Seabrook is cost effective. We find this result, however, to be of secondary import. For we re we to reach the oppo si te result, given the planning and construction lead times and the admitted environmental constraints, we f i nd it unreasonable to expect a coal unit to be i available in time to meet petitioners'
- demonstrated intermediate-term po we r needs.
111/ While the c a pi t al cost of convefiing UniA 7 to combined cycle operation may be only
* $623/KW and the O&M a s socia ted with the plant is relatively small, the inclusion of energy costs outweighs their apparent attractiveness. Further, a reactivated and converted Unit 7 would have a useful li fe approximately half that of Seabrook.
See also p. 120. I 1
. D.P.U. 19738, 197d3, 20055, 20109 &72 Page 242 V. FINANCIAL CAPABILITY A. Introduction In reviewing the financial ability of the petitioners to assume their propssed commitments, we will focus upon the financial plans submitted by them which show their total projected year-to-year construction fund requirements from 1979 to 1998. Each of the companies has presented its construction fund requirements for any given year, including its requirements relating to Seabrook, in terms of the sum of all planned construction extenditures, by aggregating the costs of all facilities under construction d u r i ng the particular period. These financial plans reveal the sources from which the needed capital will be derived, and generally include allowances for interna 31y generated funding, short-term borrowings, and proceeds from the sale of long-term debt and preferred or common equity. In view of the length of the construction period, the petitioners have necessarily made certain assumptions regarding future operating and money
.. . . . . _ . _ - _ _ . , . , _ _ _ _ - ~ _ _ . .
i t 2 D.P.U. 19738, 19743~, 20055, 20109 &72 Page 243 i { market conditions. The reasonableness of these assumptions and the impact of the- financing i plans upon each' utility are the principal areas - of any inquiry. Prior to our discussion of the j financial testimony presented by each petitioner, j a j we must, however, address a threshold issue raised by the inte rveno rs concerning the validity of the financial forecasts in light-of ! changes in the construction estimates for the j project. When the petitioners filed their financial testimony in August 1979, they based their analyses as to capital requirements r ela ti ng to Seabrook upon a PSCO January 1979 cost estimate of $1.P25 billion. Thereafter, on April 8, 1980, a week. be fo re the record was to close, and after full cross-examination of the , companies' direct cases, PSCO produced an
' updated cost estimate, prepared i n March 1980, I which e s tima ted' the cash cost of the project at i
i $2.08 billion. 112/ Petitioners did not seek 1127 These estimates of cash cost do not
- TEclude AFUDC-since i t ~i s not a cash outlay.
;d u r i ng the - cons truc tion period. ,
\
l 1 1 2
.-,. - -e.-, ,r, , , -- .L-y .- y..-r, r--n--=--w-v- , - , , , .m e- s,,ev----,--- -- ,-,--,,e-,---.a -- s
. D.P.U. 19738, 197a3, 20055, 20109 &72 Page 2da to a me nd- the ir financial analyses to reflect the higher PSCO estimate.
a The intervenors contend that since there has been an increase in the projected capital cost per PSCO's own estimate, the petitioners' financial testimony is outdated and leaves the Department with no evidence upon which to found a decision. According to intervenors, the failure to revise testimony on this issue is fatal to the petitioners' cause. There can be no question that a more comple te presentation of the petitioners' financial case would have included an analysis i of the impact of the revised construction estimate upon their funding of the additional cost. Nevertheless, based upon the r e co rd in this proceeding, we cannot agree that the pe ti tione rs have thereby failed in meeting their burden of proof on this matter or that there is a lack of credible evidence from whien a reasoned decision can be made. - Initially we would note that the upd a ti ng of cost estimates for a project .with
1 1 D.P.U. 19738, 19743, 20055, 20109 &72 Page 245 the lead-time of Seabrook can be ex pe c ted to be made throughout the constru'etion pe r iod as a result of changes which occur over time in scheduling, money ma r ke t conditions, and basic labor and materials costs. In presenting their direct cases, the petitioners of hecessity had to rely upon the most current information then available as to the capital cost of the project. When the revised e s tima te was received, it would not have been reasonable for the Department to require that all materials previously submitted be recalculated, nor was it reasonable to expect
- a c ro ss-the-boa rd revisions from the petitioners.
If for every change in c i rcums ta n ce a f f ec ti ng the project we were to expect a complete analysis of the impact of that change upon each of the issues relating to it, the Department would become entwined in a proceeding which could end only when the units were placed in service. Independent of the merits of the intervenors' position, such a procedure would effectuate that po s i t i o n . Consequently, while we recognize that o u r.
t
, D.P.U. 1973P, 19743, 20055, 20109 &72 Page 246 1
decision must be founded upon the most reliable information, that decision must also be made in a timely fashion so that the companies involved i can proceed wi th the substantial supply and financial tasks con f ron ti ng them with or without Seabrook power. In this type of case, the public interest requires a substantive determination, for adequate future capacity cannot be provided by wa i t i ng for demand to exceed supply: the construction of generating facilities requires significant lead times, t
- Inherent in the planning process is a present commitment to a variety of uncertain future occurrences; most basically, however, the continaed existence of the opportunity for commitment is not insensitive to time. We must, q
therefore, at some point step down from the i treadmill which a case such as this can become and determine the merits of the parties' claims despite less than ideal information and analysis. More important, however, is the fact that despite changes in the PSCO construction e s tima te our a bili ty to review the
, y _q e - .p-- +w y -- y 7?-
D.P.U. 19738, 19743, 20055, 20109 &72 Page 247 petitioners' financial ability is not seriously impaired. The updated cost esti-- .e is in the record and the magnitude of the increased burden
- which the higher capital commitment will impose upon the petitioners can be assessed in lig ht of the financial testimony presented. The issue is susceptible to this type of analysis because the ability to finance cannot be considered to exist I only up to a clearly identifiable level of capital expenditure. There is not a pa r ti cula r i
dollar amount of investment which can be precisely pinpointed as the unquestioned d i v id i ng line between financial ability and ruin. Rather, the very nature of the question lends itself to qualitative judgments which can be made over a wide range of potential expense levels. These judgments are possible given the extensive evidence before us. An additional observation regarding the assessment of financial ab'ility is a l so warranted in lig ht of our primary interest in this proceeding: to insure that the r a te pa ye rs continue to receive adequate and l
D.P.U. 19738, 19743, 20055, 20109 &72 Page 248 reliable service at just and reasonable rites. , Given a demonstrable need for the c a pa c i ty sought to be acquired and the absence of reasonable alternatives, the possible strain which the financing of additional ca pa c i ty may have upon a company and its customers must in certain instances.be balanced against the threat of future service reductions or interruptions. The De pa r tment is obligated to assure adequate and reliable future power. Thus, while some financial burden may have to be assumed by both the company and its ratepayers, the consequences of not a cce pt i ng this burden may make the additional financial obligation a hi g hl y 1 reasonable and necessary step. We will now proceed with our discussion of the financial evidence presented by each of the petitioners. l l
D.P.U. 19738, 19743, 20055, 20109 &72 Page 249 B. Fitchburg's Financ_lal papability Fi tc hb u rg requests authorization to purchase an additional 10 MW of capacity in the Seabrook units from CL&P and 6 MW from PSCO. Mr. Frank Childs, the Company's Vice President and Assistant Treasurer, presented testimony regarding the purchase price of the proposed acquisitions, the company's present construction program, and the Company's ability to finance its construction program. For the purposes of its direct testimony, Fi tc hbu rg assumed that purchase of the 10 MW interest from CL&P would take place on July 1, 1980. As of
- hat da te petitioner i
estimated that the " transfer" costs would be S5,102,900 i n cl ud i ng progress payments for construction, fuel and CL&P's booked A F ilD C . Fi tc hb u rg intends to g e ne ra te this pa ymen t through a combination of internally generated funds and short-term borrowings. 113/ , I 1137~ Fi tc hbu rg recently renecotiated its credit Tines to $9,650,000.
.~ _ .
D.P.U. 19738, 19743, 20055, 20109 &72 Page 250 The p r o po s ed transfer of the 6 MW - interest from PSCO would take place over an
" adjustment period" of approximately 15 to IP months. Once all regulatory approvals have been given, all construction costs incurred with respect to PSCO's share of the Seabrook project will be paid by all other joint owners purchasing from PSCO until such time as PSCO's s ha re is reduced from its current level of 50 percent to approximately 35 percent.
Fitchburg's total share after the " adjustment period" will be 0.86655 percent. On a pe r KW basis, the PSCO interest transferred will be less costly than the CL&P purchase because of timing differences a ssocia ted with AFUDC accruals. l Petitioner's construction program for the next five years consists of expenditures for its currently owned oortion of the Seabrook project (.17 pe rcen t) , Pilgrim II, Millstone III, Montague Units I and II, and Fitchburg
D.P.U. 19738, 19743, 20055, 20109 &72 Page 251 Local. 114/ From 1980 to 1985, estimated construction expenditures are $35,773,100, of
- whien 50.3 percent or $17,749,300 115/
r e pr e s e n ts both its present a nd proposed interest in the Seabrook project. We no te in reviewing Fitchburg's construction forecast that it has oiversified its interest i n to several projects in which it is a joint participant. Assuming that the construction schedule proceeds as planned, Fitchburg will not be excessively dependent upon any single unit or source of power. Petitioner presented a so u r c e of funds statement.for the years 1979-1988 (Exh. FGE-14R). Thiu statement is based upon a number of assumptions i n cl u d i ng the following:
- 1) New long-term debt at 13.5 percent;
- 2) Preferred stock at 12 percent; 1147 Fitchburg- Local represents e x pt. nd i t u r e s by tee Company to maintain its equipscnt at present levels (capital addi tians) .
115/ Based on PSCO construction cost estimate oT January 1979. 1
D.P.U. 19738, 19743, 20055, 20109 &72 Page 252 j
*l
- 3) Common stock issues priced to i achieve a 10 percent yield on {
the then e x i s t i ng dividend (less $1.00 per share for the cost 3 of issue);
- 4) Short-term borrowings at 14 percent;
- 5) Sufficient rate relief;
- 6) O&M a nd taxes other than income taxes increased at 7 percent per year;
- 7) Dividend payments increasing at 7 percent per year.
i Based upon these assumptions and upon an analysis of its source of funds statement, Fitchburg has concluded that it can finance its construction program between 19PO and 1985 in the fo13<aing manner: t (S Millions) Common stock 4.78 Preferred stock 2.50 Long-term debt 19.00 Notes payable (3.61) Other funds (5.82) Subtotal 16.65 Internal funds 18.63 Total 35.28 I ['
D.P.U. 19738, 19743, 2n055, 20109 &72 Page 253 The Attorney General does not contest either the reasonableness of the assumptions used by Fi tc hbu rg in its forecast or whether the plan, as presented, illustrates an a bili ty to meet the level of capital investmen deemed necessary. Rather, he asserts that the financial da ta is based upon an erroneous assumption as to the cost of Seabrook and is further outdated because of the revised PSCO cost estimate. As we have already noted, Fitchburg's financial f o r e c a s t' was of necessity prepared at a certain moment in time and was based upon the then most recent cost e s tima te of , the project from the lead participant. (See Section A above.) However, by PSCO's own estimate, the cost of construction for the project has increased from $1,825 million to $2,085 million: an increase of $260 million. Assuming Fi tchb u rg would be responsible for both its j present and proposed ownership share of the i n c r e a s ed cost, it would thus need to generate
$2.2 million in additional capital, or $367,000 1
b
,, . . - . . u.. ,-- . - , , , ,. - , . - , . -
. o Page 254 D.P.U. 19738, 19743, 20059, 20109 &72 per year. 116/ I Petitioner's source of funds I
statement was pr ed ica ted upon very reasonable assumptions. We note that its short-term borrowings do not become excessive over the forecast period. AFUDC as a pe r c e n tag e of net income does not become high, with the exception of 1982. Fitchburg's internally generated funds as a percentage of its total construction expenditures follow " normal industry standards," again with the exception of a single year. It also appears that Fitchburg will meet both its indenture and coverage requirements. In essence, the Company's forecast appears to be fairly sound and based upon reasonable assumptions. 117/ Fitchburg must, however, raise an additional $2.2 million above that de ta il ed in its source of funds statement. Petitioner has IIx7- NYW5-This TTITon x o.e6Wss.
~~~
calculation is of course quite simplistic; but it serves as a guide to the increased costs due to the updatto construction budget. 117/ See p. 17, Fitchburg reply brie f. l
l l l l l l D.P.U. 19738, 19743, 20055, 20109 &72 Pige 255 secured lines of credit equal to $9.65 million. In the early years of the source of funds statement, Fitchburg's borrowings do not approach this limit. We find Fitchburg will thus be able to r a i se the additional $2.2 million initially through short-term borrowings. Fitchburg's coverage ratios a re strong throughout the period; due to this fact, Fi t c hb u rg should be able to secure additional long-term financing of $2.2 million without difficulty. 118/
~
J18/ The Attorney General in his initial brief,
- p. 121, points to a Fi tc hbu rg preliminary prospectus (S.E.C. Form S-7, May 28, 1980),
which indicates that Fitchburg may need to incur
$1.1 million in expenditures through 1984 in addition to the $2.2 million based upon the latest PSCO construction cost estimate. A fair reading of the prospectus reveals that the reference to the higher project cost is premised upon difterent in-service dates than the latest PSCO e s t i m a '.e , as well as upon dif ferent construction costs and AFUDC rates. If, in fact, this scenario should tu rn out to be the case, the additional $1.1 million in required e x pe n d i t u r e r, does not, in lig ht of Fitchburg's short-term line of credit and its draw upon that line through 1984, have a significant effect upon its ability to finance.
. o 19738, 19743, 20055, 20109 &72 Page 756 D.P.U.
In conclusion, we find the ' evidence before us persuasive that Fitchburg will be able to finance its present and proposed Seabrook interests. 119/ TT97- Pi 33 nst wish toTEpIy, howe ir- teat we viiw as 1. the mas.itude of either the C o m p a n yconstruction
' r,'i n i m a l forecast or its Nor do we investment in the Seabrook project.
wish tc imply that the circumstances surrounding each debt and equity financing will not be carefully scrutinized. We will, at the appropriate time, decide the merits of each such issuance.
19738, 19743, 20055, 20109 &72 Page 257 D.P.U. C. Montaup's_ Financial , Capabi_lity i Montaup requests Department approval to increase its ownership s. M in the Seabrook project from its presently owned 1.9 percent to approximately 5 percent, or an inc re a se of 3.1 percent. Montaup has agreed to purchase approximately 1.03 percent or 23.P1 MW from CL&P; 1.06 percent or approximately 24.49 MW from UI; and approximately 1 percent or 23 MW from PSCO. The terms of the agreement between Montaup and the selle rs a re identical to those of other petitioners. In the case of UI and CL&P, Montaup would make one la rge upfront payment for the construction expenditures and associated AFUDC incurred by the present owners. Montaup estimated that as of January 1, 1990, the pu r c ha se price from C L& P would be approximately $9.P million, inclusive of AFUDC; the 1 percent entitlement from UI was : r.a t e d at $10.2 million, inclusive of AFUDC, as of the same date.
\
l
19738, 19743, 20055, 20109 &72 Page 258 D.P.U. The present agreement with PSCO requires a transfer of ownership interest over a period of approximately 15 to 18 mer.ths. All constructi a costs incurred with respect to PSCO's sharc of the Seabrook project will be paid by all other joint owners purchasing from PSCO u n t il such time as PSCO's share is reduced from its current level of 50 percent to approximately - 35 percent. Montaup estimated expenditures for this 1 percent share to be approximately $22.6 million between 1979-1985. As is the case wi?h Fitchburg~, the PSCO interest will be less costly on a per KW basis than the C L& P or UI purchases because of timing differences associated with AFUDC accruals. On August 3, 1979, Montaup presented prefiled testimony in r e s po n se to our request for additional information contained in Mr. Richard M. Burns, our June 28th order. Treasurer of Eastern Edison, and Mr. Donald G. Pardus, Treasurer and Chief Financial Officer of
^
EUA, testified on Montaup's financial situation. The Company presented a forecast of construction
-s t
19738, 19743, 20055, 20109 &72 Page 259 4 D.P.U. expenditures for the period 1979-1988. The company also presented a so u r c e of funds statement for the same period. Montaup projects cash requirements for its construction program i of $154.4 million between 1980-1985. Of this amount, S89.6 million, or SP percent, represents 7 ca sh expenditures for the Seabrook project at a 5 percent ownership interest. As can be seen below, all of the i cash requirements needed by Montaup for its construction program would be acquired from outside financing; none of its cash requirements was projected to come from internally generated funds. In fact, the company projected a negative cash flow of $49 million from 19PO-19P5. The source of funds statement presented in its prefiled testimony (Exh. M-16) showed that Montaup intended to meet its cash construction requirements of $154.4 million plus f cover its projected internal o pe r a t i ng deficit of S49 million between 19PO-19P5 in the following manner: l
19738, 19743, 20055, 20109 &72 Page 260 D.P.U. ($ millions) AP6 Long-term debt Common stock 73.2 Short-term borrowings 91.6 To t al cash reouirements 203.4 The source of funds schedule was prepared utilizing the f ollo wi ng assumptions:
- 1) Long-term debt at 9-10 percent;
- 2) Sufficient rate relief;
- 3) Short-term interest ra te s (prime) at 10-11.75 percent;
- 4) Common stock d i v i d e nd payout ratio of $12 per share;
- 5) Ope r a t i ng and maintenance increase of 8 percent per year;
- 6) AFUDC rate of 11.5 percent, c alcula ted in accordance with FERC Order 561.
Page 261 D.P.U. 19738, 197d3, 20055, 20109 &72 Subsecuent to submission of the prefiled testimony and the cross-examination of its financial witnesses, 120/ Montaur filed a petition with PERC (Docket EL80-8). The a ppli c a ti on (Exh. AG-223) filed on Decerber 13, 1979, requested FERC to allow Montaup to include a portion of-CWIP in rate base in order to ... meet a seve re financial difficulty a r i s i ng from the large cash requirements of its construction program." 121/ T237- Cross-eiiETEiiTHE 5T tee CHEpiEV i---- TInancial witnesses on its prefiled testimony was co n cl ud ed on October 31, 1979. 121/ Montaup has also filed wi th FFRC an ipplication for a general rate increase (nocket ER80-520). This action has been consolidated with Docket EL80-8, and the Department has interveneG in these proceedings. i
D . P . tl . 19738, 19743, 20055, 20109 &72 Page 262 On March 24, 19R0, additional financial testimony (Exh. M-72) was filed by Mr. Pa rd us on behalf of Mot.aup. T he cestimony indicated that for the short term (1980-10P4) Mon taup would face seve re financial difficulties; the Company believed, however, that the purchase of the additional Seabrook shares was still in the public interest due to:
- 1) assurance of capacity; and
- 2) assurance of c a pa c i ty at known costs.
Although Mr. Pardus was cross-examined on the financial information contained in the FERC filing, the Company presented no updated financial exhibits. The Company's filing before FERC included a number of schedules on the Company's projected financial condition over the next six years. Amo ng the se exhibits is a forecast of the Company's cash requirements over the period 1980-1985: 154.4 Construction Internal operating deficit cash 38.2 Working capital & debt retirement 6.6 Total cash requirements 199.2
D.P.U. 1973P, 19743, 20055, 20100 &77 Page 263 The Attorney General contends that the financial picture presented in the FFRC f il i ng is understated d ue to two factors: (1) that the construction costs associated with the Seabrook project contained in Montaup's exhibits are now out of date; and (2) that petitioner has incorporated untenable assumptions in its source of funds statement, which in turn understate the serious financial difficulties with which Montaup will be faced. The Attorney General requests us, therefore, to deny the pe ti t io n s due to the Company's financial difficulties and the ul tima te impact on the ratepayers. We agree with the Attorney General that, in p r e pa r i ng the assumptions to derive the source of funds statement, petitioner could have made more realistic assumptions with respect to the costs of long-term and short-term debt. However, we do not concur with the Attorney General's belief that more realistic debt assumptions would produce a situation .hich would catapult the Company into financial disaster. l
D.P.U.'1973P, 19743, 20055, 20109 &77 Page 244 Tnis conclusion is based upon our analysis of the source of funds statement. If the Company had assumed mo re current interest ,. rates for debt, and all aspects of the fo reca s t rema ined con stant , net income would decrease and cash required from outside financing would increase. We find that this increase in the cost of debt will not substantially affect the Company's total cash requirements. 122/ The record does indicate, however, that Montaup cannot presently finance its construction requirements at a 5 percent ownership interest in Seabrook. T he FFRC filing indicates that Montaup will not be able to raise approximately $50 million of the necessary capital. Mr. Pardus testified that, due to the i n s ta bili ty of the capital ma r ke ts a nd on advice 122/ For example, had the assumption for the cost of long-term debt been increased by 2 percent, the Company's cash reouirements would increase by approximately $4 million over the period, in contrast to to t al cash requirements of $203 million over the period. I l
Page 265 D.P.U. 19738, 19743, 20055, 20109 &72 i e i from the Company's investment bankers, Montaup had lowered its estimate of proceeds from common . stock issues by $50 million. That Montaup cannot finance its proposed construction program is clearly shown in the following statements-by the Company: Montaup was advised by commercial and investment bankers that an improvement in cash flow will be required to finance the construction program through to completion of the second Seabrook unit (Exh. AG-223, p. 2) . If Montaup is unable to obtain t
' the required ra te relief from this Commission (FERC), it will be forced to attempt to reduce its ownership interest in Seabrook to a level that can be financed without any CWIP in rate base (Ibid., p. 3).
In our June 28th Order we stated that each petitioner must de mons tra te "that the purchasing company has the ability to finance the proposed acquisition." The Company has filed a pe ti tion with FERC for the inclusion of a portion of CWIP in ra te base, citing extreme financial hardship. Its cash flow statements forecast a large negative cash flow situation
page 266 P.P.U. 19738, 197A3, 20055, 20109 &72 I AF t1DC as a percentage of between 19P1 and 19P5. ' the Company's earnings is extremely high fo r a number of consecutive years. On the record before us, thcn, we must conlude that Montaup has not met its burden of proof with respect to its financing capabilities at a 5 percent ownership interest in the Seabrook project. Yet, in our analysis and find i ng s with respect to petitioner's d e m a nd forecast, we concluded that Montaup had demonstrated a need for a maximum additional interest of 56 MW in the project. If Montaup had otherwise shown a financial ability, approval of an interest approaching the 56 MW would have been forthcoming. T he fact that Montaup has not shown an ability to finance its full proposed in te re st of 71.3 MW does not, however, lessen Montaup's need to obtain additional capacity to meet its future demand. With no additional interest in the project, Montaup's 1988 reserve will be 15.2 percent, this reserve margin is too low. Our review of the record indicates, l l l l
o . D.P.U. 19738, 19743, 20055, 20100 &72 Page 267 however, that a lesser interest in the project than that proposed may be able to accommodate both need for power and financial capability criteria. The additional 1 percent interest r e pr e sen ted by the PSCO o f f e r i ng will increase Pontaup's reserve margin to IP percent. This increase will enable petitioner to meet its internal peak and still maintain a re se rve margin that, while not as great as the record would support, is not unacceptable under present circumstances. As we explain below, Montaup can presently finance thic 1 percent interest because of both the reduction in overall capital expenditures and the nature of the PSCO transfer agreement. At a 2.9 percent ownersnip share 123/ in the project, the Company's cash requirements will be reduced by $52 million, at a minimum (Exh. AG-173). This coincides almost exactly with the $50 million in financing which T _T2]7 sontaup s present 1.9-percent share plus 1 percent from PSCO.
19738, 19743, 20055, 20109 &72 Page 26P D.P.U. i Montaup's FERC filing indicates it will not be j able to acquire. Montaup's cash requirements l l should therefore be at a more manageable level. 3 In addition, the approval of the transfer agreement with PSCO will eli mi n a te the large upfront cash expenditures required by the other purchases. T he overall cost of the 1 percent PSCO acquisition will be less costly to both the consumer and Montaup than a similar acquisition from either CL&P or UI, and it should help all ev i a te some of PSCO's present cash flow pr,blems and thereby contribute to the viability of the project. We note that Montaup is taking some positive s te ps to improve its current cash flow problems, most notably, its FERC petition and its decision to inve s tig a te the normalization of the debt component of AFUDC. Recent decisions by the NHPUC that contemplate the po ssibility o f a delay in the completion da tes of the units could also serve to alleviate some of Montaup's cash flow difficulties, as well as offset the
l l 19738, 19743, 20055, 20109 G72 Page 269 l D. P.fl. I l impact of the increased cost of the project. Moreover, the capital markets appear to be r e t u r n i ng to more stable conditions which will provide a better climate for Montaup to raise the necessary capital. Although the project cost has been updated from $7.9 billion to $3./ billion, a substantial portion of the increase j is due to the accumulation of A F ttD C . The increased cost d ue to AFUDC will not affect the cash requirements of the Company. Of the $260 million attributable to increased cash requirements for the project, Montaup's share of t he se costs will be approximately $7.5 million over a cix to nine year period. In eliminating 1 the cash commitments r el a t i ng to the CL&P and UI purchases and taking into account the circumstances which will have a positive effect upon Montaup's cash flow, the additional burden created by the project's increased capital cost should not be excessive or beyond the Company's financial ability. Based on the record before us, we will the re f o re allow Montaup to increase its
'19738, 19743,.20055, 20109 &72 Page 270
- D.P.U.
ownership sha re pursuant to the transfer agreement with PSCO. If the Company's financial position improves to the extent it feels it can demonstrate that it is capable of funding a greater interest in the project, we will investigate a pe ti tion o f more limited scope to determine whether the acauisition of additional shares would be consistent with the public ' interest. However, on the r e co rd before us, we must deny Montaup's petition with respect to the CL&P and UI purchases. _ = . - -. ,
1 9 7 '; P , 19743, 20n55, 70109 &77 Page 271 D.P.U. e D. New _Bedford's_ Financial SaEakkkkt1 New Bedford requests approval to ac qui re an additional 2.1739 percent interest (50 MW) in the Seabrook units from PSCO. A's is the case with Fi tc hbu rg and Montaup, the acquisition of this interest would take place over an
" adjustment period" of approximately 15 to 18 9
months. All construction costs incurred with respect to PSCO's share of the Seabrook project would be paid by the other joint owners pu r c ha s i ng from PSCO until such time as PSCO's share is reduced from its current level of 50 New percent to approximately 35 percent. Bedford's total interest in the project after t he " adjustment period" would be 3.52317 percent. 124/ N E G F. A is the parent of two retail electric o pe r a t i ng subsidiaries, New Bed f o rd and Cambridge, and one generating subsidiary, Canal. All of the subsidiaries pay out 100 percent of
~~~
12d/ It presently owns a 1.34927 perceht interest.
o . 1973P, 19743, 20055, 20109 &72 Page ??? D.P.U. I their earnings to the parent, which in turn pays out dividends to the public. The subsidiary I companies' debt issues (with the exception of Canal) are either privately or publicly placed. Canal's debt issues are publicly placed. Mr. Earl Cheney, Financial Vice President of New Bedford, Cambridge and Canal, presented testimony and was cross-examined on the financial position and estimated construction expenditures of both New Bedford and Canal. Mr. Cheney testified that, once regulatory approvals are received, New Bedford intends to petition the Department to transfer all of the NEGEA system nuclear project interests from New Bedford to Canal. He further testified that the primary reason for this proposed transfer was the financing flexibility of Canal: be ca u se of its more favorable indenture terms and its small present capital commitments when compared to New Bed f o rd. The witness maintained that although New Bed fo rd could finance the additional interest in
D.P.U. 19738, 19743, 20055, 20109 &72 Page 273 Seabrook, to do so would seriously jeopardize its bond ratings. For the purpose of its testimony 4 in this proceeding, New Bed f o rd assumed that the sale of all its interests in nuclear projects to Canal, including its present and proposed Seabrook shares, would be effected in the second half of 1980. The se units include Seabrook, Pilgrim II and the Montague units. All of petitioner's financial exhibits were based upon the assumption of an immediate transfer of the Seabrook interests to Canal. Consecuently, we will focus on Canal's ability to finance, and any findings we make with respect to the NEGEA system will be based upon the assumption that New Bedford's interest in the project will in fact be transferred to Canal. 125/ 125/ SEA a rg ues in its initial brief, p. 24, EEat Canal is not presently before the Department, a nd the re f o re since New Bedford's financial exhibits focus on Canal's ability to finance and not its own, that New Bed f o rd has failed to establish a prima facie case. We find, however, the appropriate time Tor making this - argument has long passed. The Canal link in the "New Bedford" financial case has not changed throughout t he se proceedings; extensive cross-examination was conducted wi t h knowledge (contil.aed on next page)
o . 4 19738, 19743, 20055, 20109 &77 Page 274 D.P.U. f of the transfer to Canal assumption. Had the i issue been raised formally at an earlier date, !' ' the procedural deficiency could easily have been cured by joining Canal as a party; this course, however, would have had no effect on the merits I of the "New Bedford," NEUTA systen case, the To testimony presented or the witnesses called. grant the SEA request for dismissal at this late date would serve no purpose other than delay. I { t ; + l I I
._. . .- -. . = - .
D . P . t! . 19738, 19743, 20055, 20109 &72 Page 275 New Bed f ord estimates that its present investment in planned nuclear facilitics is approximately $72.3 million (Exh. NP-7, Sch. C-2). Upon the transfer, Canal proposes to finance these purchases initially through short-term borrowings, and subsequently through a debt issuance of $35 million a nd a common stock offering of $30 million, with the remainder be i ng generated through internal funds. 2 Assuming the above transfers are approved, Canal would then be responsible for all expenditures relating to NEGEA's jointly own ed nuclear units. For the period 1981-19P5 Canal has estimated that its construction expenditures will be $114 million; 126/ of this amount, $85.9 million or 75 percent relates to the Seabrook project (Exh. NP-7, Sch. C-2). Canal forecasts that it will finance these
- construction costs over the five-year period 1257 Ex cl u d i ng tne New England Power Compary Chirlestown units (NEPCO units).
19738, 19743, 20055, 20109 &72 Page 276 D.P.U. through a combinatfon of $56.2 million in internally generated funds and $73 million in s e c u r i ty issues and other funds. Canal's source of funds statement is ba s ed on the f ollo wi ng assumptions:
- 1) Short-term borrowings at 11-12 percent for 1979 and 10 percent thereafter;
- 2) Long-term debt at 10 percent;
- 3) Dividend payments of 70 percent of Canal to NEGEA (in contrast to the present 100 pe r cen t) ;
d) Local tax increase at 6 percent per year;
- 5) Sufficient rate relief for NEGEA subsidiaries.
New Bedford originally requested Department approval for the pu r c ha se of 70 MW from CL&P (D.P.U. 1973F), as well as 50 MW from PSCO. New Bedford, however, allowed its agreement with CL&P 12]/ to lapse and subsequently withdrew this po r ti o n of its 127/ ThA contrict between CL&P and New Bedford expired on December 31, 1979.
l L D.P.U. 19738, 19743, 2ioa5, 20109 &72 Page 278 i
)
I transpired since New Bedford's financial testimony was presented: (1) the NEP units have been cancelled; (?) the CL&P agreement has expired and was not renewed; (3) the construction budget for the Seabrook project ) j has been updated by the lead participant; and (4) t he po te n t i al for delay in the in-service dates of t he Seabrook units in accordance with recent i NHPUC decisions. 128/ Of these events, three will ! dec rea se the cash recuirements needed by Canal i to finance its construction program. The , cancellation of the NEP units will lower Canal's construction expenditures between 1979 and 1985 by $15.6 million. The expiration of the C L& P agreement will lower the company's cash requirements by approximately $65 million. These combined factors will decrease the l' Company's need for outside financing by $80.6 128/ NHPUC Report No. DR 79-197, June 77 1980,
- p. 59; DR 79-187, September 18, 1980.
o . D.P.U. 1973P, 19743, 20055, 20109 &77 Page 279 million over the forecast period. The recent NHPUC o rd e r s which may af fect the in-service dates of the units will also lower the Company's cash re-quirements. The fourth event, the increase in the project cost announced by the lead participant, will, of course, increase the cash requirements 129/ of Canal for its construction 4 program. Our review of the source of funds statement also reveals somewhat optimistic assumptions for the cost of debt. Assuming all other aspects of t h's forecast remain constant, more realistic debt assumptions would tend to d e c r e a se net income and in turn i nc rea se the cash required from outside financing. We find this increase in the cost of debt, however, will not substantially increase the Company's cash
~~
129/ It should be noted that-although the project cost has been updated from s2.9 to $3.e billion, a substantial portion of t he increase is due to the accumulation of AFUDC. The increased cost d ue to AFUDC will not affect the cash requirements of Canal.
Page 200 D.P.U. 1973P, 197A3, 70055, 20109 &72 requirements, l}0/ Therefore, we f i nd that the l t combination of tnese two factors which increase I the Company's casn flow requirements does not begin to offset the decrease in cash requirements of over $80.6 million cited above. Canal has no present short-term bo r rowi ng s . It therefore has a great deal of flexibility in raising the initial amounts of outside c a pi t al requirad. Its i nd e ntu re allows construction work in progress to be bondable and 1 therefore gives Canal easier access to the In addition, ca pi tal market tnan New Bedford. Canal's prosent capital commitments to other projects are at relatively low levels. Further analysis of the source of funds statement presented by Canal indicates that a substantial amount of its construction expenditures will be raised through internally
~
1307~ For eximple, had the assumption for'the cost of long-term debe financings been 12 percent, the company's cash requirements would increase by $400,000 ($200 million in long-term debt x an additional 2 pe r ce n t) per year for three years in comparison to total cash requirements per the Company forecast of $11# million. l l
o . D.P.U. 19738, 19743, 20055, ?Oln9 &72 Page ?P1 g e ne r a t ed funds. AFUDC as a percentage of net income exceeds net income for a pe r i od of three years, as the intervenore have pointed out. However, the expiration of the CL&P contract will obviously ennance this ratio. After careful review, we find Canal has the ability to finance New Bed f o rd 's presently proposed additional interest in the Seabrook project. - VI. VIABILITY OF THE SEAPROOK PROJECT In our June 28th Order, we were concerned by the lack of evidence r eg a rd i ng the ability of PSCO to complete the Seabrook project. The development of this issue in D.P.U. 20055 focused on the ability of PSCO to meet the financial burden resulting from a proposed 35 percent interest in the project. As we view the issue, the determination of such a b il i ty depends on PSCO's access to capital markets and on the s c o pe of the NHPUC's commitment to maintain PSCO's financial integrity. Both of these factors are dependent upon the interaction of a
19738,'19743, 20055, 20109 &72 Page 2P2 D.P.U. large number of essentially non-quantifiable variables which depend on future contingencies, s re unknowable at tnis ti1e with precision, and . are by no means independently ascertainable. In its July 27, 1979, decision the NHPUC stated: "The Commission would like to reiterate once again its belief that Seabrook is necessary for both New Hampshire and New England." 131/ In December 1979 the NHPUC further stated: "
...the Conpany has maintained and correctly, we believe, that Seabrook is a valuable project." 132/ dore impo r ta n tly ,
howe.ver, the NHPUC backed up these sta teme nts in its June 7, 1980, order by providing PSCO $18.3 1 million 133/ in perm anent rate relief out of an 2 approximate $19.3 million 134/ reauested. While J the extent of relief is 1.1 itself significant, the disposition of certain substantive issues by
~
_131/ UHPUC Report No!~DR~79-197, Julh'277~1970,
- p. 11.
132/ NHPUC Report No. DR 79-187, De ce mbe r 21, IF7 9, p. 9. NHPUC Report No. DR 79 1P7, June 7, 1980, f 133/ ;
- p. 56.
Ibid., l 134/ p. 3. t
-g -
o . l D.P.U. 19738, 10743, 20055, 20109 &72 Page 2P3 , l ) the NHPUC, especially the attrition allowance, the increase in the depreciation rate, the full normalization of interest expenses and the increase in rate of return, are also persuasive indicators of the NHPUC's sco pe of commitment to PSCO's continued financial integrity. After a
- careful reading of the NHPUC's decisions subsequent to the statutory elimination of construction work in progress ("CWIP") from i PSCO's rate base, we believe that the NHPUC clearly supports the Seabrook project, and that it is committed to the provision of relief adequate to maintain PSCO's fiaancial integrity.
A succinct statement of the factors affecting PSCO's access to capital markets is found in the November 30, 1979, affidavit of Willian O. Harty, 135/ submitted be f o re the NHPUC in support of PSCO's petition for emergency interim rate relief: TI57 Mr. Warty Ts a vTce PresTdent ~ o T~Forgan Cuaranty Trust and head of the bank's public utilities department. Morgan Guaranty Trust is one of PSCO's lenders. i 1
o . D.P,U. 19738, 19743, 20055, 20109 &72 Page 2Pd Public Service's ability to raise capital is extremely vulrierable to deteriorating capital market conditions, unfavorable utility industry and nuclear power developments, and changing perceptions about political and regulatory developments currounding the reduction of its interest in Seabrook and about the Company's rates (Exh. AG-?id,
- p. 1, para. II) . .
Subsequent to the submission of Mr. Harty's affidavit, the prime lending rate reached an unprecedented 20 percent. This peak in the prime rate was followed by an equally unprecedentea decline. 133/ Present capital market conditions show significant improvement over the conditions prevailing earlier this year, and this improvement enhances the prospects for PSCO to raise additional capital. Furthermore, in s pi te of the fact that the recent perturbations in the prime lending rate which have dominated the capital market have made the task _of_ projecting the_ average c ~,s t of capita,1 7, 1980, 1137 waPuc aeport no. na 79-1e7, aune , l
- p. 41.
i f
- O 4
19738, 197d3, 20055, 20109 &72 Page 295 D.P.U. , yet to be raised extremely difficult, PSCO has been able to licuidate each of its public offerings subsequent to the November 1978 New Hampshire gubernatorial election. 137/ We find that the confluence of these factors supports the judgment of PSCO's management that the company will be able to finance a 35 percent interest in the project. With respect to the unfavorable utility inoustry a r.d nuclear power developments mentioned by Mr. Harty, these developments are not generic to PSCO; they affect every electric utility in the country. Nuclear health and safety issues are clearly a major source of uncertainty. They are not, however, subject to our jurisdiction or control, and to date, litigation over these issues has been consistently resolved in the project's 137/ The total amount of permanent financing r ai se d by PSCO for 1979 and through March of 19AO is approximately $219 million. Exh. PSC-11,
- p. 12. See Tr. 32, pp. 78-Pd.
l I
19738, 19743, 20055, 20109 &77 Page 2P6 D.P.U. We are un w i ll i ng to presume other favor. 118f than that the public health and safety are being carefully and judiciously protected, and insofar as these issues affect the cost of Seabrook, we refer to our discussion of total project costs. Regardless of the investing public's present valuation of the utility industry relative to other industries, a s i 'o u a t i o n over which neither we nor the NHPUC have any direct control, the provision of an a equa te a nd reliable supply of electricity is an absolute-public necessity which, as a consequence of the in te rmed ia te to long-term nature of the utility planning process, must not be dominated by short-term economic uncertainties. Because we believe that the NHPUC is committed to ma i n ta i n i ng the financial integrity of PSCO, we do not agree with the 138/ It should be noted tnat the Tocus oT Inquiry regarding the issue of financial ability be f o re the NRC concerns these very questions of health and safety; in particular, whether a participant's financial ability may lead to compromises in a project's integrity. l
D.P.U. 19738, 19743, 20055, 20100 &72 Page ?A7 Attorney General's suggestion that the NHPUC's support of PSCO will not have a f avo rable i m pa c t upon investors. Rather, we think that the NHPUC's June order has largely lifted the cloud of uncertainty which heretofore has enveloped the Seabrook project and inhibited PSCO's a bili ty to raise necessary capital at favorable rates. With regard to the regulatory developments surrounding PSCO's reduction of its interest in Seabrook, we cannot ignore the result that we reach today. Although we have no direct r9ntrol over the investing public's r e s po'.. se to our Order, we believe our action will further reduce the uncertainty associa ted with the viability of the Seabrook project. Given PSCO's past financial difficulties, none of the f acto rs we have addressed is alone sufficient to assure the project's continued viability. Taken as a whole, however, the record supports a finding that PSCO will be able to attract sufficient ca pi t al to comple te the project at its proposed owne rshi p level . 4
1973P, 19743, 20055, 20100 &72 Page 7PP D.P.U. VII. CONCLUSION Consideration of the issues which we articulated in our June 28th Order constitutes the structural neans by which we have attempted to move towa rd our ultimate objective in these consolidated proceedingst to ensure for the consumers of the petitioning , Massachusetts utilities that t h e'i r future energy needs will be provided by reliable service at just and reasonable rates. As this decision demonstrates, extensive evidence was presented by the parties on the specific issues set forth in the June 28th Order. Our task has been to critically assess the evidence presented and determine from the record whether the preposed acquisitions will accomplish our underlying objective. With regard to the Seabrook project, we have f o u nd that it is a viable undertaking and that PSCO will be able to compl e te it at a reduced ownership interest of approximately 35 percent. Implicit in this determination is the finding that the project l i
D.P.U. 19738, 19743, 20055, 20109 &72 Page 289 represents a particularized and well defined future source of generation capacity. Moreover, with r eg a rd to the ability to finance, we have found that Fitchburg and New Pedford can meet the financial commitments of the full ownership interests requested in their petitions and that Montaup can meet the additional financial burdens given an interest less than that proposed.
- We have also found that each of the Massachusetts petitioners has shown a need for significant amounts of capacity to satisfy f utu re consumer demand. The reader has perhaps gleaneI from the demand sections of this decision that f o r e c a s t i ng future e ne rg y needs for a utility is not a simple undertaking. As we noted in 3ection II, inferential chains in the forecasting process are interdependent, extremely long, and ul tima tely rely upon the a ppl i c a t i on of informed judgments at each link.
In r e v i e w i ng the various need for power claims we have, thus, carefully considered all of the projectie;ns and where a ppro pr ia te applied our
D.P.U. 1973P, 19743, 20055, 20109 &72 Page 240 own ex pe r ti se in a s se s s i ng the significance of data furnished by the parties. If in this process we have appeared con se rva tive in our approach, this conservatism proceeds from our judgment that, from a planning perspective, it is generally prudent to view the upper limits of estimated growth and system capacity requirements as deserving somewhat greater weight than the lower limits. Within the context of our review of the investment decisions as proposed and approved herein, the consequences of some modest future excess capacity are far less severe than those flowing from insufficient capacity. As a Federal Power Commission witness ex pl a i n ed in a case involving i similar forecasting issues: The consequences of insufficient reserve are ma ni f old . It can lead to small scale interruptions or widespread blackouts, affecting a few individuals or leading to situations affecting the health, safety, and economic well-being of large numbers of people. The li fe of individuals dependent upon iren lungs, artificial kidney. machines, and other life s o s t a i n i ng equipment will be endangered. M a r.u f a c t u r i n g activities involving electric heating, constant temperature conditions, and electric drive and controls will be interrupted, with possible spoilage of work in process.
i D.P.U. 1973P, 19743, 20055, 20109 &72 Page 201 Other manufacturing activities will be interrupted but may suffer no more than loss of time and the losses that accompany unscheduled stoppages. Nine Mile _ Point, supra at 364, fn. 57. In order for each of the Massachusetts petitioners to satisfy their demonstrated future power .7 e e d s , we have found that the acquisition of additional ownership interests in the Seabrook project is, for these companies, the most viable option which can be relied upon at this time in planning future system requirements. In our decision, we fully discuss many o t;.e r energy sources which have been proposed as posaible alternatives to Seabrook. The petitioners have shown that some of these alternatives, for example, oil and gas fired units, do not offer less costly power. ! l 1 Independent of cost, we are also concerned about the future assured stability of pe t roleum supplies. In light of petitioners' already principal reliance upon fossil fuel dependent ; capacity, the inclusion of additional nuclear
19738, 19743, 20055, 20109 &72 Page 792 D.P.U. ca pa c i ty in their system mixes further offers obvious diversity advantages. For other asserted alternatives, such as solar and wind power, independent power production, and cogeneration, the record indicates that none of the se presently represents a source which offers, when compared to Seabrook, the same degree of certainty for meeting the demonstrated capacity needs of petitioners. Recognition must be given to the simple fact that firm commitments must be made today for d e f ini te quantities of power in order to assure anticipated future demand. These companies cannot ba se their present planning responsibilities upon alternatives which only offer at this time the potential that their widespread application and further dr.velopment may become quantifiable sources of power in the future. While we have found that many of the asserted alternatives presently involve too many unknowns in terms of likely availability, production characteristics or cost to substitute l l f
O e Page 293 D.P.U. 19738, 19743, 20055, 20109 &7? them for additional capacity in the Seabrook project, these alternative sources of capacity or load reduction may well become more viable, cost effective or certain in the future. Therefore, our determination here should not be construed as a diminution of our continued support for the development of alternative technologies and energy saving strategies. Moreover, we would once again express our interest in seeing thrt the region's hyd ro potential is fully utilized. The advantages of additional hydro capacity in the petitioners' system mixes is a m pl y set forth As noted therein, earlier in our discussion. however, we v ie w this source of power as complementary to Seabrook capacity rather than as a s u b s ti t u te for it. In closing, we would note that, although we have commented that partial deferral of the project's in-service dates would have a positive impact upon petitioners' cash flow positions, we do not feel delay is in anyone's best interest. Without_ delay, the project is
D.P.U. 1973P, 197d3, 20055, 20109 G72 Page 294 demonstrably less expensive by significant amounts to both petitioners and the consumers they serve. In this instance, the tension between the provision of reliable future capacity at the lowest cost and the strict adherence to financially conservative income and balance sheet criteria a pp r o pr i a te for ordinary times should be resolved in favor of the least costly provision of capacity. The recent forces which have been impinging the electric utility industry are clearly extraordinary when viewed from the perspective of the days when the Department could order reductions in rates subsequent to expansion of capacity. j
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D.P.U. 19738, 19743, 20055, 20109, 72 Page 295 i [ VIII. ORDER Accordingly, af ter due notice, hearing, and considera-tion, it is ORDERED: That the acquisition by Montaup Electric , Company of a 1 percent interest in the Seabrook project I j from Public Service Company of New Hampshire and the [ I terms of said acquisition are hereby found to be consistent I 4 L j with the public interest, and the joint petition of Montaup ; r i j Electric Company and Public Service Company of New Hampshire i l docketed as D.P.U. 20055 requesting approval of said ac-quisition and the terms thereof is hereby approved; and it is FURTHER ORDERED: That the acquisition by Montaup j Electric Company of a 1.03542 percent interest in the Seabrook l f
! project from Connecticut Light & Power Company and the 1 ,
terms of said acquisition are hereby found not to be con-l sistent with the public interest, and the joint petition of Montaup Electric Company and Connecticut Light & Power Company docketed as D.P.U. 19738 requesting approval of said acquisition and the terms thereof is hereby dis-I allowed; and it is i 1 FURTHER ORDERED: That the acquisition by Montaup Electric Company of 1.06469 percent interest in the Seabrook project from United Illuminating Company and the terms of said acquisition are hereby found not to be consistent with l e
, , . -<. - ,,., ., , a- , nwa. - - , . - - > - cen, m ,
D.P.U. 19738, 19743, 20055, 20109, 72 Page 296 the public interest, and the joint petition of Montaup Electric Company and United Illuminating Company docketed as D.P.U. 20109 requesting approval of said acquisition and the terms thereof is hereby disallowed; and it is FURTHER ORDERED: That the acquisition by Fitchburg Gas & Electric Light Company of a 0.4349 percent interest in the Seabrook project from Connecticut Light & Power Company and the terms of said acquisition are hereby found to be consistent with the public interest, and the joint petition of Fitchburg Gas & Electric Light Company and Connecticut Light & Power Company docketed as D.P.U. 19743 requesting approval of said acquisition and the terms thereof is hereby approved; and it is FURTHER ORDERED: That the acquisition by Fitchburg Gas & Electric Light Company of a 0.2609 interest in the Seabrook project from Public Service Company of New Hampshire and the terms of said acquisition are hereby found to be consistent with the public interest, and the joint petition of Fitchburg Gas & Electric Light Company and Public Service Company of New Hampshire docketed as J D.P.U. 72 requesting approval of said acquisition and the terms thereof is hereby approved; and it is FURTHER ORDERED: That the acquisition by New Bedford Gas & Edison Light Company of a 2.1739 percent interest in the Seabrook project from Public Service Company of New Hampshire and the terms of said acquisition are hereby found to be consistent with the public interest, and the
t D.P.U. 19738, 19743, 20055, 20109, 72 Pcgo 297 joint petition of New Bedford Gas & Edison Light Company and Public Service Company of New Ilampshire docketed as I D.P.U. 20055 requesting approval of said acquisition and i I the terms thereof is hereby approved, subject, however, to the condition that New Bedford Gas & Edison Light Company transfer said interest in the Seabrook projcet
, to Canal Electric Company at such time as New Bedford Gas
& Edison Light Company may acquire said interest.
By Order of the Department,
/s/ DORIS R. POTE Doris R. Pote, Chairman l
/s/ JON N. BONSALL Jon N. Bonsall, Commissioner g , /s/ GEORGE R. SPRAGUE George R. Sprague, Commissioner 4?,yt < x '. <,. .
- t. : 9,
*U
- Commissioners participating in f f' , *,' decision of D.P.U. 19738, 64
. j/ ,. w D.P.U. 19743, D.P.U. 20055, D.P.U. 20109, and D,F.U. 72
<'g/t,4-O, ng a . were: Chairman Pote, k,.840gge Commissioner Bonsall and
,{ s Commissioner Sprague.
^
At e copy; . At >st: / , I l /R
\
THIR ST E . I Secreta y Q
Appeal as to matters of law from any final decision, order or ruling of the Commission may be taken to the Supreme Judicial Court by an aggrieved party n interer.t by the filin~, of a written petition praying that the order of che Commission be modified or set aside in whole or in part. ,
' i Such petition for appeal shall be filed with the Secretary of the Commission !
within twenty days af ter the date of service of the decision, order or ruling of the Commission, or within such further time as the Commission may allow upon request filed prior to the expiration of the twenty days after the date of service of said decision, order or ruling. Within ten days after such i petition has been filed, the appealing party shall enter the appeal in the Supreme Judicial Court sitting in Suffolk County by Filing a copy thereof uith the clerk of said court. (Sec. 5, Chapter 25, G.L. Ter. Ed., as most recently amended by Chapter 485 of the Acts of 1971). I e 9 'I 9 9 l I t f !}}