ML18230A827

in Matter of Application of Carolina Power & Light Company, or Increase in Rates & Charges - Testimony of Dennis W. Goins, Economist

ML18230A827
Person / Time
Site:	Harris
Issue date:	03/23/1977
From:	Goins D State of NC, Utilities Commission
To:	Office of Nuclear Reactor Regulation, State of NC, Utilities Commission
References
Download: ML18230A827 (16)

Text

REcEivED NIR 23 19~7 CHlEF CLERK COMMISSlON C. UTlUTlES Docket:8 W ~~op Cent'eJ@ ~gisou Date ef Decume~

~~'FCUUlr T+~DOt'KEI Ftx BEFORE THE NORTH CAROLINA UTILITIES COMMISSION In the Matter of APPLICATION OF CAROLINA POWER AND LIGHT COMPANY FOR INCREASE IN RATES AND CHARGES DOCKET NO. E-Z, SUB 297 Testimony of DENNIS W. GOINS ECONOMIST NORTH CAROLINA UTILITIES COMMISSION March Z3, 1977

DOCKET NO. E-2, SUB 297 1 q. Please state your name and background.

2A. My name is Dennis W. Goins. I am an economist employed by the 3 North Carolina Utilities Commission. In 1970 I was graduated 4 from Wake Forest University. I received a Master of Economics 5 Degree in 1972 from North Carolina State University, where I 6 also received my Doctor of Philosophy Degree in economics in 7 1975.

9 I was emp'oyed by this Commission as an economist in August, 10 1974. Since then I have testified before this Comnission several 11 times regarding the issue of residential rate design. The resi-12 , dential rate designsthat I presented to this Comoission in the 13 most recent Carolina Power and Light Company (Docket No. E-2, Sub 264),

14 Virginia Electric and Power Company (Docket No. E-22, Sub 170), and 15 Duke Power Company (Docket No. E-7, Sub 173) general rate cases were 16 adopted and are presently in effect.

17 18 I am a member of the Ratemaking Task Force of the EEI-EPRI National 19 Rate Design Study. In addition, I am working with the rate design 20 and costing group of the experimental peak-load pricing study 21 sponsored oy the Federal Energy Administration in North Carolina.

22 Carolina Power and Light Company (CP8L) and Blue Ridge Electric 23 Membership Corporation are the two electric utilities that are 24 participating in this study.

25 2'. What is the purpose of your testimony?

1A. The purpose of my testimony in this proceeding is to analyze the 2 residential rate schedule proposed by CPEL.

4g. Have you examined the testimony and exhibits of Nr. Oavis7 5A. Yes. I have closely examined his testimony and exhibits regarding CPEL's p! oposed residential rate schedule, RES-l. I have also examined other pertinent data provided to me by CPSL.

9q. Oo you agree with the residential rate design proposed by Mr. Davis7 10A. Nr. Davis has consolidated the residential rate schedules approved 11 in Docket No. E-2, Sub 264 into one residential rate schedule, 12 RES-1. 'fhis consolidation of Schedules R-2, R-3, and R-4 into 13 Schedule RFS-1 was accomplished by setting a uniform customer 14 charge, eliminating the water heating discount block, eliminating 15 the 801-1500 KWH block in Schedule R-2, and creating a sumaer-16 winter price differential applicable to all customers. I agree 17 with the basic design of the RES-1 schedule proposed by Mr. Davis.

18 However, I do have certain suggestions to offer concerning the 19 applicable charges in Schedule RES-l.

20 21 The consolidation of Schedules R-Z, R-3, and R-4 and the creation of 22 a summer-winter price differential applicabIe to all residential 23 customers removes some of the argument against charging different 24 prices for electricity consumed during the same time periods. Sched-25 ule RES-1 is a form of peak-load pricing (based on the continuance of 26 system peaks in the su+ver months), and such pricing formats should 27 be encouraged.

1 The creation of a single KWH block for summer usage and two KWH 2 blocks for winter usage essentially follows the blocking I recom-3 mended in Docket No. E-2, Sub 264. Exhibit DWG 1 shows average 4 monthly YWH consumption per residential customer during different 5 time periods. The data in the two pages of this exhibit show that 6 except for peak month consumption, average R-3 and R-4 customer 7 usage should fall in the 0-800 KWH winter block.

9g. Have you proposed a residential rate schedule that differs from 10 Schedule RES-1 proposed by Mr. Davis?

11A. Yes. Exhibit DWG 2 shows an alternative residential rate schedule 12 that I have designed. This schedule differs from Mr. Davis'ro-13 posed RES-1 in three respects: (1) the basic facilities charge has 14 been lowered to $ 6.00 per customer per month; (2) the summer KWH 15 rate and the initial block KWH rate for the winter period has been 16 raised by 0.1 mill to 3.544 per KWH; and (3) the winter tail block 17 rate has been increased by 1.9 mills to 2.764 per KWH. These changes 18 continue the movement to recover total customer costs through a sep-19 arate rate component and also tend to spread the percentage price 20 increase for the residential class more evenly among all residential 21 customers.

22 23 I have recommended that the-basic facilities charge be increas'ed 24 only to $ 6.00 for two reasons. First, I do not believe that it is 25 necessary to move immediately toward recovery of full customer 26 costs by means of the basic facilities charge. The implementation

1 of basic facilities charges, which I reconmended in Docket No. E-2, 2 Sub 264, e,nabled CPEL to remove most of an inequitable distribution 3 of customer costs through the KWH charges. The basic facilities 4 charges implemented in Docket No. E-2, Sub 264 were $ 5.00 for Schedule 5 R-2, $ 4.55 for Schedule R-3, and $ 4.40 for Schedule R-4. Raising 6 each of these to $ 6.00 will enable CPhL to recover an even qreater 7 portion of the customer costs through a separate charge. However, 8 customer costs differ for different classes of residential customers.

9 Exhibit ON 3 shows that customer-related costs for R-2 Customers 10 exceed similar costs for R-3 and R-4 customers by nearly $ 1.50.

ll Note that the average customer costs for the residential class 12 exceed the customer costs for R-3 and R-4 .customers. Second, if 13 rates are to be raised, I believe that more emphasis should be 14 placed on 'he recovery of demand- and energy-related costs than 15 on the recovery of customer costs. This does not mean that I 16 consider customer costs to be unimportant. I do believe, however, 17 that since rate increases are requested primarily because of costs 18 incurred -in building facilities to meet increasing kilowatt demands, 19 proper price signals should be given to consumers in order to show 20 them that increased consumption, particularly during certain time 21 periods, u'.timately leads to new construction demands and requests 22 for rate relief.

23 24 'I have recommended that the winter tail block KWH rate be increased 25 by 1.9 mil",s over the winter tail block KWH rate proposed by Mr.

26 Davis. Wirter heating loads have .been induced by the establishment

1 of low tail block rates for all-electric customers. This treatment has been justified by citing the higher load factors and cost-related 3 differences of R-2 customers. Exhibit DWG 4 shows, however, that the annual load factor of R-2 customers has declined steadily since 1972. Thi" means that recovery of cost-related items for R-2 cus-6 tomers must be recoverect by revenues from less KMH sales (less KWH 7 sales as a percentage of potential KMH sales). In addition, Exhibit DMG 5 shows that in the 1976-77 winter season, CPEL's winter system g peak exceeded the previous summer system peak. While this is not 10 proof th t CP8L is becoming a winter-peaking system, it does indi-cate that winter loads should not be encouraged by the residential 12 rate structure as much as such loads have been encouraged in the 13 . past.

14 15 Monthly bill comparisons are made in Exhibit DWG 6. In the summer, 16 monthly bills under either the CP8L RES-1 rate or the rate that I 17 have proposed will be almost identical. However, in the winter, the monthly b'i lis for high usage customers will be about $ 2.00 to $ 4.00 lg higher under my proposed rate than under the CP8L RES-1 rate.

20

\

The percentage increases in monthly bills under the CP&L RES-1 rate 22 and'y proposed rate are shown on Exhibit DMG  ?, pages 1 and 2.

23 Note that high levels of consumption in the winter by R-3 and R-4 24 customers actually result in lower bills for these customers. This 25 is due to the consolidation of the rate schedules and the non-existance 26 of a summer-winter- price differential in the current R-3 and R-4 rate

schedules. I believe that the rate schedule I have proposed distri-butes the rate increase more equitably among all residential customers 3 than does Mr. Davis'roposed Schedule RES-l. I do not believe 4 that either schedule will promote wasteful and inefficient uses 5 of electric'ty. I do believe that the winter tail block KWH rate

,6 should be higher than the rate proposed by Mr. Davis. In addition, I do not feel that the Commission should at this time increase the basic facilities charge to a level in excess of the $ 6.00 per customer per month that I have proposed. Once the final determination has been made on both CPKL's revenue requirement and the amount of fuel costs to be included in the base rates, .adjustments on the KWH charges that I have proposed can be made.

13 14 g. Dr. Goins, does this conclude your testimony?

15A. Yes.

16 17

, 18 19 20 21 22 23 24 25 26

Exhibit DWG 1 of 2 1'age AVERAGE MONTHLY KWH CONSUMPTION PER CUSTOMER1 Rate Schedule Period R-2 R-3 R-4 KWH/Customer 6-30-76 2 1591 826 421 1975 1587 828 418 1974 1643 814 397 1973 1853 853 406 1972 1760 810 384 System averages Test year 1" months ended 6-30-76

Exhibit DWG 1 Page 2 of 2 KWH CONSUMPTION PER CUSTOMER DURINg MONTHS OF SUMMER AND WINTER PEAKS'ate Schedule Period R-2 R-3 R-4

~KWH/Customer )

6-30-76 S 1,41 2 919 541 W 2,986 912 435 1975 S 1,412 919 541 W 1, 940 784 381 1974 S 1,388 959 512 2,336 804 376 1973 S 1,579 1,070 558 W 1. 919 772 358 1972 S 1,427 958 521 W 2,123 778 353 1

System averages S = Summer; W = Winter

Exhibit DWG 2 Page1 of 1 STAFF PROPOSED RESIDENTIAL RATES Schedule RES-1 Summer Billin Months Jul -October f6.OO Basic facilities charge 3.544 per KWH for all KWH Wi n ter Bi 1 1 in Months November- June

$ 6.00 Basic facilities charge 3.544 per KWH for the first 800 KWH 2.764 per KWH for all over 800 KWH

Exhibit DWG 3 Page 1 of 1 CPEL UNIT COSTS Present Rates Annualized Pro osed Rates Annualized Demand+ Demand+

Schedule Ener Customer Ener Customer 4/KWH $ /Customer/Mo. g/KWH /Customer/Mo.

R-2 2.7371 9.00 3.0822 10.04 R-3 2.8683 7.59 3.3370 8.58 R-4 2.7707 7.30 3.2406 8.21 Total 2.8111 7.85 3.2330 8.84 System data for 12 months ended June 30, 1976

Exhibit DWG 4 Page 1 of 1 ANNUAL LOAD FACTORS Rate Schedule Year R-2 R-3 R-4 1975 59.48 48. 78 42.68 1974 62.27 48.54 43.93 1973 66.59 46.69 42.17 1972 76.28 57.93 49.61 Computed or, a coincident peak responsibility basis; KW demands measured at customer meter level

Exhibit DWG 5 Page 1 of 1 SYSTEM PEAK DEMANDS Period MW Demand S 1976 5121 W '976-77 5509 S i975 5060 W 1975-76 4968 S 1974 4771 W 1974-75 4261 S 1973 4711 W 1973-74 4219 S 1972 4119 W ',972-73 3957 S '971 3625 W 19/1-72 3625

'S = summer

Exhibit DWG 6 Page 1 of 1 MONTHLY BILL COMPARISONS KWH Us~cSe Present Rates Pro osed Rates R-3 R-4 CP&L RES-1 Staff Pro osed Summer Minter Summer Winter Summer Minter 0 $ 5.00 $ 5.00 $ 4.55 $ 4.40 $ 6.50 $ 6.50 $ 6.00 $ 6.00 100 8.34 8.34 7.89 7.74 10.03 10.03 9.54 9.54 500 20.77 20.77 20.32 21.03 24.15 24.15 23.70 23.70 1000 35.11 34.91 34.66 37.08 41.80 39.88 41.40 39.84 1500 50.56 45.86 50.11 52.53 59.45 52.73 59.10 53.64 2000 66.01 60.6) 65.56 67.98 77.10 65.58 76.80 67.44 3000 . 96.91 82.11 96.46 98.88 '12.40 91.28 112.20 95.04

Exhibit DWG 7 Pagel of 2 COMPARISONS OF PERCENTAGE INCREASES IN MONTHLY BILLS: CPSL RES-1 VERSUS PRESENT RATES Rate Schedules R-2 R-3 R-4

~KMH Usa e Summer Minter Summer Minter Summer Winter (S) 0 30.00 30. 00 42.86 42.86 47.73 47.73 100 20.26 20.26 27.12 27.12 29.59 29. 59 500 16.2i'9.05 16.27 18.85 18.85 14.84 14.84 1000 14.24 20.60 15.01 12.73 7.55 1500 17.53 5.76 18.64 5.23 13.17 0381 2000 16.80 8.20 17.60 0.03 13.42 (3.53) 3000 15.98 11.17 16.52 (5.37) 13.67 (7.69) 1 Numbers in parentheses denote percentage price decreases

Exhibit DWG 7 Page 2 of 2 COMPARISONS OF PERCENTAGE INCREASES IN MONTHLY BILLS: STAFF PROPOSED RESIDENTIAL RATES VERSUS PRESENT RATES Rate Schedules R-2 R-3 R-4

~KWH Usa e Summer Winter Summer Minter Summer Winter

(<)

0 20.00 20.00 31.87 31. 87 36.36 36.36 100 14.39 14.39 20. 91 20.91 23.26 23.26 500 14.11 14.11 16. 63 16.63 12.70 12.70 1000 17.92 14.12 19.45 14.95 11.65 7.44 1500 16.89 7.58 17.94 7.04 12.51 2000 16.34 11.27 17.14 2.87 12.97 3000 15.78 15.75 16. 32 {1.47) 13.47 I3.88)

Numbers in parentheses denote percentage price decreases