ML19308A420

Testimony in Response to Tx Utils Generating Co & Houston Lighting & Power First Set of Interrogatories

ML19308A420
Person / Time
Site:	South Texas, Comanche Peak
Issue date:	03/05/1975
From:	Rogers O CAROLINA POWER & LIGHT CO.
To:
Shared Package
ML19208C305	List: ML19208C304 ML19208C306 ML19208C308 ML19208C310 ML19208C312 ML19208C314 ML19208C315 ML19208C322 ML19308A389 ML19308A390 ML19308A391 ML19308A392 ML19308A393 ML19308A398 ML19308A399 ML19308A400 ML19308A401 ML19308A402 ML19308A403 ML19308A404 ML19308A405 ML19308A406 ML19308A407 ML19308A409 ML19308A410 ML19308A412 ML19308A413 ML19308A414 ML19308A415 ML19308A416 ML19308A417 ML19308A418 ML19308A419 ML19308A420 ML19308A421 ML19308A422 ML19308A423 ML19308A424 ML19308A425 ML19308A426 ML19308A427 ML19308A428 ML19308A429
References
E-8884, NUDOCS 7909260319
Download: ML19308A420 (23)

Text

__ . _ . _ . __ . _ _ - . . _

., h, CAROLINA POWER AND LIGilT COMPANY , , , ,

FPC DOCKET NO. E-8884 ) '[,,,,gt.jj g DIRECT TESTIMONY OF 0. FRANKLIN ROGERS '

f ; n:3'

Q 1Q PLEASE STATE YOUR NAME AND ADDRESS.

2 3 A My name is 0. Franklin Rogers. My business address is 1000 Crescent 4 Avenue, N.E., Atlanta, Georgia 30309.

5 6 Q BY W110M ARE YOU EMPLOYED?

7 8 A I am a member of the firm of Souchern Engineering Company of Georgia.

9 4 10 Q PLEASE STATE YOUR EDUCATIONAL BACKGROUND.

4 11

! 12 A I attended Emory University in Atlanta for two years and Georgia

, 13 Institute of Technology for two years, receiving a degree of Bachelor 14 of Industrial Engineering from Georgia Institute of Technology in 1955.

, 15 I also attended Emory University Law School.

16 17 Q PLEASE STATE YOUR PROFESSIONAL EXPERIENCE.

18 19 A Upon graduation from Georgia Tech, I served three years as an officer 20 in the'Unitbd States Navy, after which I began working for Southern 21 Engineering Company in 1958. I have, during that time, headed the 22 Retail and Wholesale Rate Departments in my Company. I have performed 23 rate studies for over seventy-five rural electric cooperative and 24 municipal systems in thirteen states during this period of time. I 25 have participated in wholesale rate and contract negotiations with thirty-six privately owned investor utilities in nineteen states.

., ) 26 27 During this period of time, I have prepared or participated in pre-28 paring numerous cost of service studies of investor-owned utilities, ,

29 rural electric cooperatives and municipal systems.

30 31 Q liR. ROGERS, WITil RESPECT TO ELECTRIC RATE CASE MATTERS, llAVE YOU EVER 32 GIVEN TESTIMONY BEFORE TilIS COMMISSION OR ANY STATE UTILITY REGULATORY 33 COMMISSION?

34 35 A Yes, I 1rve. -

36 37 Q WILL YOU PLEASE IDENTIFY Til0SE PROCEEDINGS AND Tile COMMISSIONS BEFORE 38 WilICil YOU IIAVE TESTIFIED?

' 39 40 A I have testified as a rate expert before several State Commissions j 41 including North Carolina, South Carolina, Kentucky and Indiana. I have 42 previously sestified before the Federal Power Commission in the follow-43 ing proceedings: Mississippi Fower & Light Company, FPC Docket No.

1 44 E-7577; Carolina Power & Light Company, FPC Docket No. E-7564; Georgia 45 Power Company, FPC Docket No. E-7548; Public Service Company of Indiana, 46 FPC Docket No. E-7645; Alabama Power Company, FPC Docket No. E-7674; 47 Gulf Power Company, FPC Docket No. E-7625; Florida Power Corporation, 48 FPC Docket No. E-7679; Duke Power Company, FPC Docket No. E-7720; 49 Pennsylvania Electric Company, FPC Docket No. E-7718; Public Service 50 Company of New llampshire, FPC Docket No. E-7742; Indiana and Michigan s/ll em suom .~w =

7 909260 3[ 7

6 1 Electric Company, FPC Docket No. E-7740; and Virginia Electric and Power 2 Company, FPC Docket No. E-8026. I have also submitted prepared testimony 3 in Consumers Power Compang, FPC Docket No. E-7803; Appalachian Power 4 Carpany, FPC Docket No. E-7775; and Toledo Edison Company, FPC Docket 5 No. E-7929; and Mississippi Power Company, FPC Docket No. E-7625.

6 7 The privately owned electric companies with which I have 8 personally negotiated on behalf of wholesale customers and participated 9 in cases before the Federal Power Commission since 1960 are.as follows:

10 (Although . do not recall all of the docket numbers, I indicate the 11 docket numbers of those cases filed since 1969.)

12 13 Florida Power Corporation (two occasions) (E-7679), Gulf Power 14 Company (E-7686), Georgia Power Company (four occasions) (E4548 and 15 E-8170), Virginia Electric & Power Company (three occasions) (E-7611 16 and E-8026), Carolina Power & Light Company (E-7564), Delmarva Power 17 6 Light Company of Virginia (three occasions) (E-7560 and E-7769),

18 Delmarva Power 6 Light Company of Maryland (three occasions) (E-7560 19 and E-7769), West Penn Power Company, Pennsylvania Electric Company 20 (three'occanlons) (E-7718), Metropolitan Edison Company (three 21 occasions) (E-7630), New Jersey Power 6 Light Company (two occasions),

22 Buckeye Power, Inc., Duke Power Company (four occasions), (E-7557, 23 E-7720, and E-7994), Public Service Company of Indiana (E-7645),

24 Northern Indiana Public Service Company (E-7758), Detroit Edison 25 Company (E-7687), Central Illinois Public Service Company, Illinois "j 26 Power Company, Eentucky Utilities Company, New York State Electric 6 27 Gas Corporat.lon, Alabama Power Company (two occasions) (E-7674),

28 Oklahoma Gas and Electric Company, Public Service Company of Oklahoma, '

29 Public Service Company of New llampshire (E-7742), Central Illinois 30 Light Company, Niagara Mohawk Power Corporation, Mississippi Power 31 6 Light Company (E-7577), Mississippi Power Company (E-7625), Central 32 Vermont Public Service Corporation (two occasions) (E-7685 and E-7798),

33 Flotida Power & Light Company (E-8008), Indiana and Michigan Elcetric 34 Conpany (E-7740), t.ppalachian Power Company (E-7775), and Consumers 35 Power Company (E-7803).

36 37 Most of the negotiations and rate cases involved rate schedules 38 which contained fuel adjustment clauses. Many negotiations resulted 39 in substantial changes in, or deletion of, the fuel adjustment clauses.

40 41 Q IIAVE YOU TESTIFIED BEFORE OTilER COMMISSIONS?

42 -

43 A Yes. I have testified before the Atomic Safety and Licensing Board 44 of the United States Atomic Energy Commission In Consumers Power Company (Midland Plant, Units 1 and 2), AEC Docket Nos. 50-329A 45 46 and 50-330A. Additionally, I have submitted testimony before the 47 Atomic Safety and Licensing Board in the matter of Alabama Power 48 Company Joseph M. Faricy Nuclear Plants, Units 1 and 2, AEC Docket 49 Nos. 50-348A and 50-364A.

50 h

F $

i l

Q 1 Q MR. ROGERS WILL YOU PLEASE DESCRIBE IN GREATER DETAIL YOUR 2 EXPERIENCE CONCERNING FUEL ADJUS'H1ENT CLAUSES?

3 4 A I have designed many fuel adjustment clauses and I have analyzed

, 5 and negotiated fuel adjustment clauses on behalf of our clients with 6 their wholesale power suppliers.

7 i 8 In many, if not most, of the rate cases and negotiations noted above, l a fuel clause was at issue. Additionally, I.have testified in the 9

10 following proceedings which involved only fuel adjustment clauses:

11 12 The North Carolina Utilities Commission, Docket No.

{ E-7, Sub. 114 the result of which was that Duke Power 13 14 Company's proposed fuel adjustment clause for retail i 15 customers was disallowed by that commission; j 16 17 The Federal Power Commission in FPC Docket No. E-7720,

! 18 Duke Power Company; and 19 20 Tlie Federal Power Commission in the rulemaking pro-l cceding concerning fuel adjustment clauses in whole-21 22 sale rate schedules, Docket No. R-479, in which I 23 represented the American Public Power Association,  !

24 the National Rural Electric Cooperative Association, l

25 many statewide cooperative organizations, and statewide j 26 municipal organizations, as well as regional.and indi-i 27 vidual organizations.

I 28 '

l 29 Q BY Wil0M IS YOUR TESTIMONY SPONSORED IN Tills PROCEEDING?

30 31 A My testimony is sponsored by the North Carolina Electric Membership 32 Corporation and through it, its Carolina Power and Light served 33 member systems, Four County Electric Membership Corporation, and

! 34 by the Municipal Intervenors.

35 36 Q WILL YOU OUTLINE BRIEFLY YOUR ASSIGNMENT ON BEllALF OF TIIESE l

i 37 INTERVENORS IN TilIS PROCEEDING?

i 38 I 39 A My assignment was to determine whether Carolina Power and Light 40 Company's (CP&L) imposi tion of a fossil fuel adjustment clause as a l 41 supplemental escalatorj clause attached to its rate schedule l 42 applicable to its wholesale electric service (RS-10) is reasonabic,

43 and I was also asked to prepare a tariff or tariffs appropriate for l

44 the wholesale sale of power by CP&L to its wholesale customers. .

45 46 Q MR. ROGERS, WILL YOU PLEASE STATE T11E SCOPE OF YOUR INVESTICATION 47 CONCERNING CAROLINA POWER & LIGHT'S PROPOSED FOSSIL FUEL ADJUSTMENT 48 CLAUSES?

49 50 ,

O t _ _ _ _ _ _ _ _

1 l

t - - . - .. .- -. ..

1 -

g ,j 1 A 1 have reviewed the testimony and exhibits submitted by CP6L 2 witnesses concerning the tariff proposed by CP&L in this proceeding.

3 1 have reviewed past contracts between CP&L and its cooperative

4 customers and the proceedings before this Commission in Docket l 5 No. E-7564.

6 7 I have reviewed the filing by CP&L, the testimony and Exhibits 8 submitted by its witnesses, and certain additional information con-9 cerning its operations which it supplied at the request of the 10 intervenors.

11 12 In my examination of CP&L's proposed fossil fuel adjustment clause I 13 have given primary regcrd to two questions: First, is the particular 14 fuel clause which CP&L has proposed a just and proper one, in consider-15 ation of the objective of recovering the actual increase in fossil 16 fuel cost above the proposed base of 0.513 cents per kilowatt-hour?

17 And second, is a fuel clause based solely upon fossil fuel expense 18 appropriate for CP&L to superimpose upon its existing rates for 19 wholesale service when the Company plans to shift substantially i 20 from fossil' fuel generation to nuclear generation in the near future?

21 ,

22 Q IN WHAT RESPECTS DO THE TWO FILINGS BY CAROLINA POWER AND LIGHT l 23 COMPANY, DOCKET NO. E-7564 AND DOCKET NO. E-8884, DIFFER WITH RESPECT 24 TO TARIFF FILINGS?

25 j 26 A In the proceeding under Docket No. E-7564, CP6L filed only a revised 27 rate schedule, Schedule RS-7. Subsequent to the filing of Rate 28 Schedule RS-7, a settlement agreement was reached between CP&L and ,

29 its wholesale customers. As a r.esult of that agreement, Rate 30 Schedule RS-8 was put into ef fect for CP&L's cooperative customers 31 and the existing contracts were amended.

32 33 In this Docket No. E-8884, CP&L has filed a tarif f consisting 34 of Rate Schedule RS-10, General Terms and Conditions for Resale 35 Scryice, and a Service Agreement for Resale Service, which is a -

36 contract.

37 I

38 Q WILL YOU BRIEFLY DESCRIBE YOUR ANALYSIS OF CP&L'S PROFFERRED TARIFF 39 IN 11 TIS PROCEEDING?

40 41 A I have found there are substantial deficiencies in the tariff filed 42 by CP&L. These are: .

43 44 (1) CP6L proposes to limit the availability of power from 45 new delivery points to its wholesale customers by allowing 46 only specified quantitles to be obtained from designated 47 places on its system.

. 48 49 CP&L's AVAILABILITY section of Schedule RS-10 is unduly 50 restrictive in that it is limited to existing facilities of -

.s)

~ - - - -

I

-%~

~_ . . - . - = .. - _ . _ - - _

i -

i i v;) 1 adequate type and capacity. Since CP5L is in the business 2 of selling electricity both at retail and at wholesale, it 3 has a utility responsibility to provide the facilities of 1

4 adequate type and capacity needed by its wholesale custo-5 mers as well as its retail customers.

6 7 (2) The tariff provisions for contract term, termination, and payment subsequent to termination for idled facilities t 8 9 are confusing as presented by. CP&L. CP&L proposes a con-10 tract which would be a Service Agreement and an. attachment 11 to that Service Agreement called " Exhibit A" which would 12 describe cach delivery point. In Rate Schedule RS-10 l 13 under CONTRACT, CPLL says the contract potiod fer the 14 schedule will be seven years with a th'.ee year cancella-15 tion notice. Whenever load growth requires CP&L to in-16 crease the capacity of its facilities at a delivery point,  ;

17 the contract period is automatically extended for seven 18 more years. In Section No. 11 of the General Terms and 19 Conditions for Resale Service portion of CP6L's tarif f, 20 under TERM AND TERMINATION, the seven year term with

! 21 three year cancellation notice is again described. In 22 this instance the seven year period starts whenever an 23 Exhibit A - and there might be several of these attached 24 to the Service Agreement - is amended due to some change 25 in facilities at a delivery point. Then in Paragraph (h) j 26 of Section 11, the customer is allowed to terminate within 27 the initial seven year period by reimbursing Company for 28 the unamortized portion of investments that the Company '

l 29 has made. No particular time frame is set for this termi-30 nation. Finally, in the Service Agreement portion of the 31 tariff in Paragraph 5, the term is again set as seven years

> 32 with a three year cancellation notice. In view of these 1 33 confusing provisions, the. term of the tariff is not cicar.

1 34 y

35 Under the section CONTRACT PERIOD found in Resale Service

, 36 Schedule RS-10, terminology is loosely used. The word 37 " contracts" is used but there are no contracts in the 38 proposed tariff. The Service Agreement is one part, the

39 Terms and Conditions are one part, and the Rate Schedule 40 RS-10 is another, all of which together are defined in

! 41 the General Terms and Conditions as the " Contract for

! 42 Service". If CP&L means " Contract for Service", questions

! 43 arise in bunches. If the customer decides to cancel one 4 44 delivery point because of a change in load requirements, is the entire contract for Service canecled?

l 45 46 47 What compulsion is the cooperative under to sign a contract 48 in the first place? More specifically,-why would a coopera-49 tive sign a contract which had not been negotiated? The 50 contract for Service must be mutually agreeabic, not unilaterally mandated.

. %s)

~ ~ ~ ~ ~

l

-i- 1 i

I g,j 1 In summary, seven years is too long a time period for the 2 contract to run. The three year cancellation period is 3 excessive. The wholesale customers could obtain power from 4 other generating resources without changes in delivery facili-5 ties. SEPA power is, for instance, presently delivered by 6 CP6L. Other sources may become availabic on short notice.

7 If these other sources of supply are obtained contractually, 8 a three year limitation for their receipt would be excessively 9 long. CP&L's statement of the term of the tarif f is not clear.

10

, it (3) CP&L proposed to change the time interval during l 12 which the kilowatt demand for billing purposes is measured 13 from a 30 minute interval to a 15 minute interval. This 4 14 change is totally inconsistant with the 30 minute interval 15 used by the Southeastern Power Administration to determine 16 its billing to government preference customers. Since the 17 Southeastern Power Administration's sales to cooperatives 18 are deducted from the cooperative's total purchases to 14 determine the sales by CP&L, the change from a 30 minute 20 interval to a 15 minute interval by CP6L is nothing more f 21 than raw harassment.

22 23 In general, tiie maximum 15 minute demand for a billing .

24 period will be higher than the maximum 30 minute billing 25 demand during that same billing period. It cannot be lower.

26 Since the SEPA demand is subtracted f rom the total billing

. iw) 27 demand on the station to determine the billing demand of

) 28 CP6L, the impact of the SEPA power on the cooperative's '

29 rtte is diminished. For example, if the total billing 1 30 demand on a station was 1,000 kilowatts and there was a 31 100 kilowatt SEPA allocation to that delivery point, CP&L's

32 billing demand would be 900 kilowatts, if all demands were

33 measured with a 30 minute interval. If the demands have l 34 been measured on a 15 minute interval, the billing demand l 35 would be, say, 1,030 kilowatts as compared with the 1,000 36 kilowatt demand of the 30 minute interval. CP6L's billing 37 demand ,would, therefore, be 1,030 minus SEPA's 100, equaling

38 930 kilowatts. The supply of SEPA power has dropped from 39 10% (100 + 1,000) to 9.7% (100 + 1,030) . Obviously the 40 economic effect of the SEPA power is reduced by this trickery 41 of meter readings. Said another way, a change to a 15 minute 42 peak, if made, would have to be accompanied by an increase in 43 the SEPA allotment as is done in other areas. The SEPA allot-44 ment is not, however, involved in this pr.oceeding.

45 .

46 The 30 minute demand interval presently contained in Rate 47 Schedule RS-9 must be retained. It is not simply a matter 48 of economics between CP&L and the preference customers.

1 49 In effect, it reduces the SEPA allotments.

50

~

%w .

- _ - .. _ . . - - - . = _ - -.

I t

Q (4) While 'l agree with CP&L that some power f actor adjust-

~

l 2 ment provision is needed in a tarif f,1 cannot agree that 3 CP&L's proposed power factor adjustment is reasonabic. In 4 fact, it seems to be punitive. The critical time for power 5 factor correction is during the period of maximum demand.

- 6 CP&L proposes to determine the power f actor f rom two dif fer-7 ent time periods; the maximum kW demand registered and 8 the maximum reactive kilovolt-amperes _ measured. There in 9 no electrical law that would say that these two maximums 10 would occur at the same instant. In fact, the probability j 11 is that they will not. The tariff I propose has a substi-l' 12 tute provision which solves that problem. The power factor L3 is defined as the power factor during the interval of 14 maximum kilowatt demand measurement.

15

16 (5) The fuel clause proposed by CP&L has many deficiencies, 17 which I-discuss in detail later in my testimony.

18 19 (6) CP&L proposes to have something it calls " additional 20 facilities" as part of its service to wholesale customers.

21 I do not know what " additional facilities" are because 22 " normal facilities" are too loosely defined. On original

23 sheet No. 11 of the tariff filed by CP&L under Section 4 l 24 FACILITIES AND ACCESS, CP&L attempts to define " normal i 25 facilities" and " additional facilities", but the attempt i 26 fails.

27 l 28 The " point of delivery" referred to by CP&L is some unde- _

29 termined location specified in Exhibit A. This point is, 30 presumably, negotiabic between CP&L and its customer. Since 31 it is negotiable it could be at a 115 kV line or it could 32 he at a 12 or 23 kV bus or a 12 or 23 kV line. Each of 33 these situations presents a different engineering problem.

, 34 A 115 kV line connection might require a breaker station, 35 or a step-down station to some sub-transmission or distri- .

! 36 bution voltage. Delivery at a 12 or 23 kV bus might require l 37 additional bus work. Furthermore, either the customer or 38 CP&L could install the f acilities required to accommodate 39 CP&L's system to the customer's need. Normal facilities 40 can an.I do vary substantially from point to point.

i- 41

! 42 The term " additional facilities" is far too broad and simply 43 allows CP&L too great a latitude in determining what f acilities l 44- are " normal" and what facilities are " additional". CP&L 45 provides a service in delivering power and energy to its 46 wholesale customers. CP&L has asked the Federal Power 47 Commission for a Rate of Return which will provide all 48 the revenue the law will allow. CP&L has the responsibility 49 therefore, to provide the facilities required to deliver the 50 . product it sells. No provision is needed for " additional

%)

_ .. ~ _ .

j t facilities".

2 3 (7) CP&L inexplicably proposes to expand the metering 4 accuracy range of plus or minus two percent to plus or 5 minus four percent. Plus or minus two percent is 6 standard in the industry as the band within which no 7 metering adjustment is required.

8 9 (8) CP&L proposes no protection for its wholesale custo-10 mers in the event there is a requirement for the limita-2 11 tion in the use of electricity. Wholesale customers must 12 have protection to insure they are looked upon as a large 13 number of customers and not just one customer at the 14 delivery point.

15 16 (9) The mutually indemnifying clause proposed by CP&L 17 is unnecessary.

18 19 (10) CP&L makes its customers subject to the contract pro-20 visions even though no contract is signed. This is done by 21 filing General Terms and Conditions which become effective, 22 according to those Terms and Conditions, when service is 23 accepted. It has recently been held that a provision ~of 24 this type is " superfluous", that "its inclusion in the 25 tariff may only cause confusion and controversy", and 26 that it "should be stricken". See the Initial Decision

'"j 27 of the Presiding Administrative Law Judge in Mississippi 28 Power Company, 50 FPC 897, 911-914 (1972), affirmed by the

. 29 Commission on this point, 50 FPC 885, 887, 894 (1973). To 30 the same ef fect is the more recent Initial Decision of the 31 Presiding Administrative Law Judge in Florida Power 6 Light 32 Company, Docket No. E-8008 (November 26, 1974), at pp. 52-54.

33 Accordingly, this provision should be deleted.

34 35 Q UAS 111E DOCUMENT LABLED EX1tIBIT' (OFR-1)-PREPARED UNDER YOUR .

36 SUPERVISION?

37 38 A Yes. The document entitled " CAROLINA POWER 6 . LIGHT COMPANY, Agree-39 ment for Sale of Electricity to Municipal Utilities and Electric l 40 Membership Corporations" was prepared under my supervision.

41 .

42 Q WOULD YOU PLEASE DESCRIBE ARTICLE 10F YOUR PROPOSED AGREEMENT FOR l 43 SALE OF ELECTRICITY TO ELECTRIC MEMBERSilIP CORPORATIONS BY CAROLINA 44 POWER AND LIGilT COMPANY?

[

45 46 A Article 1 - Electricity Supplied rectifies one of the great failings 47 of CP&L's proposed tarif f. It designates reasonabic delivery point 48 availability and the date of the initiation of service cf any delivery 49 point for which the cooperative must pay if it terminates the service 50 prior to the five-year-in-service requirement for such facilitic3.

l J

1 In paragraph (b) of Article 1, I have specified that the voltage wo/

2 fluctuation shall not exceed plus or minus 5% as opposed to CP&L's 3 plus or minus 10%. CP&L's plus or minus 10% is a retreat from its i

4 present plus or minus 5% requirement, and no justification has been j 5 given for.such change. Additionally in paragraph (b), I have specified 6 where new delivery points may be obtained: on the Company's system 7 where the operating voltage is 66 kV or higher, any location where j; 8 a secondary bus is transformed from 66 kV or higher, or where other i 9 operating voltage exists and adequate capacity is available to meet i

10 the customer's estimated load for the initial five years of the 11 delivery point's operation. In this arrangement the customer has 12 the responsibility to request reasonable terms and the Company has 13 the responsibility to provide reasonable service for the five year j 14' period. Further, I require that the voltage be the voltage existing

15 at the location designated by the customer. Finally, the Company 16 would not be obligated for a delivery point unless the initial load l 17 is at least 500 kilowatts. There are therefore, limitations and 18 constraints on the Company and on the Customer.

19 20 In paragraph (c) of Article 1, I addressed the very serious problem 21 of voltage changes at existing delivery points. As Mr. Treadway 22 has testified, this has been a long standing problem between the 23 Company and its Cooperative customers.

24 25 In paragraph (d) af Article 1, I have specified a responsibility of

~

26 the customer not to connect to other sources of electricity without f

) 27 reasonable written notice to the Company and an agreement by the 28 parties on such matters or conditions, if any, electrically necessary ,

29 for paralle] operation or standby service. In my opinion these are 30 reasonable conditions.

1

31 32 Q WILL YOU PLEASE EXPLAIN Tile PORTIONS OF YOUR TARIFF CONTAINED IN

! 33 ARTICLE 2 - FACILITIES.

34

)

35 A In this section I have specified who will own the facilities at

. 36 different points in the system. The division of responsibility is ,

, 37 at the delivery point. This is the same division of responsibility 38 that the Company proposes. I have, howevcr, deleted any mention of ,

39 " additional facilities" because there is no true definition of such 40 facilities when " normal facilitics" are not defined. Neither I nor -

i 41 the Company has defined " normal facilities".

42 . ,

43 Q WILL YOU PLEASE DESCRIBE Tile ARTICLE 3 - OPERATION?  !

44 45 A The tariff that I propose would require the Company to provide 46 adequate and dependabic electricity for the present and future.

47 requirements of the customer at existing or newly established 48 delivery points during the term of the contract. There is a mutual 49 requirement to exchange information about loads and system changes.

50 In CP&L's tariff, however, under Section 9 COMMENCEMENT AND I W f

-g-

d h 1 2

CONTINUITY OF SERVICE, CP&L places conditions on its requirement to provide service in paragraph after paragraph.

There is no re-3 quirement for the Company to provide the same quality of service 4 to a wholesale purchaser as it provides its retail purchasers, 5 giving due regard for the wholesale purchaser's many customers 6 at a single delivery point. 1he Company could consider the whole-7 sale delivery point as only one customer, which of course would be 8 unreasonable. A wholesale customer serves hundreds of customers 9 from a single delivery point. CP&L would have the right to suspend l 10 service without notice and obviously without regard for the wholesale l 11 purchaser's, customers' needs.

12 13 Q WILL YOU PLEASE EXPLAIN ARTICLE 4 - SCHEDULE OF CHARCES?

14 15 A Ubat the customer will have to pay should be a part of the contract.

16 I simply require that the rate schedule be attached as an Exhibit B 17 to assure there is no misunderstanding of the oneness of the package 18 agreement. After all, the contract determines what the customer is 19 purchasing and it should also determine the price oaid for the 20 purchade. '

21 22 Q PLEASE DESCRIBE ARTICLE 5 - METERING. .

23 24 A For some inexplicable reason, CP&L has set a band width of 4% fast 25 or slow as the range in which no adjustment to received quantitles i

'" j 26 would be required. Plus or minus 2% accuracy is standard in the 27 industry, and I see no reason to change it. _My tariff,_therefore,

28 contains a plus or minus 2% accuracy requirement. ,

j 29 30 Q PLEASE EXPLAIN ARTICLE 7 - COMMENCEMENT AND CONTINUITY OF SERVICE .

31 32 A I recognize that the Company might have some problem with delays in 33 providing electric service at new delivery points because of right-

! 34 of-way problems, injunction, strike, riot, invasion, flood, fire, 35 explosion, breakdown, acts of God or the public enemy. In recogniz-36 ing this, I have stated that the company might have to extend the 37 specified time for commencement of delivery of electric service. I 38 have, however, gone further to require the Company to exercise due j 39 diligence in acquiring right-of-way. I have further stated that the 40 Company may not discriminate against the wholesale customer by assign-41 ment of equipment required for commencement of its service to some 42 other customer. If the Company does discriminate in this manner, f 43 the Company shall be liabic for the delay in the commencement of 44 service. To me this is reasonable so that the Company will not be 45 in a position to arbitrarily route its equipment to its retail 46 customers to the detriment of its wholesale customers. The wholesale 47 customers need protection in the contract from this danger.

48 1

49 in paragraph (c), of Articic 7, I require the Company to give the 50 customer written notice of any scheduled or planned outage as soon s.)

! =1 % -

B

'q) I as such outage is planned or scheduled. CP6L's tarif f contains no 2 such provision. I further require the company to give the customer 3 as much notice as circumstances will permit in case of an unscheduled 4' outage. Although such requirements might be taken for granted, it is 5 my opinion that these requirements should be spelled out in the con-l 6 tract to insure the customer's rights.

i 7

) 8 In paragraph (d) of Article 7, I place a requirement on the Company not

, 9 to discriminate against the customer in the event the quantity of l 10 electricity available is limited. CP6L's tarif f contains no provision 11 for this.

12 13 Paragraph (e) of Articic 7 protects the custemer in the event the i 14 customer is unable to receive service through some act of Cod or some l 15 other problem beyond the reasonable control of the customer. This 16 simply mirrors the Company's release from responsibility under 17 similar circumstances.

18

, 19 Q PLEASE EXPLAIN ARTICLE 8 - TERMS.

~ '

20 21 A I think it is unreasonabic to require a wholesale customer to agree

]

22 to a term longer than a Company is willing to agree to a fixed rate.

23 It is understandabic that many companies do not want, given today's i 24 economic climate, to enter into fixed-rate contracts for long periods.

25 On the other hand, it is desirabic to have some length of term so that 26 the parties will have some reasonable assurance that the agreement

! *- 27 will have some stability. With these factors in mind, I have provided 28 for a contract which can be terminated by cither party on two years' ,

j 29 notice. Additionally, I have provided that a customer must reimburse

! 30 the Company for facilities, when such facilities are solely devoted i 31 to the customer, at delivery points which have been in existence for I 32 fewer than five years.

33 j 34 As explained at length in the testimony of Mr. Treadway, many 5

35 facilities installed by the cooperatives in reliance on the continued 36 existence of CP6L's facilities have been rendered useless by unilateral 37 changes in its facilities made by CP&L. I have not suggested that 38 CP6L hold the wholesale customers harmless for investment. I believe 39 that the requirement that the customer build to the system of CP&L, 40 combined with the investment protection to CP6L for five years af ter i 41 the initiation of service at a delivery point and a termination pro-42 vision on two years' notice for either party define the obligations

43 of the parties, and create ' the certainty and stability that has 44 been missing in the relationship between CP&L and the cooperatives I j 45 over the years. It should be noted that the issues of the term

• l i

46 af ter the initiation of service at a delivery point and the canec11a-tion provision common to this case were contested in the Alabama 47 48 Power Company case, (Docket No. E-7674) . In that case Judge Kurtz,

49 in his Int.tial Decision of May 25, 1973, adopted a term providing 50 for canec11ation any time after five years from the date of initiation i

J .

L 1 l

1

--, v - - . -4 --

-m . - . . - ,

g,) 1 of service at a delivery point provided at least two years' written 2 notice is given. This was affirmed by the Commission.

3 4Q PLEASE EXPLAIN Tile FIRST PARAGRAPl! 0F YOUR PROPOSED SCilEDULC R9-10, 5 AVAILABILITY .

6 7 A inis simply requires the Company to make service availabic to coopera-8 tive customers from its facilities. It restricts the service to 9 cither full requirements or full requirements except for supplemental 10 service of the Government. There is a sharp difference between the 11 availability section that I propose and that proposed by CP6L. CP&L 12 would substantially limit the availability of its service by adding 13 the phrase "of adequate type and capacity" as a description of the 14 facilities f rom which it will provide service. CP&L has a responsi-15 bility to provide service f rom its system as it exists or as it must 16 be adjusted to provide such service. CP6L is in the business of a 17 selling electricity, and it has a responsibility to provide the 18 facilities required for the sale.

19 20 Q WILL YOU PLEASE EXPLAIN Tile SECTION APPLICABILITY?

21 22 A This section restricts service to a single type delivered at one 23 point through one meter installation or compensated to that point.

24 I have deleted the section in CP&L's tarif f which allows totalized 25 retering for a customer which accepts a minimum billing demand of

'"; 26 27 60,000 kilowatts received at a voltage of 115 kV or higher.

find no substantiating economic justification for the provision as I can 28 proposed by CP6L although I do find justification for the recogni- ,

29 tion of utility responsibility which such a customer accepts. 1 30 believe such recognition is best made through a provision for 3l high voltage discounts as proposed by Witness Martin.

J 32 33 Q PLEASE EXPLAIN TYPE OF SERVICE.

34 35 A The type of service that the Company should supply is very simply -

36 the type of service it has availabic: alternating current, 60 37 cycle three-phase at a standard voltage of the Company. CP&L 38 would severely restrict this very simple requirement by requiring 39 a negotiation for each delivery point for the establishment d.

40 " Exhibit A". I describe this as a negotiation charitably, m .ase 41 CP6L has, according to its tarif f, the right to fill in whatever l 42 initial and maximum demands it wishes. It,has the right to put in 43 other provisions for change of voltage or change of characteristics i 44 of service. Indeed, with so much flexibility, CP&L has the right i 45 to do practically anything it wishes with an " Exhibit A" as a 46 condition for Type of Service.

47 48 Q Wily HAVE YOU LFFT 'IllE MONTitLY RATE SECTION BLANK 7 i

49 50 A We have no basic objection to the type of rate proposed by the ssh' 8

l

~

l gj 1 Company except that the overall rate level is too high, and as 2 Mr. Treadway has testified, the terms and conditions of service are 3 simply not sufficiently definitive or stable to fix with a reasonable 4 degree of dependability the factors of cost against which any proposed 5 rate must be tested. Until such conditions are fixed it will be 6 inpossible to determine, prospectively, what the Company's cost may 7 be to serve its wholesale customers.

8 9Q PLEASE DESCRIBE Tile BILLING DEMAND DETERMINATION PORTION OF YOUR I 10 PROPOSED RATE SCilEDULE.

) 11 12 A I have basically followed the Company's proposed determination of 13 billing demand in Rate Schedule RS-10. I have, however, made two 14 changes. The first, as previously discussed at length, is the 15 necessity of the continued utilization of a 30-minute demand for 16 billing purposes. Second, I recommend deleting the sentence "A load

17 transfer for forty-eight hours or less will not be considered for i 18 current an future billing at the point of delivery to which it was 19 temporarily connected." In the very first sentence in the determina-20 tion of the-demand and energy (Original Sheet No. 6) CP6L .very 21 properly provides for appropriate adjustment to preclude duplication 22 of demand caused by the switching of loads between delivery points.

23 The insertion of the sentence which I suggest be deleted renders 24 useless the most appropriate adjustment precluding the duplication 25 of billing demand. It is most appropriate to preclude all duplication 26 of demand for billing purposes since the demand charge is designed to 1

4- 27 cover charges all the way back through the generators.

28 ,

29 Q PLEASE EXPLAIN Tile POWER FACTOR ADJUSTMENT SECTION OF YOUR PROPOSED 30 RATE SCIIEDULE.

31 32 A I believe that there should be some provision for the customer to 33 maintain a minimum power factor of 85%. This is essentially what 34 the proposed section requires. It further requires an increasing 35 penalty per reactive kilovolt ampere (kvar) as the power factor 36 becomes smaller and a decreasing reward per kilovolt ampere as the 1 37 power factor increases above 85% toward unity. CP&L's power f actor 38 adjustment requires a punitive charge if the power factor is less 39 than 85%. CPLL would determine the kW demand at one meter interval 40 and the kvar demand at another meter interval. Electrically, such a

41 determination is meaningless and serves only to increase the apparent l 42 reactive kilovolt amperes registered and billabic. I have eliminated 43 this problem by requiring that the reactive and real demands be 44 measured at the maximum demand interval during the billing period.

,3

46 Q PLEASE EXPLAIN Tile SECTION llIGil VOLTAGE DISCOUNT.

47 48 A This section is very'important to the wholesale customers. It 49 allows a recognition of investment by the customer in facilities 50 required to obtain service from power supply sources.

4 i

. ..- . . . _ . = .- .~. .. .-.. . -- -_ . - . .

a 1 It allows the rate to be set .nore or less equally regardless of the 2 voltage of delivery and with regard to the facilities the customer i 3 is required to install. I think that such a provision must be i

4 included for proper rate recognition.

5 6Q PLEASE EXPLAIN Tile SECTION PAYMENT.

7 8 A I simply require that bills be paid within 15 days. This is exactly 9 the same as CPLL proposes.

1 10 i

11 Q PLEASE DESCRIBE Tile SECTION , CONTRACT.

! 12 13 A This is an extremely important provision. There should be a contract

4 between the Company and the customer. This section requires that

15 service be provided according to that contract. The contract should 16 be mutually satisfactory, not unilaterally mandated by the Company.

j 17 This provision ties the contract and the rate schedule together to 18 form the tarif f.

19 j 20 Q P!.USE DESCRIBE CP&L'S FUEL CLAUSE PROPOSED IN THE INSTANT DOCKET.

! 21 22 A 1::e Company has proposed the following fossil fuel adjustment 23 cinuse:

l 24 I

25 FOSSIL FUEL ADJUSTMENT CLAUSE 26 RIDER NO. 1

\~ 27 28 APPLICABILITY i 29 .

I 30 This Rider is applicable to and becomes a part of all of 31 the Company's rate schedules and riders which provide for the 32 supply of metered electric service.

I 33 j 34 HILLINC 35 .

36 The monthly bill computed under the applicabic rate schedule ~

37 will be increased or decreased by an amount equal to the result j 38 of multiplying a factor, determined by the equation below, times 39 the kidi used.

40 41 F= E - (.00513 x G) x 1 i

42 8 1-T i 43 i

44 talERE:

F = Adjustment factor in dollars per kWh, rounded to the 45 .

1 nearest ne-thousandth of a cent 46 .

E = Fossil fuel cost for the second preceding month 47 l

48 *

, 49

! 50 i

i

^

- - - - . , - - , ,,, - , , , , ,, w .....w, ., -.x- . , - - -m -n-, . . - ,

4

i 4

4 s

e) 1 C = kWh generated by fossit plants in the second preceding 2 month

3 S = Total kWh sales, including all wholesale sales, in the j 4 second preceding month

' T = Applicable state gross receipts tax rate 5

6 7 "Second preceding month" means the second calendar month preceding 8 the month in which the bill is rendered.

9 10 A credit determined by the above equation shall not reduce 11 the monthly bill to less than the minimum stated in the applicable L2 rate schedule.

13

14 This proposed fossil fuel adjustment clause calculates the 15 per kilowatt-hour variations above or below the Company per kilo-16 watt-hour fossil fuel cost in the base period used by the Company 17 in deterni.ning its proposed rates to be the difference between the 18 recorded fuel cost in the second calendar month preceding the month 19 in which the bill is rendered and a base fossil fuel cost of 5.13 20 mills per kilowatt-hour multiplied by the kilowatt-hours generated 1 21 by fossil plants in such month. This variation from the base cost 22 is then increased to recover gross receipts taxes. The increased 23 amount = fuel cost variation plus taxes - is divided by the to tal 24 kilowatt-hour sales, including all wholesale sales, in the second 25 preceding month to reflect the fuel cost adjustment per kilowatt-26 hour at the average consumer's point of delivery. This is clearly LD 27 demonstrated by the Company's formula which may be rewritten as

. 28 follows: .

29 l 30 (1) F = E - (0.00513 x G) x 1 S 1-T 31 32 33 (2) F = E - [(A_ x C) x G] x 1

[B D ] 1-T 34 s

35 36 (3) F = [E - (A x C) ] x G x 1, x 1 37 s 1-T 38 G (B D)]

39 1

! 40 (4) F = [E_ - (A x C_)] x G x 11 x

[G (B D)] 11 S 1-T

!. 41 i 42 1

43 Where A = Fossil fuel cost in $ for the mon'th of June 1973 44 B = Btu burned during the nonth of June, 1973 C = Btu burned in fossil plants during the 12 months ended 45

. June 30, 1973 46 47 D = kWh' generated in fossil plants during the 12 months 48 ended June 30, 1973 49 11 = kWh total net generation in the second preceding month.

i 50 l .

V

- -,---e , -a . < , e

4 l g,j 1 Obviously, the term E is the fossil fuel cost per kilowatt-hour 2 G 3 of net generation by fossil fueled plants in the second preceding 4 month. The term A is the fossil fuel cost per Btu for the month 5 B 6 of June, 1973; C is the average heat rate for the 12 months ended 7 D g June 30, 1973. The product A x C is the fossil fuel cost per 9 B D 10 kilowatt-hour for the time span the Company has stlected as its 11 base period. The term G is the ratio of fossil g( neration to total 12 11 13 generation in the second preceding month; H is the ratio of total 14 S 15 net generation to total kWh sales in the second p;eceding month.

16 The equation above can be rewritten as follows:

I 17 18 F = [(Second Preceding Month Fuel Cost /kWh)-(Based Period Fuel Cost /kWh) 19 x Fossil Generation x Total Generation x 1 l 20 Total Generation Total Sales 1-Tax Rate

21 22 In effect, the Company takes the per kilowatt-hour change in fossil 23 generation fuel cost for the second preceding month, factors out 24 nuclear and hydro generation, factors in average system losses 25 for the second preceding month, and factors in the state gross i 26 receipts tax rate. The result of this calculation is used as Nu) 27 the fuel adjustment factor applicable to kilowatt-hour sales in 28 the current month.

29 30 Q MR. ROGERS, lleWE YOU FCRMED AN OP1N10N AS TO Tile ABILITY OF Tile 31 COMPANY'S PROPOSED FOSSfL FUEL ADJUSTMENT CLAUSE TO REPRESENT ONLY 32 Tile VARIATION IN CURRENT FUEL COST FROM BASE FUEL COST?

33 34 A I have.

35 -

36 Q WILL YOU PLEASE GIVE US TilAT OPINION? -

37 38 A The fosstl fuel adjustment clause which is proposed by the Company 39 is what 1 call an "Ef ficiency Type" clause because it adjusts for

40 changes in fuel cost per kilowatt-hour from the base period.

~

41 1 agree with the use of this method of determination because it 42 takes into account changes in the system heat rate and, thereby, 43 passes on to the customer the effects of changes in generation 44 fuel clause is deficient. These deficiencies are:

45 .

46 (1) The failure to include nuclear fuel in the fuel cost 47 determination.

I 48 (2) The failure to include fuel costs associated with

49 purchased power.

50

!  %.)

d d

I

, %u) 1 (3) The use of average system losses to adjust sales at 2 the wholesale Icvel.

3 (4) The use of average system losses for the second j

4 preceding month to adjust generation cost per 5 kilowatt-hour to the sales level.

6 (5) 1he imprecise definitions used in defining the 7 various symbols employed in the fuel adjustment 8 factor equation.

1 9 i 10 Q PLEASE EXPLAIN,WlIY NUCLEAR FUEL SHOULD BE INCLUDED IN TIIE FUEL 11 ADJUSTMENT FACTOR DETEIO!INATION.

12 13 A The failure to consider nuclear generation can inflate the cost 14 per kilowatt-hour charged to the Company's customers. This can 15 best be illustrated through the use of a simple example. Le t us j 16 assume the following conditions:

! 17 18 Base Period Current Period 19 Total net Generation kWh 10,000,000 10,000,000 j 20 Ilydro Generation kWh 3,000,000 3,000,000 21 Fossil Generation kWh 4,000,000 3,000,000 j 22 Nuclear Generation kWh 3,000,000 4,000,000 ,

j 23 Fossil Fuel Cost kWh 8 9

, 24 Nuclear Fuel Cost mills /kWh 2 2 25 Fossil Fuel Cost $ 32,000 27,000 j 26 Nuclear Fuel Cost $ 6,000 8,000 27 Total Cost of Fuel $ 38,000 35,000 -

28 Total Sales kWh 9,500,000 9,500,000 '

29 30 The tax factor is omitted in this hypothetical case because it will 31 only further inflate any variations from the base cost. Employing 32 the method proposed by the Company, CP6L would receive fuel clause 33 revenues of $3,000 [ derived as (27,000 - $0.008 x 3,000,000) x 9,500,000]

34 9,500,000 35 when in fact, CP6L has experienced a decrease in the total cost of 36 fuel of $3,000. The inequity is obvious. When the ratio of nuclear j 37 kWh generation to total company kWh generation increases, CP&L's

! 38 proposed fuel clause recovers revenues in excess of fuel cost increases i -

39 or, said another way, when there is a change in the " Generation Mix"

! 40 an overcharge may result.

l 41 l 42 g 12. ROGERS, IIAVE YOU FORMED AN OPINION ABOUT Tile PROBABLE " GENERATION 43 MIX" 0F Tile COMPANY IN TIIE FUTURE?

44 4 45 A Yes, Sir. The generation mix will certainly change. In his direct 4

46 te s timony, flied in FPC Docket No. E-8884, Mr. Shearon liarris has

! 47 utated that at present nuclear generation comprises 13% of the i 48 Company's total generation. lie outlined the Company's planned 14 9 generation additions for the period 1974-1984; of 8032 Inf to be 50 installed 5242 MW will be nucicar generation. (Exhibit OFR-2).

I N

- - - - ~ - - -

• y , w * , - , - - , -

w~, - , , ,

- - - ._- .. ~ . . . _.- .- . . _

i g) 1 Based on this data, the Company's generation .aix will change f rom 2 13% nuclear in 1973 to approximately 44% nuclear in 1984. In fact, 3 the mix could be as high as 30% nuclear by the end of 1975. These i

4 percentages are, of course, based on CP&L's generating capacity, ,

! 5 not the energy generated. The change in the " mix" of ene jy 6 generated will be even greater than the change in generating

,7 capacity since nuclear units are operated as many hours a year 8 as possible to take ad antage of their low fuel cost. 1hus, 9 the ratio of energy generated by nuclear units to energy generated

] 10 by fossil fired units will be greatly increased and CP&L will 11 recover revenues in excess of fuel cost increase.

I 12 13 Q ARE TIIERE ADDITIONAL DEFICIENCES IN Tile C051PANY'S PROPOSED FUEL 14 CLAUSE?

4 15 16 A Yes, Sir. The Company has failed to include fuel costs associated j 17 with purchased power in its fuel cost determination.

18 I

19 It appears that the Company has sa* signed its own fossil fuel l 20 cost per kilowatt-hour as the fuel cost per kilowatt-hour attribut-l 21 abic to energy purchased. This method of assignment will result 22 in reliable operation of the fuel clause only when Company fossil

. 23 fuel costs per kilowatt-hour are equal to fuel costs per kilowatt-l 24 hour assignabic to purchased power. This result can be illustrated j 25 with a simple example. Int us assume Company "A", with only fossil

. 26 generation, which generates one-half of its total sales in company z 27 plants with a fossil fuel cost of six mills per kilowatt-hour and j 28 purchases one-half of its total sales from Company "B" whose fuel ,

i 29 cost is eight nills per kilowatt-hour. Obviously, the composite 4 30 cost of fuel for Company "A" is seven mills per kilowatt-hour 31 (Exhibit-(OFR-3)). Any recovery of increased expenses based on a 32 fuel cost of six mL11s per kilowatt-hour will not produce a reliable 33 result-(Exhibit-(OFR-3)). When purchased power costs per kilowatt-4 34 hour decrease while company fuel costs per kilowatt-hour increase 1 35 an overcharge may result. Conversely, when purchased power fuel 36 costs are greater than company generation fuel costs per kilowatt-37 hour, the Company nmy recover less than the actual increased cost.

38 (Exhibit-(OFR-3)).

i 39 j 40 Q ARE TilERE OTilER ASPECTS IN WilICll YOUR ANALYSES Sil0W CP&L'S FUEL

~

41 CLAUSE TO BE DEFECTIVE 7 f

42 , ,

43 A Yes, Sir. The Company has nade no ~ provision for recognizing the i 44 difference in losses associated with service to the various classes l 45 of customers. The failure to make such a provision results in -

l 46 charges to the wholesale customer which should be borne by the *

! 47 retail customer. When CP&L elected to use total sales as its "per

! 48 kilowa tt-hour" cost determinant, all losses are included in the cost l 49 determination. This is clearly shown in Equation 4, Page 6 by the j 50 expression H which is the ratio of kWh total net generation to S

b.,)

L i

l V

,,- y . - - - - - - - , ,, e~~,- ,,. , ,n , . _ , ..-w

. - - , . _ . . . - + , . .

e l g,) I total kWh sales.

2 3 Average losses for the total system are always greater than 4 losses associated with wholesale sales for resale standing alone 5 because total system losses include losses in distribution facilities 6 which are used to serve retail customers but which are not usec in l 7 serving wholesale customers. This fact is clearly illustrated on 8 Page 34 of Statement M which develops the energy responsibility

. 9 allocation factors of Period I - 1973. One can develop from this 10 tabulation that 1.062 kilowatt-hours are necessary at the generation j 11 level to deliver 1 kilowatt-hour at the distribution level while j 12 only 1.d32 kilowatt-hours must be generated to deliver 1 kilowatt-13 hour at the transmission level. (Exhibit OFR-4) This comparison 4 14 shows that approximately 3% more kilowatt-hours are required at the i 15 generation level to deliver energy to a customer at the retail 16 (distribution) level than are required to deliver a like amount of 17- energy at the wholesale sales for resale level.

18 19 To account for losses properly at the wholesale level, the 20 Company's-foel adjustment formula should be multiplied by 21 1-Average system losses expressed as a decimal fraction 22 1-losses at the Transmission level expressed as a decimal fraction

23 i 24 Indeed, the use of average system losses in CP&L's fuel clause

25 results in a double charge for wholesale customers since wholesale 26 customers must (1) account for distribution losses within their

'u 27 own systems and then (2) pay CP&L for distribution system losses

28 imputed ir; CP&L's fuel adjustment clause. ,

29 30 Q ARE TilERE STILL OTilER ASPECTS IN WillCl! YOUR ANALYSES S110W CP&L'S ,

31 FUEL CLAUSE TO BE DEFICIENT?

32 33 A Yes, sir. The Company has in effect applied current period losses 34 both current and base period generation in its proposed fuel 35 adjustment calculation. This application will result in the -

36 Company failing to recover the full amount of the change in fuel ~

37 costs when losses in the current period exceed those in the Base 38 Period. Conversely, when losses in the current period are less 39 than those in the Base Period the Company will fall to refund the 40 full amount of the reduction in the delivered cost per kWh.

41 i 42 The following example illustrates this obvious ..eficiency 43 in CP&L's proposed method of adjustment:

44

i. 45 46 47 48 49 50 s.) l

, -19 '

g.g 1 Assumptions: Base Period Current Period 2

3 Case I 4 Fossil Fuel Cost in $ 1,000,000 1,000,000 5 Fossil Fuel Generation in kWh 100,000,000 100,000,000 6 Total Sales in kWh 90,000,000 90,000,000 7 Fuel Cost /kWh at Generation 8 Level-M/kWh 10 10 9 Fuel Cost /kWh at Sales Icvel 10 M/kWh 11.11 12.50 11 12 13 Calculations By the Company Method:

14 15 $1,000,000 - ($0.010 x 100,000,000 kWh) x 80,000,000 kWh = $0 16 80,000,000 kWh 17 18 Under the Company's method nothing is recovered.

19 20 Calculation in Accordance with FPC Opinion No. 517:

21 22 ($ 1,000,000_ -

$ 1,000,000 ) X 80,000,000 kWh = $111,200 23 80,000,000 kWh 90,000,000 kWh 24 25 This method indicates that $111,200 should be recovered by the 26 Company.

"j 27 28 Obviously, under Case 1 conditions where losses in the 29 current period have increased above those in the Base Period the 30 Company fails to recover the full amount of the change in delivered 31 cost per kilowatt-hour.

32 33 Case II Base Period Current Fariod 34 35 Fossil Fuel Cost in $ 1,000,000 1,000,000 36 Fossil Fuel Generation in kWh 100,000,000 100,000,00')

37 l'oel Sales in kWh 90,000,000 95,000,000 38 Fuel Cost /kWh at Generation 39 Level M/kWh 10 10 40 Fuel Cost /k". Nies Level ~

l 41 M/kWh 11.11 10.53

! 42 .

l 43 Calculation By the company Method:

44 45 $1,000,000 - ($0.010 x 100,000,000 kWh) =

$0 l 46 95,000,000 47 48 Again, under the Company's method nothing is recovered.

49 50 1 %)

l

-. . = - . . . . ~ . _ . _ . .-_- --- - - . - . -

j l

g,/ 1 Calculation in Accordance with FPC Opinion No. 517:

2 3 ($ 1,000,000 - _l,000,000) x 95,000,000 = $55,100 4 ( 95,000,000 9,000,000) 5 l 6 This method indicates that ~$55,100 should be refunded under Case II

7 conditions, the Company has overcharged the customer. l 8  ;

i 9 Clearly, the Company's method of calculation will produce an i 10 equitable result if and only if losses in the Base Period and the [

i 11 current period are identical. '

12

13 Q ARE 'IllERE STILL ADDITIONAL ASPECTS IN WHICH THE COMPANY'S FUEL  ;

14 CLAUSE IS DEFICIENT?

I 15 16 A Yes, Sir. The definitions for components of the proposed fuel 17 clause are imprecise. The term "E" is defined as fossil fuel cost 18 for the second preceding month. It is not clear what FPC accounts 19 should be included in this cost. This definition should be. changed 20 to specify FPC Account 151 as the source of thin amount if, in fact, 21 only fossil fuel is to be considered in calculating the fuel adjust-

! 22 ment. Additionally, it is not specified whether this cost includes l 23 fuel costs for Company plants only; or whether fuel costs from j 24 jointly owned or leased plants are included; or whether fuel costs j 25 associated with purchased power are included. Similar questions 26 arise about the definition of "G" - kWh generated in fossil plants.

ll %"O 27 i

28 These terms should be more explicitly defined by language l ,

j 29 similar to that required in the Commission's Order No. 517 con-

! 30 cerning fuel adjustment clauses in wholesale rate schedules.

31 32 DID YOU PREPARE AN EXHIBIT S110NING WHAT YOU MICHT CONSIDER UNDER

} Q 33 CERTAIN CIRCUMSTANCES TO BE A PROPER FUEL CLAUSE FOR CP&L?

34 i 35 A Yes, I did. This is Intervenors' Exhibit.No. (OFR-5).

I 36

37 Q PLEASE EXPLAIN THE FUEL COST ADJUSTMENT CLAUSE CONTAINED IN i 38 INTERVENORS' EXilIBIT NO. (OFR-5).

! 39

! 40 A The fuel clause contained in Intervenor's Exhibit (OFR-5) 41 conforms with the Commission's Order No. 517 concerning Fuel j 42 Adjustment C1suses in wholesale rate schedules.

j 43

44 I have defined the adjustment factor as the difference '

l 45 between the fuel cost per kilowatt-hour of sales during :the j 46 current period and the fuel cost per kilowatt-hour of sales 47 in the Base Period multiplied by an appropriate factor to j 48 reficct transmission losses only. These fuel costs should

{ 49 include fossil and nuclear fuel consumed for the purpose of 50 supplying energy to the utility's customers. Recognition of i .,

h  %.).

• esme -esee -eu.= e e p  %

l r

- ~. - . _ _ ~ _

. _ ._. .. . _ . -a _

2 , , , . . , ,

i~ - ,

. . f a

(j

, 1 inter-system energy purchases and exchanges is provided by 2 the exclusion of fuel costs incurred because of inter-system 3 energy sales and by inclusion of the fuel cost of energy pur-4 chased from other systems. Sales should include all kb'h sold 5 excluding inter-system sales.

6 7 .

8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

.] 27 28 29 30 31 32 33 34 35 36 37 38 .

39 -

40 41 42 -

43 44 45 46 47 48 49 50 C

%N U lITED STATES FEDERAL PO'JER CO:011SSIO:1 DOCl2T I'O. E-8884 CAROLINA POWER A'iD LIGilT COMPMlY STATE OF GCORGIA)

) SS:

COU ITY OF FULTON)

I'ccitlfy that the attached testimony and exhibits in this docket were prepared by me or under my supervision and that the answers contained in such testimony and exhibits are true and correct to the s ,)

best of my knowledge and belief.

/ -

,,- jff e, V "}.t' . .,..

O. Franklin Rogers '

4 Subscribed and sworn to before me this 5th day of March, 1975.

i i

-l' .'

' $ .7 m ,'<:" a

'k)  ;

i

! i.. f. h. k Y'%

tiotary Public \ ,

l

• My Conntission expires June 5, 1976.

-- ~ ~~~

! ~ ~ ' ~ , ny t;t' P@?. Occrr.ta, Sta'2 et 13rr9

,,,3 et..; r,w.gon E 9i scs lc.nc 5,1970 l l

l

,