ML20003F000
| ML20003F000 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 09/09/1980 |
| From: | Zeppa M TEXAS, STATE OF |
| To: | |
| Shared Package | |
| ML19240B984 | List:
|
| References | |
| 3250, NUDOCS 8104170647 | |
| Download: ML20003F000 (53) | |
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i CCCKET 30. 3250 APPt.!CATIC1 CF TEXA3 ELECTRIC PU!!! UTILITY CCMM!53!C.1 SERVICE COMPuf FOR A RATE INCREASE CF TEXAS EXAMINE 1's 2EMRT Prececueil Histery Cn.May 15, 1980, Texas Electric Se vice Caesany (TEIC3) filed with the Cpmissien a statement of intent to alter its rates for all cust:=ers subject to this Comission's original jurisdiction. TESCO re;crted that more than $10,000 retaf f and wholesale cust:mers are located within the af fe:ted service areas. TESCO's statement of intent recites that revenues will be raised $122,304,351, or 17.77, of adjusted test year On w y 19,1980, TE5 3's ;re:csed rate increase was sus: ended for 123 days revenues.
a beyond the otherwise legal effective date Of June 19, pursuant to 543(3) cf the 7u311:
Utility Regulatory Act TEI. REY.CIV. STAT.MN. art.14a6e (hereinaf ter referred to as PURA or the Act).
A ; rehearing conference was conducted :n June 3,1930, at which the following
~;arties were granted intervence status and greuced as felicws. Also listed are the representatives cf each party making an as:earance during the c urse Of the hearing:
(1) Texas Municipal League (Con Butler and Barry Wolf)', the Cities cf Fcrt Worth and Odessa (Sutler and Wolf), Colorace River Municipal Water District, Tarrant and Midland Counties, the Cities of North Richland Mills (Butler and Wolf),
Haltem City Sassen Park, Lake Werth, Richland Hills; (2) Cao Rock, Lene Wolf. Lyntegar, Midwest, and Taylor Electric Cccceratives (Earnest Casstevens), Bra:cs Ele:tric Pcwer C:c;erative (Jose:h Riley and Ccke Mills);
(3) Ccmmunity Pustic Service Company (Micnael Shirley);
(4) Ass:ciation of Ccemunity Organizations far Refers Mcw (Cercthy Harwced and l
Geoffrey Gay), Citizens for Fair Uttitty Regulation; (5) Texas Incustrial Energy Censu::ers (Jeffrey Jac::s) Gulf 011 Company; and (5) Texas Retailers Asscciation (Raf ael Guintan1114).
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l TESCO nas re: resented by Messrs. Carter 3urcette and Tater Chamserlain. The ccersissica l
Staff eas re: resented by Mr. Fernando 2:drigue: and Ms. Nancy Lesnikar. The moti:n ::
inte vene f the Senice Centers ta Wicnita Falls filed two nests bef:re tie hearing was i
denied as untimely. A sec:nd ;re edarMg ::nference was c:ncucted en June 12 for the pur;:se f ruling :n Ocjecticas to requests far inf:rmatien.
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! sic.4170 N 1
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Docket ho. 3250 Page 2 Prior to the hearing on the merits, appeals from the estamating crainances of tne following cities were flied and censo11cated with Occxet No. 3250: Coancma, Jolly, Blue Mound, Samscm Park, De Leon, Dean, Bellevue, Ackerly, S.eetwater. Holliday, Maslet, Kennedale, German, Forsam, Snyder, Lakeside City, and Fcrt Worth. The hearing on the merits nas convened on Monday, July 23, 1930, but testimony aas not presented until Wednesday, July 30. During the interim, the parties conducted settlement negotiations in an attept to resolve all disputed issues. With limited exceptions, these negotiations were not successful tnd a full hearing on the merits was necessary. All parties' revenue requirements cases were ecncluded by Thursday, July 31. The hearing was then recessed until Monday, August 4, while the parties resumed settlement negotiations on rate design issues. The hearing on rate design issues convened on August 4 and adjourned the following day.
All parties appearing at the hearing, except Texas Retailers Association (Retailers), and Bra:cs Electric Cocperative (Brazos), presented direct cases on some aspect cf this rate case. Official notice nas taken of the following: (1) the requests for Information and the answers thereto specifically referenced in direct testimony, cross-examination, or closing briefs; (2) the Commission's Order in Aco11 cation cf Texas
'pewer and Licht Co., Occket No. 2006, 5 P.U.C. Stu. 609 (A:ril 23,1980); and (3) all Exniner's Reports and Orders in TESCO's three previous rate cases -- Cockets No. 527, 1903, and 25C5. In addition, two stipulations were entered into between various parties.
First, Texas Industrial Energy Consumers (TIEC) and TESCO stipulated as between theselves that the Staff's recanendations an ; rice elasticity adjustzeats, both as to the elasticity rate facter and the rate classes to which it should be applied, were appecpriate and shculd te adcpted. Transcript at 374 Second, TESCO and its wholesale customers crally entered on the record into a stipulatic settlement of varicus rata design issues affecting the memcers of that custcmer class. Although it was to be filed shortly after the hearing, a signed ccpy of that stipulation had not teen filed as of the date of the issuance of this Report. However, since the terms of the stipulation were recited into the rei:crd without ocjection, an unsigned ccoy, filed by the Cocos, is attached hereto as Cocp's Exhibit 3 and is incorporated into this report for all purposes.
Coinion Texas Electric Service Campany is an electric ;ublic utility which provides retail and aholesale electricity to a rather large service area in nceth central and westarn Texas, stretching frem the Dallas-Fort Worth yetrcolex cn tha east to teyond the Odessa-Midland ares en tne est. All in ail, TEICO provices se%f ce In scme 23 Texas counties.
TESCO is, like its sister c.rnoanies Dallas Pcwee and Light (CPLL) and Texas ?0wer and Lignt (T75L), a wnolly-cwned sutsidiary cf Taxas utilities Campany (TU), the parent
4 Occket 'fo. 3250 Page 3 holding cancany cf the Texas Utilities systes. Texas Utilities also owns three :tner subsidiaries hlen provide specialf red services at c:st to the TU systes c: mantes, including TE!O3.
These are Texas Utilities Servicas, Inc. (TUSI),.nich furnishes certain engineering, financial, and other services; Texas Utilities Fuel 03 meany (TUFC3),
which acquires, stores, and delivers all and gas for use ts a generation fuel; and Texas Utilities Gererating Cmany (TUGC3),.nich serves as coerating agent f:r the :cerating subsidiaries' jointly-owned generating stations and also cans and coerates certain itining equipment at the cuantes' jointly-cwned lignite-fueled generating stations. F inally, it shoujd be noted that TESCO, in turn, has its own anol1y-owned specialized,sutsidiary.
Old Ocean Fuel C: meany,.nich wns and Ocerates trans;crtation and storage facilities used to deliver fuel to gas-fired generating stations in wnich TE5:3 has ewne-shis interests.
A further note of explanatica needs to be given in this Accet. In a major rate case of this sagnitude, it is not ;cssible to specifically address all possible issue; which could have teen raised durifig the course of the pr:ceedings. Thus, C Ex miner v111 attest to delineate and focus u;cn these 5:ecific maj r issues which were raised by the parties. Failure cf the Exminer to conment :n any issue raised by a party d:es not mean, however, that that issue was not c:nsidered. In such cases, the Exminer finds that TESC3's treatment cf taat particular satter is the ene = cst persuasively set f rth in the record and for that reasca should be ad:;ted by the Casilssion. The =ajor areas of inquiry will be cegani:ed and discussed in the felicwing crder: determinatica f rate base, return, c:st Of service, rate design, and tariff.
1.
Ceter-sination cf 2 ate 3ase
. A.
Oesreciation and Current Cos TE!O3 witness, Mr. Wes Taylcr, testified that TESC3 seeks Conmission a: r: val of tne see de:reciation rates as:reved in Occket 40. 25C6 with two exceptions.
TES 3 Exnibt: 1 Taylce at 19.
First, the lignite ;r:ductica desreciation rate is to te
' adjusted to re'1ect the inclusion of several longer life itsnite units ahlen have teen added since 1977 wnen this de:reciati:n rate was first calculated. Sec:ed, the gas /cil
- recuction de
- reciation rate is to be adjusted to ref fect tne extended service life of Eagle wountain Unit 1, resulting fran the replaccent Of that unit's geaerater met:r and other impr:vements being made to this unit.
Staff Engineer Kent Saatacff reviewed TESC3's pr: posed decreciatten rates and reconmended >eir ap;reval. Staff Exhibit 3 at
- 3. Those depreciation rates, as folic =s, are found in Acolicatice, Schedule I-5 at 1 and are recarnended f:r adcotton by the Exmainer:
Furctional Classiffettfen P-Ocosed lates (T1 pr:cucti:n Plant Lignite 3.33 3as/311 4.52 Old Ocean Fuel Co.
3.14 Trans:nissien plant 2.18 31stribution plant 3.24 3eae-41 Plant a.73
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Docket No. 3201 page a TEICO recorted a net current cost of $2,232,117,257, (A:plicatten, Senedule 3 at 1),
.ne c:mponents of hich are: current cost of $3,073,732.a63 (A0011 cation, schedule E at
- 6) and adjus*aent f:r age and c:ndition of $731,515,206 (application, $cnedult F-1 at 2).
Co rent cost was deterstned by applying accrepriate trending indices to the vintage toot original c:st data from TESCO's precerty accounts. The age and condition adjustment aas calculated by determining the ratio of accumulated de:reciation to original c:st plant and multiplying the current cost by that ratio.
Cities' witness, Mr. Sam Rhodes, challenged TESCO's method of calculating current cost c:ntencing that 1: included plant currently being replaced ahich should not te allowed to earn a return at the ratepayers' expense. Having made adjustments to TESCO's accamnuls.ted depreciation reserve Mr. Rhedes calculated an adjustment for age and condition using a ratio cf decreciat%n reserve to Mr. Rhodes' recommended decreciable plant ratner than total plant as was done by TESCO.
Staff Engineer Saatheff reported that TESCO's net current cost is 51.957,068.251
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Staff Exhibit 3 at 4.
Mr. Saathoff's calculation of current cost was performed by the same mthodology as TEICO's and differed by only 52.00. Staff Exhibit 3, Schedule I at
- 2. Mcwever, Mr. Saathoff calculated the adjus*Jent for age and c:ndition using a trended thecresical reserve methodology adepted by the Cernmission in IESCO's three previous rate cases. Using this methodolcgy, Mr. 544theff determired that the appre;riate adjustment for age and canditi:n is $1,116,664,200 (Staff Exhibit 3. Schedule I at 2), or 1325.048,395 greater than TESCO's.
The Cannission having approved Mr. Saathof f's methcdology on three cccassions, and all other parties having failed to conclusively estaolish that this methcdology is incorrect, the Exaniner recomnends ade: tion of a net current c:st cf 31,357,068,251 3.
Invested Capital TESCO requested that its invested cacital be set at $1,664,391,331 based on the following calculation (Application, Schedule 3 at 1):
(1) Plant in Se-vice
$1,a33,200,358 (2) Accanulated Oe reciation (381,926.260)
(3) Net Plant in Service
$1,101,213,333 (4) Construction work in Pr:gress 538,079,959 (5) Plant Held for Future Use 3,348,445 (6) Nuclear Fuel in Process 25,531,715 (7) Working Ca: ital 71,548,734 (8) Custmer Deposits (3,920.772)
(g) Acesulated Oeferred Income Tax (69,758,408)
(10) Rese ve for Insurance and Casualties (1,302,321)
(11) Otner Investad Capital 11,564,391,331 (1) Plant in Service TE:CO's back criginal c:st plant in service nas unc:ntastad.
4 Oocket No. 3250 Page 5 t
(2) Ac:anulated. Depre:tatten Staff act.auntant Ms. Cathertne Ocnes and Mr. Rheces each resorted that they adjusted accumulated dereciation ny one-nalf of TESC3's are:csed adjusted decreciation ex;ense to cat:h depreciation ex;ense with the accrocriate level of de:rectacle plant in service.
Ms. Jones ;recosed to increase the accanulated decreciation reserve 1253,434 wnich is one-half of TES 3's ' year-end de:reciation and asertization expense adjustment shewn en Acolicatici, Schedule I 5 at 1 Mr. Rhodes pur;crting to be making the same adjuste.ent, increased the a::umulated depreciation reserve 1483,000. The Exminer rec:enends adcotton of the Staff adjustment.
- The Ocmission at:sted such an adjustment in its 3rder in Oocket 10.'2506.
(4) Construction Wort in Pr:gress -- TES 3 witness, Mr. David teica, testified that inclusion of 100% of TESCO's test-year-end CWIP in the company's rate base is necessary to maintain 'ESCO's credit worthiness in view cf its large construction ;r gen. TE!;3 Exhibit 1, Kelch at 4-7.
Mr. Kefen re;ceted that over the last fcur years CWIP as a percentage of ::tal plant has been accreximately 25%. This is also the same ser:ent of ince'me avallasie to c: mon, wntch, in Mr. Kelch's c;tnien, is higher than is c:nststent with maintaining TESC3's financial integrity.
Mr. Rhoces ::ncurred with the. inclusion Of ICC: Of TE!C3's year-end CWIP in Its rate base as necessary for the maintenance of TESCO's financial integrity.
- However, Mr. Rheces also ;r:;osed a 1CC% allowance f:r funds used during ::nst uctica (AF;0C) offset to TESCO's revenue requirenent to reduce tne financial != pact on rate;ayers. The Commission 5:sff, en the other hand, recomenced thst only 5C% of TZ3C3's year-end CWIP te included in TESCO's rate base.
Ms. Jcnes dettmined that 50% of TE500's requested CWIP..ould te sufficient to meet tne test year financial parameters suggested by Staff Ec:ncmist f.hrts 0h113. These :-iteria are (Staff Exhttit 5 at 49):
a) AFU0C saould be no mere than 20 to 25 percent Of ine:me availaole to C:mmen.
b) Pre-Tax interest coverage, excluding AFUCC, snould x in the range of 3.75 to 4.25 times.
c)
Internally ;enerated cash should te no less than 43 ;ercent and no scre than 50 percent.
The Examiner finds that the Staff's faciusico of SC'. Of test-year-end CWI? is 5
l sufficient to maintain TESCO's financial integetty during this pericd cf maj:r plant l
c:nstruction. Whfie Mr. Child's testimony on this issue is ;recised u;ca C39anche Peak Unit No. I's going on Ifne in the fall :( 1981, and even theu;n TESCO anecunced sacr:17 l
bef:re the hearing that it aculd be delayed until 1982, the Examiner aces not find any t
l evidence which aculd dist:rt the Staff's CWIP reconmendation.
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(5) Plant Held for Future Use -- TE! 3 pre;osed to incluce 53,343.aa5 in stant held for fature use in its rate base. This ;re:erty, telfcested on TE!"3 Exnitit 1, Taylor Exnielt 5 f s ;rtmarily related to fature generatice sites and transmission factitties.
I The C ttes c:ncur-ed wita TEIC3's future plant ;re;csal, tu* Ms. Jones disallowed l
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t Docket No. 3250 -
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Page 6 5254,250 cf TESCO's request. This adjust..ent emoved the cost of various eater rignts in Titus County purenased to provide cooling water for a future generation facility.
Ms. Jones made this adjust:nent because, in her opinion, the preserty.ould not be used witnin the next 10 years. Staff Exhibit 4 at 21 The Examiner recmmends 1005 allowance of TESCO's ;remosed plant held for future use. While the 10 year usefulness rule has teen creviously accoted by this Commission and
.is acerceriate for many future plant itas, the Examiner finds that it is inaccrecriate i
for rapJdly depleting natural rtsourceP such as lignite reserves and fresh water rignts.
Although the expense of obtaining real estate for generation er transmission sites may be quite high ten or more years in the future, this type of ;rcoeaty will be avattacle at a fair sartet ; rice. This is not true with decletacle resources such as lignite and water rights. There is only a finite supply of these resources and their ownersnip and control is rapidly being monocalized today. They w111 not be availaole in the future at any price if competitors (municipal, -industrial, or utility) are able to purchase the's new and reserve them for tnete own future uses. Utilities must have these resources in the future and the only way to insure inelr availtollity is to purentse them now. Such an analysis of plant held for future use is consistent with the court's mandate in gthwesteen Bell Teleenere Co. v. 8ue11e Utility Cemmission, 5115.W. 22 503 (Tex. Ig78).
- l (6) Nuclear Fuel in Process -- TESCO's requested level of nuclear fuel in process was uncontested.
(7) Working Capital -- TESCO witness, Mr. Tommy cutterly reported that all ites in TESCO's $71,548.734 requested morting cacital are necessary in providing utility service.
TESCO Exnibit 1, Queberly at 5.
The cmponents of that request are as follons
)
(Application, Schedule 3 at 1):
i (a) Average Materials and Sucpiles 5 9,577,417 (b) Average Merenandise (292,61a) c) Average Plant Materials & Coerating 3u; plies 9,294,303 d) Fuel Stock 39,70s,509 e) Average Prepaynents, excluding Deposits, Sales and use Tax 4.'74,347 (f) Average Worting Funes 4.241.C93 (g) Casn working Capital 13,539,977 Total Working Capital 571,528,73 i
The Cities presented a balance sheet approach for calculating a preser.orting capital allowance.
The Commission has consistently rejected this metnocology for calculating TESCO's norting cacital and the Examiner recommenes its rejection nertin.
However, the Esaminer finds that the Cities' position on sme norting capital comconents discussed tetow are not integrally tied to the talance sheet accroact and.111 te
- resented to the Commission for Cons 1M*ation.
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c Docket No. 32!0 -
- Page 7 (a-b) Discussed in (c) telow.
(c) Plant.w terials and 0:erating Su:alles -- The Staff scertved TEIC3's a
reported average balance of p1 tat materials and Operating suoplies.
The Exasiner c:ncurs.
(d) Fuel Stock -- TESC3 aas authorized in Occhet Mos.1903 and 2$05 to include 1.3 million barrels of fuel all in its rate base as a stanc3y fuel supply during fuel curta11eent periods, excluding fuel oil tur9ed at TESCO's lignite plants. In,the instant docket, TESC3 requests to increase its rate base fuel inventory to 2.0 million barrels.
Mr. Taylor reported that TESC3 turned 1.07 millien barrels :f oil in 1979 and saintained an end of test year inventory of 1.3 million barrels. TESCO cited two majer facters wnich necessitate an increase in allowable fuel oil inventories. First, TESC3's Old Ocean gas c:ntracts exotes in January,1981 This gas supply was not subject to curtallments cut TESCO's remlacenent gas c:ntracts will te. Seconc. TESC3's 1931 fuel plan anticipates 90a.CCO mi from Cemanche Peat Unit No.1, and if this amcunt of generation is not availacle, TESCO re;crts that as ruch as 1.67 millien barrels of oil could be retuired to offset this generation loss.
Cities 41 ness Rhedes pr:;osed to allow TEIC3 a fuel all invent:ry level cf
$16.159,0C3. In ;reparing his rec:mmendation, Mr. Rhoces calculated the senthly fuel c:nsu:ngtions Of various TEK3 generation facilities for the ;erict cf June 1979 to May 1930 and using this data detenimed that twice the highest usage would te a reassna31e inventory level for each plant. He then calculated his recm: mended fuel 111cwanca using TESCO's re;orted unit price. TX. Exnibit 2 :f 17 and Schedule 7.
Staff witness Saathoff reeximended that TE3:3's allowatie fuel oil invent:ry te increased to 1.5 million harrels because f the curtallment contingency created by the expiration cf the Old Ocean contracts. Mr. Saatneff detemined that the necessary fuel oli invent:ry for an average utility is te: ween 1.a and 1.7 miilien barrels based u;cn a survey f he'iel dit requirements cf the following electric utilities: City f Austin, 3ra::s Elac':ric Power Coccerative, Central 7 =er and Light, City Pus 11c Service Board, 0411&s Pc a* inc Light, Gulf States Utilities, Housten Lignting and P:wer, Lewea C:1crado l
River Auth:rity, Southwestern Ele:tric Power, Texas Power and Lignt, and West Texas Utilities. Mr. Saath ff fcund that TESC3's positten with regard to fuel oil c:nsumotion was equal or superior to that of the average utility c:mpany and for this reas:n he settled upon the figure of 1.5 million barrels, which he found to be above er very close to the future annual fuel oli needs projected by TESC3. Staff Exhthit 3 at 12 and L
3cnedule II.
The Examiner ::ncurs in part eith wr. Saatacff and finds that desmite the icss Of the Old Ocean c:ntracts TEIC3 is in a 1tch mere enviaole ;ositi:n regar:ing t e need to turn fuel cil than is the average electric utility. TEIC3's hign ;ertentage Of lignite gereraticn ca:a:ity recuces its need f:r gas fired geaert:fon during ne wintar Off :est
- eef o
- s. TEIC3 nly turned slign:1y scre than 1 milli:n tarrels :f cli during ig79.ntch l
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Coctet No. 2250 page 3 included see abnormally severe ainter neather.
Further, TEZ3's pr::osal d:es not provide for s ot market fuel all purchases during :eriods of oli turns.
It is not necessary to have all the oil that =111 he turned during a ainter season en hand.nen the season begins.
Gener ally, the Exaniner finds Mr. Rhodes' analysis to be the most persuasive in the record on this issue; however, to take some allowance for the loss of the Old Ocean c:ntracts, the Ezaniner sculd recar. mend that the Carraissicn reaffir its cecisions in Occket 105.19C3 and 25C6 and limit TE303's rate case fuel oil invent:ry to cne million barrels.
(e) Prepaynents -- Sot.t TESCO and Ms. Jcnes ;rcoosed to include a thirteen month average precayment talance in rate base. Ms. Jones dete-1 ined, however, that in Mar:n and April 1979, TESCO prepaid a r:mimately 5744,000 in retiretent plan costs. In the normal c:urse of business TESCO dces not ;resay these expenses, so Ms. Jones rencved th en. The Exminer concurs alth the Staff acust. ment.
(f) Worting Funds -- TESC3's precosed acreing funds 3110.ance nas c:ntested only by the Cities' talance sheet methodology. The Ezaniner ree:mwits ad::ticn of TESCO's re:uest.
(g) Casn Werting Capital -- The Examine-c:rcurs witn TE5:3's and the Staff's use of ene-eighth of cceration and safntenance u;enses as the basis for cash norting cacital, and would reczmend adestion of an allewance cf $12.999,327, which is :ne-eignth -
cf the Exniner's recemended C&M ex;ense.
s In summary, the Exminer aculd recarr:end ad:ctica of a 531,057,984 crting canital allowance, the corponents of which are:
1 Materials and Supplies 5 9,577,117 Merchandise (292,514) i Net Materials and Su; plies 5 9,234,303 Fuel Stect 19,354,254 Prepaysentst 4.528,5C2 Working Funds 4.241,098 Cash Working Capital 12.999.321 Total '.orting Casital 351.067.994 (3) Customer Oeocstts -- TE!CO's cust:rier de:csits deduction was une:ntested.
(9) Ac::xsulated Deferred Incone Tax -- The Staff concurred with TESC3's calculatica cf deferred incoce tax. Mr. Rhodes increased TESCO's procesal by 1903,000 to reflect the rate base 1 cact f varf eus reve9ue recuirenent acustments 'ie pr:cosed. The Exciner re:3-enes accetten :f 7E%3's :recasal.
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Cocket No. 3253 Page 9 (10) Reserve for Insurance and Casualties - TESC3 saintains a reserve for insurance and casualties, "to provide a measure of ;rotection ngsinst significant uninsured tosses resulting from casualties and damage claims," because the ex:any cannot justify the
- rentum costs
- f insurance c:verage for taese losses. TEIC3 Exnitit 1, Kelch at 14 The target talanse for this fund is $5,000,000, which TE3CO Mcces to achelve at the end cf three years.
Each year's casualty losses :f a: proximately !!00,000 er scre are enarged to this reservgas they occur. At the end of the year, the differential tetdeen the talance and the target is dete-sined and a T.cnthly fund contribution is calculated to bring the tatance to the target level. In the test year, this reserve fund was used once for the replaccer.t Of the generat:r zctor :f Eagle Mountain Unit No.1 TEICO nas dete-mined that use of tais insurance reserve is ?ess costly to the ratecayers than the ;resiums on an ac repriate ancunt of casualty insurance. Since this reserve constitutes a source cf cost free espital to TEICO, the Cs pany ;re cses to reeve $1,302,321 fr:m its rate base as was done in Cocket Mcs. 527,1903, and 25:5. The C: mission Staff c:ncurres with TESCO. Staff Exnitit 4, Exniott !! at 2.
As they did in Occhet No. 25C6,- the Cities cc;osed the existence cf this reserve fund. Mr. Rhedes testified, when Ouestiened ateut his rate base adjustment en this item,
'Tne underlying pesnise to tais adjustment is my rec:rnendatici that no reserve for pr::erty insurance te maintained, and that, after abncr741 losses fully declete it, the amount cf subsequent losses te capitalized and anortized over a reas na31e ;ericd Of time.'
TM. Exhibit 2 at 25.
In the alternative, shculd the Comission authcrize the continaed existence of TESC3's insurance reserve, the Cities reczmended that TE3CO te require.1 to a:tually cedicate the insurarce reserve collars it ecliects in base rates to an interest bearing ac::unt, and that the interest so earned be used to cff set future insuranca reserve funding requireents. TM. Exhibit 2 at 23. At ; resent TESC3 d:es not set aside the actual dollars it collects f:r this fund and has these revenues f:r any uses managenent dees a:;r:;riate.
The Examiner reemenes that TESC3 te a11cwed to c:ntinue with its insurance rese-ve metned of self insurance and that it te autneri:ed to fund its rese ve ever a tnree year period to reach the 53,0C0,300 million target level. Mcwever, ne Exa:siner ::ncurs alta tne Cities' alternative ;re;csal and rec:cunenes that TESCO te cedered to dedicate the revenues cc11ected for the reserve in an interest bearing ac::unt and that the interest income frora this account be used to cffset future funding re:uireaents. In this way the ratepayers =111 receive an additional benefit fran TESC3's self insu ance pr: gras and a
f j
TE103 w111 mave actual dellars to pay f r casualty recairs and can Mus avoid the :arrying I
cost, if any, Of ceney it currently s enes to replace :r recair casualty ites. This j
dedication Of funds should c3mence nita the fr31ementation Of the revised rates to te accreved in t5e instant d:ctet and c:ntinue until tne fund reaches the 15,0CO,000 target j
lev el. This will take somewnat longer *han three years since TE!CO.ill need to rec:ver l
the u-funced current talar.ca :f the insurance rese-ve.
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e Oceket No.1?SO P age 10 (11) Other - Staff Accountant 'ones mace too further recuctions to TESCO's rate base for Other Cost-Free Capital. First, in 1977 TEICO cnanged its tax method of calculating depletion but did not change its boot metned. Since the tax method resulted in a greater dedue:fon for decletion than :ne bcct method, TESCO has the use cf additional funds at no cost.. Second, Ms. Jones renoved 1979 and first quarter 1980 contributfr.ns to the Edison Electric ' Institute for a delayed Liquid Breeder Reacter, since these contributions are not payanle untti 1932 at the earliest. The Exatniner concurs mitn these adjustments and recommenes their adeption.
In, sumary, the Examiner would reconmerta adeption of an invested capital of
$1,267,936,308 the canonents of wnten are:
Plant in Senice 51,483,200,353 Accsulated Decreciation (332,244,394)
Net Plant
$1,100,955,464 CWIP 259,039,980 Plant Held for Future Use 3,948,445 Muclear Fuel in Process 25,531,796 Working Cacital
$ 1,067,934 Customer Cecosita (3,920,772)
Accumulated Deferred FIT (69,753,4C8)
Resene for Insurance and Casualties (1,302.321)
Other (7,175,360)
Total Invested Cacital 51,357,935,308 C.
Adfusted Value of Invested Capital TESCO preposed to use a 60/40 mix of net original cost and net current cost to establisa an allowable rate base. Application, Schedule 3.
The Cities reemmended the use of a 70/30 mix.
TML Erhibit 2 at 10-12.
Using THE Staff's inflation analysis methodolcgy ccnsistently accoted by the Cam 31ssion, Mr. Child preposed a six of $3.375 net criginal cast and 36.125% net current cost. The Exxsiner recommencs adcption of Mr. Child's mix and of an adjusted value of invested capital of $1,677.207,556.
II. Return A.
Capital Stbeture TESCO's proposed capital structure for the test year enced March 31,1950, is as follons (TESCO Exnibit 1, Olson Exhibit 1):
% of Casi:41 Cacital C::meonent Amount Stncture Long Tern Oest 5 690,195.916 41.79%
Notes Payable 359,097 0.05:
Prefer ed Stock 209.623,259 12.59%
Ccc: mon Ecuity 653,793,504 39.52%
Acc.0ef. Investment Tax Credits 97,352,327
- 5. 3 9".
51.551.329.703 1 C0. 00'.
Staff Econosist Child ccncurred alta TE!CO's ;recosal althougn his finding of TE!CO's capi t al structure differed slign:1y due to reuncing.
Staff Exnici 5,
Scaedule I:. "r. Child notad that TEICO's ;rccosed caeltal structure incluced its latest
- referred s
- cck effering wifen, in his opinion, is a ;recer known and measuracle caanse in financial condition. 5:sff Exnibit 5 at 42.
f
Docket No. 3250 Page 11 Cities witness Mr. Pat Leconto, adjusted TE5CO's preposed capital structure to include changes in long-ters debt, notes payable and commen equity between March 31, 1980, and May 31, 1980, and to include the thirteen-month average balance of TESCO's notes payable to TU. As did TEICO and the Staff, Mr. Loconto included TESCO's latest preferred stock offerring. A Loconto pressed the following capital structure (TML Exhibit 3, Schedule 1):
1 of Capital Caettal Cemconeat Amount Structure Long Ters Debt 5 689,017,000 43.881
' Notes Payaole 794,000 0.051 Motes Payable to Parent-23,042,000 1.47%
Preferred Stock-209,239,000 13.33%
Common Equity 647,948,000 41.27%
Total 51,570,090,000 100.00%
The Exateiner finds that there is insufficient evidence in the record to support Mr. Loconto's proposed capital structure. Accordingly, the Examiner recomends adcotton of TE5CO's preposal.
3.
Cost of E:uity
~ESCO, tee Cities, and the Staff were the only parties to present any evidence on a precer rate of return. Since TESCO !s a wholly-owned subsidiary of TU, all return on equity antlyses by necessity concerned a return on TU's equity. This accreach was accepted in TESCO's earlier rate cases. In calculating a proper return en equity for use in the neignted cost cf clottal model, each party presented a return reccafendation based on the Gordan Olscounted Cash Flow Model (DCF) with accompanying alternative equity costing metacdologies ahich tended to support their DCF reconmendation. After a review cf the record, the Examiner finds the OCF testimony to be the most persuasive and will limit his discussion to this approach. The Examiner ould note that only the Staff economist correctly applied the CCF model as heretofore adepted by the Commission.
i Correctly stated,' the Garden model is:
0 3 K =7+G o
'dhere:
P,
- Present market price Oj = Anticipated dividend in one year
[
G = Anticipated long term growth K = The market's required return en existing stock TESCO sitsess, Dr. Charles Olsen, apo11ed the following exonents to t3e OCF model:
l P, = $17.25, 0) = 51.76, and 3 = 5.!: to 5.0%.
TESCO Exnibit 1, Olsen at 11-14, Dr. 01 son's 7, is the current martet ;rica at the time his testimeny *as :recared and his Dj =as the dividend at that time. Using those f actors, Cr. Olsen calculated a K cf 15.7%
1 Docket No. 3250 Page 12 to 15.2%. To this K. Dr. Olson applied a 110% martet to boct adjust:ent to avoid dilution of TU's :: mon stcet. After the acclication of this market to bock adjustment, Dr. Olson recommended a return on equity for TESCO of 17.0% to 13.0%, =nich he found to be appr:griate for all of TU's coerating subsidiaries.
Mr. Lccento, applied the following f act:rs to the Cities' CCF model:
7, = $17.37, j = $1.79, and G = $3.75. TML Exhibit 3 at 32, 34, and schedule 25. Mr. Leconto's 7, is D
the average high and low market prices :f TU's ttack for the six months ended May 31, 1980..His Oj assumes that TU will c:ntinue with their historical 3.03 per quarter dividend increase effective eith each calendar year's first quarter. His $1.79 D is j
compcsed of a 3.44 per quarter dividend for the last three cuarters.of 1980 and a 3.47 dividend fo-the first quarter in 1981 Mr. Leconto's growth analysis period is the see as his dividend yleid analysis period. Acalying these components to the OCF model, Mr. Locento calculated a K cf 14.1%. He then applied a market to bock adjustment of 5% to this figure for his rec:mmended return en equity of 14.8%. TM. Exhibit 3 at 35-35. This was tne hign end of his recommended returr. on equity range. Througn a comparaole earnings analysis, Mr. Locento estaallshed a low end of 13.3%1 however, he furtner stated that if TESCO was authcri:ed to include CWIP in its rate base without a full AFUCC of fset (as nas rec = mended by the Cities), then his overall return on equity rec:=mendatiens would be lower than the anncunced 13.25 to 14.8% range. TML Exhibit 3 at 37.
Mr. Child applied the following facters to the Staff's DCF medel:
7, = $18.375, 0; = $1.32, and G = 4.7% to 5.05. Staff Exntbit 5 at 18-23. Mr. Child stated that TU's st:ck has hcvered between $18.00 and $19.00 over the last few mentas, so he selected a markat price of $18.375. Staff Exhibit 5 at 18.
Mr. Cat 1d also projected the see.
dividend increase as Mr. t.oc:nto but used the last two quarters of 1980 and.the first two quarters of 1981 in contrast to Mr. Loc:nto's 3 to 1 aliccation. Applying these components to the OCF model, Mr. Child calculated a K cf 14.5% to 14.9%.
Contrary to Cr. Olson and Mr. Leconto,.w. Child applied his 110% martet to bock adjustment to the r
l dividend yield partion of the model and not to the K.
With this adjustment, Mr. Child recorrnended a return en equity range of 15.5% to 15.9%.
The Eeminer finds tnat the procer CCF cocconents to establish TESCO's return on equity are: P, = $18.35, 0; = $1.79, G = 4.5 and M/3 = 11C1. Mr. Child's stock price is selected as the most representative recent martet price.
Unitke Dr. Olson and Mr. Leconto, Mr. Child did not average the high and Icw st:ct prices for his analysis period, but selected a representative price for the period he studied. The mechanis 1c averaging of the high and low stock prices is not a truly representative price since its results can easily be disterted by a single day's abncrmally high or Icw price. The Exminer is of the coinion that the average invest:r will analyte the trend of a st:ck's martet price in selecting his fnvestment rather than a meenanical average srice =nica may or may not be dist:rtad by oc:asional abnormalities in the martet.
.e
_y
=-%.,
Docket No. 3250 Page 13 Mr. f.ocento's $1.79 per share dividend is selected since it.411 be the dividend ecpected by the investor one year from the end of the test year, =nich, given TEICO's hist:ry of annual rate filings, is the period most likely to te analyttd by investers.
Dr. Olson's dividend is improcer since it is a current dividend and the dividend yield under the CCF model is prospective. If the Commission finds that it does not concur with the Exniner's selection of dividends, the Exaniner nould suggest that Mr. Child's $1.32 per share dividend is the only alterternative reasonaoly supported by the rec:rd for prcper acplication in the 3creen model.
Th'e gr:wth testimony presented by all partias generally rec ;nites that TU's st:ck is no Toeger viewed by investors as a grcwth stock but as an inc:ee stect. The growth indicators in the record deonstrate a general decline in the rate of gr0wth to be expected by ut111tles during the current period of major capital construe lon.
This decilne is rec:qntzed by invest:rs who will sake their investment decisions ace:rdingly.
It has been reccgnized 3y tse C:: mission in TESC3's latest two rate cases. Fre:s this analysis, the Emaniner finds that Cr. 01 son's 5.St to 5.0% greath projection to be inflated, while Mr. L0c:nto's 3.75% is too Icw.
Mr. Chlid's 4.7% growth projection is generally acceptable fer the period of his analysts; however, it dces not adequately reflect *he slight decline in g owth in 'the next year to two years that the Exantner finds
.that invest' Ors will anticipate in light of TESCO's pre-nearing announceent that the construction Of Comanche Pest will take ene year longer for each unit than had previously been anncunced.
This announement occured after rr. Child precared his testimony.
Accardingly, the Exaniner would recorsnend the use of a 4.5% gr:wth factor, which rec:gnizes this anticipated decline.
In light cf Mr. l.cconto's conments regarding the possibility =f the Commission's disallowing a full AFUCC off set to TESCO's cast af service, the Exniner concurs with Dr. Olsen and Mr. Child in the magnitude of their market to tack adjustments. Applying the Exniner's reconmended CCF factors in tne fo11c=ing formula, tne Exntner recommends Commission adoption cf a 15.225t return on TE!CO's equity:
(M/3) + G K
=
o
= h (11C%)
+ 4.5%
K 15.225:
K =
C.
Return en Adjusted Value of Invested Capital l
l TESCO assigned an 3.32s cost to its icng term debt, a 5.189% cast.to its notes paya:1e, an 3.424% c:st to its preferred st:ck and a weighted usital cost :f 12.195t to its acceulated deferred investment t ax credits.
A:plicatien, Schecute M st 2.
Mr. Child c:ncurred with TE!C3's c:st assignments f:r its larg term dec; and notes payasle. He assigned a cast of 3.11C% to ; referred st:ck af ter adfusting the estimated i
cost Of TE5CO's latest ; referred st:ck issue to the C:e:any's acual c:st. Utily:ing tse
s e
Docket No. 3250 Page 14 above-referenced capital costs and his recommended 15.5% return on equity, Mr. Chlid assigned a neighted capital cost'of 11.312% to TESCO's deferred investment tax credits.
Staff Exnibit 3, Schedule XI.
Mr. Loconto recommended costing TESC3's capital at 3.33% for long-tem debt (TM.
Exhibit 3 at 11), 6.07% for notes payable (TM. Exnibit 3 at 11) and 3.12% for preferred stock (TM. Exhibit 3 at 12). 51nce he cid not include accumulated deferred investment tax credits in his recommended casttal structure (TM. Exhttit 3, Schedule 1), Mr. t.oconto mace no' recommendation on this iten. The difference between his recommendation on long-ters debt and TESC3's lies in the difference in sinking fund debentures included in the capital structure. See: 1M. 3. Schedul'e 2 and Application, Schedule H-5.
"r. Lcconto reported that he updated notes payable to TU to the w y 31,1980, level ahtch thanged a
their composite cost. Mr. Loconto aQusted TESC3's reported cost of preferred stock in the e.anner of Mr. Child's adjustments with the difference in their recommendations due to rounding.
Adesting the Staff recomendations on long-ten debt, notes payable, and : referred steck, and a reccmmended return on equity of 15.2251, the Exantner recommends adoption of a 9.17% return on TESC3's adjusted value of investad capital. Such a return results in a 11.197% return on invested capital. This recommendation is derived from the following calculations:
'amoonent Weignted Cost C
item kiount 1 ef Total Cost of Caoital l
Long Teen Dent 3 690,195,916 41.79%
8.324%
3.479%
Notes Payable 859,097
.05 6.189%
0.003 Preferred Stock 209,523,359 12.59 8.110%
1.029 l
Ccmmon Equity 653,798,5C4 39.58 15.225t 6.025 Acc. Cef. Inv. Tax Credit 97,357,327 5.39 11.197%
.660 Total 51,551,329,703 100.001 11.197%
l R eturat on Adfusted 'talue of Invested Cacital IC AC For=ula:
g;g Where IC = Invested Capital; WAC = Weighted Averagt Cost cf Cact al; AVIC =
l Adjustad Value of Invested Capital; and RCR = Rate of Return on Adjusted Value of l
Invested Capital:
l 51,373.361.990 I 11.197, 9,37; u.a n, m.sso l
l l
t
e Docket No. 3250 Page 15 111. Cost of Service TESCO requested an adusted test year cost of service of $316,297,013, as alculated by the Staff. Staff Exhibit 4 Exhibit I at 1.
The Cities and the staff made numerous adustments to Test 0's preposal and 'reczmended cost of services of $398.402,000 and
$755,358,357, respectively. For illestr! tion purposes only, the Staff's adjustments to
!!sCO's preposed cost of service are set forth below, wita each parties' ad ustments to each corconent thereof discussed separately:
COMPANY
$fAFF claimec Test Period Incze As f
Oescrfotion Amount Deficienev Total Adjustments adfusted
- 1. Fuel
$ 275.730,493 $(35,302,290) $ 240,423,203
$ 25,532.455 $ 257,050,559
- 2. Coeaations &
Maintenance 151,463,485 551,393 152,114,379 (6,C82,912) 146,031,957
- 3. Decreciatien 50,936,049 50,936,049 50.935,049
- 4. Taxes Other Than Incze 45,258,793 4.243,333 50,512.531 (1,068,985) 49.443,596
- 5. Fsderal Incze Tax 43,415.537 70,523,230 113,933,357 (32.231,130) 35,557,587
- 6. Interest on Cust:n:ers' Ceposits 232,836 232,835 232,335
- 7. Return 120,245,353 82,723,140 203,033,493 (47,523,035) 155,405.463
- 8. Total Cost of Service
$ 693,392,552 5122,904,361 $ 316,297,013 $(60,423,556) $755,363,357
- 9. Fuel and Other Revenues (279,305,925) 34,356,051 (244,933,924)
(25,499.335)(271,437,310)
- 10. Sase Rate Revenues
$ 413,586,567 $157,771,422 5 571,353,C89
$(35,927,042) 5434,431,047
- 11. Test Period Base Rate Revenue (413,536,567)
(1,412,828)(414.999,505)
- 12. Base Rate Revenue Def fciency (Excess)
$ 157,771,422 5f33,339,330) 5 69,43t 542 1.
Fuel -- TESCO adjusted test year fuel costs to ;rovide for tre replacement cf its low cost Old Ocean gas contracts with new higher ; riced gas contracts. In f
addition, the unit cost of fuel co".sumed fr:ri other sources nas adjusted to enc-of-test-l year levels. These adjusted test year fuel costs were furtner adjusted for changes in year-end custzers, weather normalization, and price elasticity for both the Oceket No.
25C6 and the proposed Occket No. 3250 rate increases. TESCO Exhiett 1. Outterly at 8 and A;pitcation, Schedule A at 34 (Year-end custzers, weatner, and ; rice elasticity 7
adustments will be discussed in Section IV below.)
. ~ - - -
Doctet 10. 3253 Page 16 Staf f act:untant J:ces generally ac:ested TEZ3's fuel ex:enses ita :ne f:11: wing adjustments. First, sne a: justed the rescr ag year end ;r*ce :f lignite fuel. TES 3
- c
- =esed a ligntte fuel adjust..ent sing tne.elgntes average : rice f:r Me last sonth in its test year, Mar:n,1933, but Ms. Jcnes :eterstned tnat Maren, 1953,.as not a representative month f:r TE%3's lignite fuel ex:ense. Ms. Jcces recomputed her lignite fuel er:ense using the.eigntes avierage c st f It; nite fuel for :ne entas :f war:n, a:ril, anc Vay,1983. Staff Eanttit a at $4.
Sec:nc Ms. Jones reclassified varicus c;erati:n and maintenan:e ex:enses.nica had teen 1 i:r=erly :narge: to fuel ::sts. Intes, sne reeves social etub cues if itFC3 ar.d T'J"03 passed en to TE%3 in its fuel bill, t.ast, Ms. Jones recxcuted TE%3's 5n sales adjustments ::nsistent =tta staff E::ncralst Ted Vogel's year-ene cust:sers,.eather, and price elasticity re::rnencatices. In taeing taese adjustre9:s, Ms. Jcnes used a test-year aversge seat rate at plants turning I'JFC3 gas rat *er taan :ne average nea: rate f:e all units, including lignite, =hien TEZ3 ;r:Sc sed. Staff Exalti: a a 5-7.
Cities' witress, Mr. itacces, concurred with TEZ3's fuel cost srecesal exces: f:r its ;ri:e elasti:ity adjustment. TM. Exnitt: 2, Sene ules 21 an: 22. After a review of all fuel ex;ense ree:reentaticas, the Exminer finds tha: tne staff's a:just.ents are
- a:;repriate and saculd be a :::ss. As pointed cut in Ms. Jenes' testtaeny, s;ecial atten:1:n to fuel costs nee:s to te made is insure tnat affiliates are not a 1e to sass tarcugh :Me fuel charge :r etner service enarge costs =hich = uld be it;:r:cer f:r an ocerating ::rcany. Staf f Einitt: 4 at 7.
In additica, = ant;ulation cf ;eneration plant maintenance scnecules em sist:rt the average c:s: Of fuel used f:r year-en fuel c:s:
affustsents. hhile there is no evidence that this ec:urre: wita TEIC3's year-end lignite adjustments, Ms. Jcnes' ;r:cesal is ar:cer :s insure ina: :nly a re:resentative fuel ::s:
level is included in customers' tase rate.
One caveat sacula te made regarding a =tten f :ne staff's fuel c:s: a:fust=ents.
The Staff's ; rice elasticit) adjustments are tased uren the Staff's ree:reendes c:st of se vice. The Exasiner's reconmended c:s: cf se vice :1ffers from the Staff't,; :neref:re,
- tne 5:aff's fuel related price elas:fcity adjustments must te so:ified slign:1y. The Examiner dees not have :ne c:rcuter reseurces necessa y :s sate taese a:justments. F:r tais reas:n, all ::s: Of service fin:ings in this :te::rt =111 re#1e:: the 5:af f's re::venced fuel ex;ense. TEC3's true fuel ex;ense :an te recaleviated using the Sta'f's metacdol:gy by the utility and rescr*e back to tne 0=missica.nen TEC3 flies 1:s new tariff. hhen czcared to TE%3's everall revenue eficiency, t' tis fuel c:s differential is sini=al.
2.
- eration anc *ainten.mca Ex;ense -- TE%3 mace ns*er:us a:justments :: 01.M ex:ense items in an eff:rt 10 ; esent the C=:missi:n eita an :: ate: ex:ense level.
- s:
l cf :nese a:fust ents ere 97c:ntested and eill n:: te cis: asses.
s m
m
-.m.
m.
m.-
- m.
q Docket.1o. 3250 Page 17~
(a) Residential Conservation Progru Effective January, 1981, the Naticnal Energy Conservatten Policy Act of 1973 requires that all major electric utilities perform energy conservation audits / inspections of customers' residences upon request. TESCO proposed a $675,000 adjust. ment to its :est of service to cover the c:st of these sudits. TEK3 anticipates that this pr: gen =111 require 25 existing emoloyees and 23 ' additional employees.
Initially, TESCO intends to send program announcuents to all residential customers to te followed up with mail-out offers to individual custseers. TESCO anticipates a 51 annual' response to these audit offers. Each responding cust:mer will be cnarged a ncminal 513 fee for the audit. Transcript at 149-155.
The Staff agreed with the need to include the cost cf the RCP in TESCO's cost of service but disagreed alth TE500's cost projections. TESO3 projected that the program anncunement aculd c:s ICC plus postage, while Ms. Jcees projected a cost of 5e per program announcement with no postage. In her cpinien, the planned announceent is suitable to send as a billing stuffer. Ms. Jones projected the cost of the audit offer to be 15e plus 15e postage. '4hile TESCO proje:ted an anticipated Sc postal rate increase, the Staff rejected this projection tecause it is not known and measurable. Further, the
' Staff proje:ts that the res;cnse rate will te only 3"..
Given these proje:tiens, the Staff determined that TE%3's existing 25 coleyees would be sufficient to carry out the audit pr:gr as. Staf f Exhibit 4 at 10-12.
~
No other direct testisony was presented on this issue, although ACOR.1 did crow -
exasine TE5:3's acccunting witness, M. Judith Yoss, extensively on this issue. Frem the ree:rd estanlished at the hearing, the Exa:siner finds that the Staff's adjustments to TE%3's RCP ;reccsal are valid and should be ade:ted.
(b) Payroll Expense The Staff c:ncurred with TE%3's payroll expense and other payroll related
~ adjatments wnich recognize the end-of-test-year n:Jeter of emolcytes and nages to te in effect in Oct:cer 1933. Hewever, TESCO inadvertantly included several coloyees in its adjust.ments who aere added to payroll af ter the end of the test year. The payroll and other related ex;tnses to these employees were disallowed. Staff Exhibit 4 at 7 3.
Another payroll related Staff adjust:nent was made to payroll related ex;enses at the Monticello it; nite-fired generatien plant. TU's lignite plants are ::erated by TUGC3 employees. TESCO adjusted TUGC0 payroll ex;ense using the last pay seriod.in Mar:n 1923, to develco a percentage incresse cf year-end base salaries over average base salaries.
In corcuting her adjustment, Ms. Jcnes included salaries for anotcytes at the shing f acilities in Mc: tins County. She re;crted that this adjust e1: had a minimal ! cact tn TESCO's pre osal.
1
Docket No. 3250 Page 18 The key to the Staff's disagressent alta.TEIC3's lignite plant sayroll adjustment was the allocation of the Monticello payroll costs from itGC3 to TESC3. TESCO owns an average of 37.395t of all tnree M:nticello units. All coerati.ig costs are allocated to TESCO en this percentage ownersnip basis excest special projects and fuel. These latter expenses are allocated on the percentage ownership nf operating company in each generation unit.
TESCO allecated the increased Monticello payroll c:sts asing the 37.395t ownersnip ;ercentage. However tne company used the percentage of costs enarged to TESC3 to the total costs for the test year of all three units to coacute the actual test-year payroll costs rather than the percentage cwnersnip to total costs. Due to the inclusion cf saecial projects, this ratio results in a percentage of 36.33%.
H. Jones determined that using this percentage understated actual test year payroll exsdnses and overstated the necessary payroll adjust:nent. To correct this, she utilized the 37.335t average ownersnip percentage. Staff Exhibit 4 at 3 9.
The Examiner concurs nith all of Ms. Jcnes payroll adjustments and reczynends their adcotion.
(c)
Insurance and Casualty Reserve
?
As discussed in II(3) above, TESCO maintains a reserve for insurance and casualties which is funded each month to reach a target level of SS million at the end of 3 years. To reach this target while recovering the cost cf the generator rot:r of Eagle Mountain l
Unit No.1. TEIC3 precoses to include $1,743,000 in its cost of service to fund the reserve. As noted previously, the Cities oppose the allowance of this insurance reserve and recommended tnat it be excluded from the cost of service. TM, Exhibit 2 at 44 46.
I iihile the Staff agrees tnat the reserve is a preferaale metacd of ;roviding c:verage for I
major casualty losses, Ms. Jones testified that she disagreed with TESCO's inclusica of j
the ces cf tne Eagle Mountain roter repair wnica sculd result in the recovery cf this j
expense in 3 years. In her opthion, this cost should not affect the current reserve j
provision; taerefore, she recommended that the Ccmmission approve no more than the j
51,320,0C0 allowed in Occket No. 25C6. Staff Exnibit 4 at 12-14 As noted in 51(3), the Examiner concurs alth TESC3's use of an insurance reserve and lj its plans to fund the reserve within three years, if the reserve dollars provided in the cost of service are dedicated to the rese*ve in an interest bearing acc:unt and the 4
j interest is used to cffset future funding requirements. Cnce the reserve reaches its j
target level, ratecayers aculd need only to contribute to the fund to replace casualty i
losses as they cccur. This replacement funding can be 4,mortized over an as;re;riate f
period. Should the C:mmission determine that this dedication of insurance reserve funds k
is inappr0;riate, the Examiner recommends adention of the 5t'aff's adjustrents to TESC3's j
precosal. As Ms. Jones stated, there is nothing magic about the 3 year funding target date. It has not teen acheived in TESCO's last two rate cases and the Staf f's adjust. ent f
[
will delay the 55 millien target level only One additional year.
=
4
,-e g-,--
r
Doctet No. 3250 Page 19 (d)
Other OLM Expenses TESCO iade a canorenensive adjustment for other :ceration and maintenance expenses including a voluminous number of geocs and services for =nich individual adjustments are unfeastbie. The Staff generally agreed with TESCO's adjustment but did recommend the use of a c:nfidence interval statistical technique to ennance the accuracy of the c:mputer mocal used by TESCO in calculating the acjustment. Staff Exnibit 5 at 3. TESCO adjusted other CLM expenses to the mean value :f the estimated relationship antle the Staff reconenkoded an adjustment to the closest bounoary of a 951 confidence interval. The Cc:maission has adepted the Staff's adjustment in Oceket Nos.1903 and 25C6. The Examiner recommends its adcption herein.
(e) Unco 11ectibles The Cities and the Staf f mace adjustments to TESC3's pr:cosed unco %.:ibles expense.
Both parties proposed uncollectible amcunts based upon their rescective reconmended costs cf service. The Examiner recomends acoption of uncollectibles of
$2,723,479, which was c:meuted by a:olying the Staff's methocology to tha Examiner's recommended cost of service.
(f) Miscellaneous As noted above, Ms. Jones reclassif ted some claimed OLM items to fue' expense. The PUC gross receipts assessment was reclassif fed to other taxes. These adjustments are proper, as is Ms. Jones' disallowance of TE3CO's anticipated postage rate increase adjustment. Ms. Jones also disallowed contributions to vart us religious crganizations and :nemeership dues and other pay::ents to social and fraternal organizations. This latter adjustment excluded social club dues allocated to TE!C3 fran TUSI and TUGC0 in their respective monthly billings for se.41ces and power cerations. Staff Exhibit 4 at 9-10.
These adjustments are pr:per uncer P.U.C. SUBST. R. 052.02.03.032.
In sumary, the Examiner would recanmend adeption of operations and maintenance
- expenses of $146,442,529.
3.
Cepreciation -- As noted in SI(A), the Staff concurred with TESCO's pre:osed de:reciation expense. The Cities made Only one adjustment, rec mmencing that the cost of the Eagle Mountain generator rotor be capitalized and amortized over the remaining Ilfe of the plant. TML 2 at 46. The Examiner c:ncurs with TESCO and the Staff.
4 Taxes Other Than Income -- As noted acove, the Staff reclas,sified the PUC gross receipts assessrent to other taxes and c:mouted the assessment using total test year revenues and the Staf f's reconmenced cost of service. All remaining other tax items were similarly rec:mouted since the Staff disagreed with TE!C3's exclusion of intersysts, sales revenues in concuting gross *ectiots related taxes. Staff Exnibit 4 at 1515. The Cities :: ace similar adjustments to TESC3's other taxes using the Cities' ete:m=enced cost of se vice.
TML Exhibit 2, Schedule 24 The Examiner c:ncurs ith the Staff's tetnodology and wculd recatmend other taxes Of $43,351,023 tased upon the Examiner's l
rec 3nmenced ::st cf service.
Cocket No. 3250 Page 23 5.
Federal in::me Taxes -- The Commission Staff reemouted TEICO's FIT tased u:en tne Staff's ree:mrmaced cost of service using a methodology c:nsistently ; resented my the Staff and a::oted my the Czmission.
Staff Exniti: 4 at 15-13. Ms. Jcnes also adjusted the ascrtizstion of deferred investment tu credits generated by Ti;FC3 and 1*JGC3. Staff Exnthit 4 at 18. The Cities adusted FIT te reflect the Cities reczmenced c:st of service and Mr. t.cc:nts's interest c:sts. TM. bntbit 2 at 47. Ceferred FIT.as acusted f:r Mr. Rheces' rec:mmendations en tne insurance reserve and the timing differences resulting fres the Cities' rec:mmenced treatment Of the Eagle Mcuntain ret:r.
TML Exnibit 2 at 16-47.
The Exatner c:ncurs alta the Sfaff metace:1cgy,,.nich, =nen acolied to tne Exaniner's rec:mmenced c:st of service, results in a FIT c:st of service c:mcenent of $35,303,531 6.
Interest :n Custrer Cepestts -- No adjustments :: this cost f se-vice ites.ere ;re osed.
7.
Aeturn -- The Staff anc the Cities esca adusted TESC3's ir: nosed return to reflect their res:ective return rec:mencations.
Tne Examiner recomme9ds a return Of
$153,331,327,.nica results from a: plying the Dniner's recomenced return to nis reconmended acusted value of invested casital.
t 9.
Fuel and Cther Revenues -- As ;revicusly discussed, the Cities ;r:cesed a full AFUCC ofrset to TESCO's cost of service. TM. Exnibit 2, Senecule 18. The Exasiner rec:mrancs sisa11 =ance of this adustment. The Cities c:ncurred with TESCO's adjustrent fer tne revenues to te c:llected uncer tne RC7. TM. Exnimit 2, Senegale 23. The Staff reduced tne RC7 revenues to the Staff's anticipated sc: gen res:cese level. Staff Exnibit 8, balbit I at 10.
The Exaniner c:ncurs alta the Staff's adjustments and ree:mr4nes their a;;reval.
11 Test Period Base Rate Revenue -- The Cities a::epted TESCO's adustments for annualization cf the Cccket 10. 25C6 rate increase, cust:mers gr =ta, and.eatner normalizati:n, but disputed TISCO's price elasticity adjustments. As discussed in 1I7(3) teic=, the Staff and tne otner parties also dis:uted the elasticity adjustment. The Staff adjusted test year revenues to reflect 5tsff Ec:nosist Ted 7: gel's ree:rraendations i
en this issue. The Exzsiner c:ncurs with tne Staff's a:fust ents and rec:* ends ineir l
agentien. Again is saculd te noted that Mr. Vcgel's adjustrents are tases on the Staff's c:st cf service and not the Exniner's an:.111 nave is te adjusted ac::rdingly.
I In suraary, the Exasiner =culd rec: mend ad::ti:n of a $253,257,950 ::st f se vice and, given the rec:mmenced revenue adjustments, a revenue deficie9cy of $66,321,125, t'e c:m:ceents cf =nica are:
I 1
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e Docket Me. 3250 Page 21 1 Fuel 5 257.050,553*
2.
Czerations & "alntenance la6.442,523 3.
Cecreciatien 50,986,041 4 Tues Otner than Income 49,351,020 5.
Federal In:ve Tues 35,203,531 5.
Interest en Custaner Oecesits 232.326 7.
Return 153,331,227 8.
Total C:st :f Service 5 753,257,350 9.
Fuel and OtMer Revenues (271.a17,310)
- 10. Base Rate Revenue 5 a81,320.5a0 11 Test Peri:d 3ase Rate Revenues fala,999,5CS)*
- 12. Sase Rate Reveaue Oeficiency 5
66,321,125
'These items reflect the Staff's yice elasttetty acjust.ments whica.de ret reflect tse Exmi'er's re:wwe* des ces: cf se*vice an: mst te mentes as discussed in this Re:crt.
- 17. Rate Design A.
Cost :f Se-vice Allocations Testifying ascut TESCO's : cst of se-vice study, TE500 witress "r. Charles Jennst:n stated (TE500 Exnibit 1. Jennston ut 5):
All::atian fact:rs were deveic:et for eaen rate ;r:ws. Customer fa:::rs were used to all:cate the cust:nr relates itris, demand f acters to allocate the deand related itets, and eergy f a:t:rs to allocate the energy related ites. Porti:ns of the rate base and ex;ense ites.ere dire:tly assigned to guard lignt and street lignt rate grou;s.
As usual in scs: generatien-and transsission electric utilities rate cases, the principal area in dis:ute as the demand aliccation fact:rs. TESCO pre;osed an average and u:ess meth::alegy.hica 15 Scesally based u:cn the 9:n. : incident ;eak terland :f each cust:: er ;rcus irres;e:tive of unen this peak =ccurs. In this ;r:ceesing, TE500 announce1 a ;re:csed eccificatics to this standard a:311:ati:n Of the average and excess methecc1cgy (TESCO Exhibit 1. Jennst:n at 5):
3ecause :t.r su:rmea seu 1 cad satstantially exces:s Our winter peak 1 cad, se use the peak demand af each grou: cc:vering during tne surrer scnths Of June tarcugn Cet: er as a : asis fer the
- ave
- age and excess metacd."
We feel that this scelfication reflects cur pnfics::Sy f using the princi les of sarginal (;eu Ica ) ; ricing in cur costing anc rate design pr:cecures enenever a net tenef t:.:uld likely result.
In each Of TESCO's ;revious rate cases, the Commission has a ; roved the use :f an j
averaged ex:ess deand allecation =ethecology. Wita tae ex:e:ti:n =f AC:;Ut, !!!;0's derand allecaticn metaccelegy nas ;erecally ac:ected in this ::ctet. Sche ;arties did I
rt:3r:::end varicus miner enanges :: s:ecific slant and ex:ense itess, tut tMese :3ac;es die not affect the basic alic:stien metaccci:;y. The mecif t:ations ;r::csec by One staff are f:und in !:aff Exa13tt 7, Senedule ! *nics is attacMed to this Re:crt and a::sted f:r all ;ur;cses, While the =nclesale cust3 ers nad similar suggeste: Marges to TESCO's c:st Of se-vice stucy, in :neir Sti;ulatice, TESCO, the C:::s, and C75 a;-eed :-cag
- r. Milt:n t.ee's reco: ence: Staff Exnicit 7, tae-selves ts ac:st staff altness w i
Sc ecui. I a :ast ents.
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e Oceket No. 3250 Page 22 The Cities did not cppose TESCO's cost of service allocations other than to suggest that the Commission give a 'better break to residential ~ users...by making the ' pure' cest-of service ratmaking method a fo1gters (sic) goal instead :f attecting to tring the residential class up so drastically in this case. TNL Exhibit 4 at 10.~
TIEC promoted cost of sarvice based rates using a cost allocation methodology akin to the sverige and excess method.
T!EC Exhibit 2.
Like the Staff. - T ic discussed its preference in allocating
- excess
- deand according to a coincident peazing methodo;ogy, but, noting as did the Staff tnat TESCO currently does act have tne load data necessary for such allocations, agreed that TESCO's proposal was satisfactory for this rate proceeding. TIEC Exhibit 3 at 14 TIEC did ooject to some laterclass suctidf rations resulting from TESCO's cost ot' service allocations since the rates of return cf each customer class under TESCO's proposal would not exactly be eoual. TIEC ;.oposed its own customer class revenue allocations, suoject to the following criteria, '.o avoid severe a
impacts on any classs
- (T)he maximum percent incresse was restricted to 1.5 times the systen average percent increase and the minimum percent increase was limited to 0.5 times the systee average percent increase, both relative to nonfuel revenue." TIEC Exhibits 3 at 19 and 4 at Schedule 3.
4 ACCRM witness Dr. Eugene Coyle recamended use of an astrage and excess methodology
- with the excess ;ortion being allocated by coincident pesas rather than noncoincident pe ak s.
To suppcrt his personal opinion of the correct allocation method to te used, Dr. Coyle made vague references to his testimony in Occket No. 3006, the latest Texas 3
Pcwer and Lfgnt Co. rate proceeding, but did not give much addittonal support for his rec:nmendation.
The Examiner recomends adoption of Staff witness Lee's cost of service allocation recommendations including the adjustments found in Staff Exhibit 7, Schedule I.
The Examiner fines that TESCO's modified average and excess allocations, as adjusted by Mr. Lee, are the only ones supported by a preponcerance f the credible evidence in this record.
While TIEC has expressed some valid concerns regarding interclass subsidizations, the yxamine-finds that TESCO's gradual move toward unity in custcmer classes' relative rates of return follows the Camission's rate design precedents cf TESCO's prior rate cases and does not create an adverse impact on any class of customer.
Uncer.the rules of evidence set forth in P.U.C. PCC. R. 052.01.CC.072, Dr. Coyle's testimony cannot be given much consideration since it is based on testimwny sataitted in Occket No. 2006 teh!ch is not in evidence in this decket. The fact that the Commission adepted his cost of service allocations in Doctet No. 3006 is irrelevant in this preceeding without proper credible evidence to supp:rt such a finding. Such evidence is absent here.
3.
Customers, Weather. and Price Elasticity Adjustments TESCO preposed several adjustments to test year kilowatt-Mour sales and Ptvenues to reflect end-of-test-year custzer levels, effects of abnormal weather, and effects Of the rate Increases approved in Occket No. 25C6 and pr::csed herein. G i sales f:r esen rate
4 Docket No. 3250 Page 23 class were adjusted for year-end numcer cf customers by multiplying the actual mi sale in each month by the ratio of year-end customers to actual customers served in each montn.
The revenue adjustment for year-end customer levels was a two stage process. Customers receiving service for a full year were re0111ed for the year at their year-end rate based en KW sales adjusted to year end. TESCO Exhibit 1. Johnst:n at 2.
TESCO's year-end customer level adjustments were not challenged.
TESCO adjusted test-year Gi sales and revenues to reflect the affects of an annormajly coo 1 *est-year sunmer and winter using a methodology originally developed by the Comnission Staff. TESCO Exhibit 1. Johnsten at 3.
The Staff disagreed lith TESCO's calculaticns, but when applying their own computer model to TESC3's operations, the Staff's model adjusted KW sales to a nuncer greater than that recuested by TESCO. For this reason, the Staff c:ncurred with TESC3's preposal. Staff Exhibit 5 at 4-5. No other party ; resented evidence on weather adjustments.
In adjusting for cust:::er ; rice elasticity resulting from incressed rates, TESCO made adjustments to reflect the price elasticity created by the rate increase approved in Occket No. 25C6. The higner r'ates approved in that decket had not been in effect during the entire test year. After adjustments for year-end cust:mers and,.eather, the KW
- sales and revenues thus adjusted were then adjusted further for price elasticity resulting frorn TESC3's ; reposed rate in:rease. These adjustments were effected by the application cf an elasticity coef ficient of -0.20 to all rate classes. TESC3 further noted that the use of an elasticity adjustment has previously been a;; roved by the Cmunission in ;rier TESCO rate pr:ceedings.
ACCRN, the Cities, and Texas Metailers all argued that an elasticity adjustment is not ao;repriate in this case. Dr. Coyle, again referring to testimony in Cocket No. 30C6 not in this record, stated that the censumption cf electricity is a c:nditfored reflex derived fr:m the pleasurable ex;eriences that such service can provide and is not subject to the type of ; rice elasticity suggested by TESC3. ACCRM Exhibit 2 at 7-10.
Cities witness Rhodes did agate that price elasticity does exist under certain c:nditions (TML Exnibit 2 at 40) but testified, af ter a discussion cf his analysis of hist:rical cust mer erergy usages and ; ries, that, in his opinion TESC1 "has f ailed to pr:;erly substantiate the eresence of price elasticity nor have they provided adecuate su; crtive evidence to quantify its impact.' TML Exhibit 2 at 42. Texas Retailers ; resented no direct evicence on price elasticity but argued that such an adjustment nas s:eculative and could not be allowed as a known and measurable charge. Brief of Texas Retailers at 3.
In their various stipulations, TIE:, CPS, the Coces, and 3ra::s agreed that the Staff's; ;reccsed elasticity adjustment was c:rrect and snould be ade:ted. Staff wit ess Vcgel testified that the Staff deveicoed and realicated TE;CO's econo:etric model using data for a different analysis ;eriod an d cetemined that TESCO's :re=osed -0.20 elasticity c: efficient.as a re:riate f:r the residential and general servfee class
e Oceket No. 3250 Page 24 customers, but was not statistically acceptacle for a:piteation to all reaining cust mer classes. The Staff preposed a total price elasticity adjustment of 462,592,752 rah for K'aN sales and $414,999,505 for te;t year revenues. M. Yogel noted, newever, that 1se e
adjustments were ;redicated upon the Staff's preoosed c:st of service and the e ' ice effect that cost of service would have on customer consumption and sould not be a prepriate f:r any Ceraission approved c:st of service dif fering frem the Staff's.
Staff Exhibit 5 at 5-3.
The Examiner reconmenes ad:ption of the Staff's price elasticity ;rcocsals adjusted to refIect the Examiner's proposed c:st of service.
The Examiner 'makes this reconmendation af ter finding that TESCO's K',41 sales and revenues do suffer fr:s some price elasticity. The Exminer ices not find Or. Coyles' arguments (these which are supocr*.ed in this record) to be very persuasive. FurtMer, in Ocekets No.1903 and 2fC6
- ne Cyraission ree:gntzec price elasticity as kncwn and measureable changes in TESCO's K'aN sales and revenues.
Mr. Rhoces' testimony c:ncerning his analysis of hist:rical c:nsunction and average revenues is based ucen his Schecule 19 which was not adjusted for inflation. Witacut a rec:gnition cf inflation, t3e Examiner can not find that Senecule to be very crecible. Finally, based upcn Mr. Vogel's testimeny, the Examiner finds that TESM has failed to meet its burden of proef for approval cf an elasticity adjustment except as it a: plies to the residential and general service classes.
C.
Wholesale Rates TESC3 has hist:rically su: piled wholesale ;ower under a single whoiesale rate (Rate-W) to five REA-financed electric cocperatives, Brazos, CPS, and the Citles of 3cwie and Goldsmith. In Occket No. 25C6, the Commission :rcered TESCO to c:ntinue to serve these cust:mers under a single rate but to implement c:njunctive billing fcr adjacent ;oints of delivery. In this decket, TESCO proposed to retain a single Rate V for all.holesale' cust:mers but to eliminate c:njunctive billing. TESCO also preccsed a $.33 per KW credit for service taxen at 69,000 volts or 133,000 volts. For purposes :f tais rate, ccand is defined by TE3CO as (TESCO Exnibit 1. Tariff 5111 at 52):
The current senth maximum kw, provided, however, that for cust:mers having not less than :ne full month of on-;eak km history the kw thus detemined may not exceed the sum Of the maximum cn-taa kw plus 3C. of the amount by.hfen the current menta maxieum kw l
exceeds the maximus en-peak kw; but not less tMan SC% =f the maximum j
cn-peak kw; nor less than 50% of the centract kw.
I Current month maximus kw is the kw recorded during the 50-minute periog f maximum use during tne current acnta.
Maximum en-:eak kw is the highest kw rec:rded at the ;reises curing the billing tentas of June, July, August, Septecer er Oct eer in the 12 tenths encing wit 3 the current tenta.
C:ntract kw is the greater of (a) tMe maximum eie:trical load s ecified in the agrement f:r electric se-vice, or (b) the tw rec:rced at the ; rem 15e1 during the 60-minute :erice cf maximum use at any time curSg the 12 mentas encing.ita the c;.r ent cnta.
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Docket No. 3250 Page 25 The Coops opposed the continued use of a single rate for all wholesale customers and the discontinuance of conjunctive billing. C?$ opposed the Coop's proposal to estan11sh separate ratet for each wnelesale customer. To resolve these long standing differences, the Coops, 3razos, CPS and TESCO negotiated tneir rate design dif ferences and agreed on the record to be bound by the attached Stipulation (Coop Exhibit 3).
However, on Septemcer 3,1980, counsel for CPS notified the Exaniner that CPS no longer concurred alth all cf the provistens cf the Stipulation and would not sign it.
This enange of position occurred af ter C75 urged the Stipulation's adentien in its trief. 3rief of C75 at 1.,Hewever, on the basis of the pre-filed testimary of all affected parties, the Exaniner finds that the terms of the Stipulation are the most appropriate method of designing a wholesale rate for TESC3. Therefore, the Examiner recommenes adcation of the Stipulation as submitted. It will not acversely impact other custcmer classes and will resolve an ongoing intra-class dispute to the mutual benefit of all parties concerned.
If the Commission does not find that it is appropriate to adopt a stipulated settlement of a ' ontested issue if one of the parties later has reservations about it, the c
Examiner recommends aception of the este design proposals of Ceep witness Carl Stever, in 50 far as they do not contradict the ccst allocations in Staff Exhibit 7. Schedule I, and establish separate rates for TESC3's eight wholesale customers. The Eminer finds from the record that the Cceps' showing that there are significant differences in the costs of serving the varicus wholesale customers supports, by a precenderance of the credible evidence, the adoption of separate wholesale rates.
D.
General Service and Industrial Rates 1
l TIEC, which represented several of TESCO's industrial customers, noted that its
{
meters cbtain service under TESCO's general service (G), high voltage general service (HV6) and magnesium plant (MP) rates.
In its precosed rate schedules for these customers, TESC3 precosas to have customer demand and energy charges for G and HV6 j
custzers but only deand and energy chages for MP customers. Both TIEC and the Staff recommended that the MP and HV6 rate structures te icentical, althcugh not necessarily I
the sace rates, and that all HV6 and MP custzers be charged a custxer charge. TIEC Exhibit 3 at 23 and Staff Exhibit S at 4 In additten, TIEC witness, Mr. Jeffrey Pollack, testified that the tail eneqy block of the HV6 and MP ratas te set at 3.3 mills per KW rather than the 4.3 mills preposed by TESC3. This is proper, according to i
Mr. Pollock, because TESC3's cost of service study indicates that its eneqy costs are approximately 1.3 mills per KW. Thus, these rates attempt to ecliect approximately 0.5
{
mills per KW cf fixed costs in the energy charge.
The Examiner concurs with j
Mr. Follock's recommendatiers and reczmends their adeption.
A similar recxcenda !cn was mace regarcing the eneqy enarge in late 3.
TESC3 precoses to chage Rate G cusiceers 5.5 mills per KW in tne tait block. nile TESC3's average eneqy cost for Rate 3 custcmers is a.S mills. In sedition the average energy I
cost for general service customers taking primary service is 3.g silis per (W, wnlle the a
Docket No. 3250 -
Page 25 i
average energy cost for general service custzers taking primary service is 3.9 mills per K'H, whfie the average energy cost for secondary general service customers is 4.9 stils.
- r. Po11act's recommendation that the Rate G energy tail block te set at a.9 mills It was w per K'W and tnat customers taking power at primary voltage levels be granted a 1.0 mill delivery credit. It was recomended that the revenue deficits created by these charges be spread through the customer and deaand charges in all three rate classes.
Again, the Examiner finds that Mr. pollect's recommendations are succortes by a preponderance of the credible evidence in the record and recommends their adept on.
Rates so designed will move closer to true cost based rates without an advers'e impact o..
other customer classes. Each customer within each class will pay more of the actual cosh he contributes to his class' cost of service.
E.
Residential Rates TESCO prcposed a residential rate with a $6.00 custmer charge, including 15 KW, and an energy charge of $.0457 per KW in May through Octc er or 5.0407 per KW in 2
Noveter through April.
Staff witness Mr. Themas Saeatman recommended that the sw:mer/ winter dif ferential be eliminated in light of the greater than average system reserves that TESC3 new has. Mr. Sweatman also recommended that TEICO not be 411ewed to reduce the KW included in the minimum bill from the 25 KW approved in Oceket No. 2506 to 15 KW sought herein. The Examiner concurs with these reemmendations which follow Commission precedents in other investor-owned electric rate cases.
TEIC3 also ; reposes an electric space heating rider for residential custmers (Rider ESH) which reduces the energy charge during Nove.ber through April for qualified custzers to 1.0179 per KW after the first 550 KW. A " qualified" customer is one who has
- electric spacing heating equipment permanently installed and in regular use f:r all living space in the dwelling
- with an exeption for wood burning fireplaces. TESC3 Exhibit 1, Tariff 5tII at 4 The Staff objected to TESCO's permanently installed heating I
equipment requirement and reemmended that this rate be available to all residential customers. This wculd allow customers with small plug-in heaters to take advantage of this rate and would eliminate the rider and fact 11 tate rate a: ministration. Mr. Sweatman also stated that it would also improve residential load fact:rs in the wintar. St af f Exhibit 3 at 3-4 When questioned by the Examiner atout the limitations in this rate, TESC3's witness.
Mr. Jennston responded (Transcript at 437-438):
f In some cases we've had customers who signt 'tave lake Mcme's er mayte even permanent hcmes anere they aculd merely nave a C0uole of temocr arily installed space hesters, and they would not te permanently installed or in use. So we made the decision that one day to reasonaoly ensure their use and not tneremy give the9 an acvantage they snculdn't have, we sculo require at least that tne hesters te permanently installed and not just te't:crary space heaters plugged into the mall for the pur;csa cf ;ualifying for the rate.
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Oceket No. 3250 Page 27 The Exuiner recoamends that the ESH tider te amended to incluce all customers.ith all electric s; acing heatirg regardless of taefe equi;=nt ty;e =lta the same exametien fer = cod turning fireplaces. TESC3's rationale for its limitation is not ;ersuastve since many cust:mers wita ;1ug-in heaters oc:upy their residences full time, nlle many centrally Meated vacation Maes are only occupied seasonally. Such a rider saculd te availaofe to all cust:sers.no migat reasonasly tenefit frcm it.
This will encourage impr:ved Icas fact:rs. H: wever, the Eminer reconmends that tae EIH Aider not te ade availaole ts all residential _ custesers since it aculd rerely.c:nstitute a ninef all to custosers alta gas or solar neating. It c:uld not significantly imoreve taese.custzers' foad fact:rs. The Commission as;r:ved winter spacing heating ; rice treaks-for all electric custze-s in Occret No. 25C5.
Finally, the Cities nitness, "r. 4. H. Aughineaugn, reco tences that the Consission shift scme Of the burden of. tais rate increase frcm :ne saculders of residential customers. He suggested that the residential cust:mer enarse te Ic=ered fran its existing, and ;r:cesed,16.00 level to 55.00.
TM. Exnitit a at 10.
TEICO's wit.9ess Jennsten testified that by icwering the included KW1 this custrer cha se was left at
$6.00 and not increased. In fact, TESC3 re;crted taat the true custcmer charge for residential consumers is a:;reximately $3.30 per month. Transcript at 437.
iihile the Examiner sy pathizes with the Cities' c:ncern about the financial irpact of this rate increase on residential customers, Mr. Augnin=augn's suggested ; rice roll tack =culd resalt in interclass subsidizatten and wculd result in an unreasenable price disc-tminatien among classes. The latter is c:ntrary to PURA, 533.
The Exminer recommends that the residential base rate not te rolled tack, but instead be adjusted to reflect the ;rc:er inclusicn of 25 KMi.
Based u:en TESO:'s ;re:csed rates, this residential rate =culd te 55.914 ;er ments. It =culd te 55.00 under the Staff's ;r:cosed rate. $leca tne Exutner's rec:manded cast of service is less than tne Staff's, the resteential base rite snculd not be higher than the Staff's recoscendation.
F.
Ratchets During his discussion cf Aceitestion cf Co runttv Nelic Se-vice Co., Decket Mc. 3Cg3, $ P.U.C. St?.L.
(July 15, 1930) at the Final Or:ers Meeting :f that cate, Crmissicner Garrett Merris directed ne staff to Inssect all ele:tric utility ratchet i
- rovistens ts insure tnat taese ratchets recover
- nly desand related c:sts and n t energy l
related costs. TESC3's pr:cosed 30/30 ratenet is set forth in 5tV(C) Aholesale Rates.
This ratchet was not pr: tested by the parties nor cojected to by the Staff.
' hen questiened by the Exciner en hether er act this ratchet rec:vered ene gy related c:sts.
Mr. Jennst:n stated (Transcrf;t at 434-435):
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o Docket No. 3250 Page 23 Well, first, let me say, Mr. Hearing Examiner, thit our denand cost in our general service rate c:ntains atout 35 percent af the demand related c:sts, which is a fairly hign figure ac ceding to most other c:mpanies in Texas.... So its acout as hign as you can get without getting your energy charge too low for our ideas of not encouraging excess use of kilowatt hours because the price is arettrarily set below the cost.
So, to follow that up, the pur:ose for the rat:het in the first place is to try to rec:ver on a monthly basis those annual casacity charges that are incurred because Of the 5: mimer recuirenant ;f an individual customer or an individual group of custc:ners. It's not perfect, but it does it about as nearly correctly as any device thit I've seen in the ratsnaking area....
I can't make that state ent bit: that c:ncisely that it does act rec:ver energy c:sts because ne strive to pet about 95 percent af :ne denand related c sts in the deand charge. So that means the other five percent are in the energy c:st.
The Examiner finds that there is no indication in the instant re:ced that T!!CO's ratchet will reccver energy related costs should it te invoked during cff peak months. In its brief, TESCO's counsel attested to clarify this issue by stating cohatically that the rat:.tet does not ecliect energy costs. Srief cf TE303 at 14.
Ac:ardingly, the
, Examiner recommends its appr: val.
3.
Fuel Adjust. ment Cla'use TESCO reported that it did not seek any changes in its existing fuel adjustment clause (Rider F). TESCO Exhibit 1, Johnston at 19. In discussing Rider F, Mr. Jennston stated, *(N)o profit cf any type is made. Fuel charges are made only in the snounts necessary to c:ver actual fuel expense, so customers ;ay no more than the a: ual costs of fJe1 Jsed to ;r: duce electricity." TEICO Exhibit 1 Johnston at 19.
As they did in Occkets No.1903 and 2506, the Cities challenged the c:ntinued use of Rider F.
The Cities cbjected to TE303 passing fuel cost from affiliates T';FC3 and TUG 03 through to the ratedayers atthout a prior Canmission finding that such excenses are reasonaole. Otties wit::ess Rhedes stated (TML Exn10f t 2 at 53):
... I recognize that ex;enses hich are beyond the c:ntrol Of TE!CO's manage ent and those nich are identified as variable should c:ntinue ts ; ass througn the fuel adjust:ent clause. However, those ex;enses of TUFC3 and IUGC3 wnich are identified as fixed expenses should te recovered thrcugh the fuel adjustment clause on a fixed cost per MPSTU basis.
kn' this pecceeding there was insufficient time to dete mine these fixed ex;enses. I rec 3rcend that the 03 mission instruct TEIC3 to provide sufficient inforaation so that a fixed cost per MM3TU can te
- alcul ated.
/
0 Docket No. 3250 Page 29 The Coenission has twice previously approved TESC3's pecposed fuel adjustment clause..It is sisilar to those of all other major Texas electric utt11 ties. Should imprcoer fuel costs te passed througn to ratagayers, corrective action may be taken in TESCO's next rate proceeding. Given TESCO's current level of capital construction, this next application will. be filed in approximately one year.
Therefore, the Examiner recommends approval of Rider F as sutraitted.
F.
Puolic Utility Regulatory Policy Act of 1978 (PURPA) m On the motion of ACORN, this rate case was designated as a PURPA hearing and all parties mere allowed to sutnit evidence on the varicus PURPA rate design and service standards. TESCO declined to submit testimeny specifically directed toward PURPA. TIEC sutmitted a considerable amount of PURPA related testi$nf,but for the most part, this testimony was generally ;olicy criented and not specific for TESC3. The reaining parties' testimony was was not specifically designated as PURPA evidence althougn some of it did address matters wnich relate to the various PURPA standards, e.g., recommendations on ecst of service allocations.
Fron the record as a wnole, the Examiner finds that there is insufficient evidence
'to make specific PURPA findings for this utility in this rate case. While the Exaniner has made recommendations en various rate case itms ahich are covered by PURPA, these rec:;r::nendations are made under the PURA and not PtiRPA. For this reason, the Examiner rec:mmends that any Intervences' requests for reimeursment of rate case expenses under PURPA, 5122 be denfed. The Exminer further recommends that no PURPA related actions te taxen regarding TESCO until the Canmission completes its planned generic PURPA hearings in the Spring cf 1931 V.
Tariff In ccepliance with the Ccmmission's directives in several recent electric cecperative rate cases, the Staf f and the Exminer made extensive reviews of TESCO's tariff to insure that it complies with the Act, the Co=iission's Sub'stantive Rules and Comnission ;recedent en electric tariffs. TESC3's tariff was generally (cund acceptaole.
It does not violate the Act.
It follows the Commission's Substantive bles, although several provisicas need to be amended to comply with the Ccrsnission's latast revisions to those Rt,les, e.g., meter tapering and notice of terminaticn of service for non-payment.
One isolated provision (cable television pole rentals) needs to be deleted since it is not a regulatory subject matter. These provisions to which the Staff or the Examiner-CDjected are subjeccs upon.hich the Ccanission has recently acted in other electric rate r
be brougnt to the Ccrmuission's attention for review in this cases and which must
- rocatcing.
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Doctet so. 3250
. Page 30 A.
Limitation of Liability Clauses, Tariff Sheets 13, 18, 23, 31, 32, 41, 42, 44-46, 48, 53 and 55.
TESCO's tariff has numer:us provisions wnich esolve the utility from all lianility for damage to customers and third parties or their preperty for acts.not resulting from negligence of the utility. In several recent cases, the Commission has struck such provisions fr m electric utilitys' tariffs, leaving such matters to the c:urts which have original jurisdiction over personal or prcJerty damage suits. TESC3 streneusly u ged the Commission not to strike its limitation of llantlity previsions in this docket, noting that the Cannission failed to strike similar tariff provisions of its sister company, TP&L, in its latest rate case, Docket No. 2006.
Srief of TESC3 at 14 TIEC urged that TESCO's 11mitation cf 11asility provisions be struck noting that they are absolute releases from all liability and are not compatible with Texas' comparative negligence statute, TEX. REY.CIV. STAT. ANN. art. 2212a. TIEC argued that since the Legislature has refused to grant puelle utilities an exemption from the c mparative negligence statute, the Commission shculd not grant such exeptions thecugh its tariff aoproval pcwers. Brief of TIEC at 15.
TIEC also cejected to the waiver of flamility provision Tariff Sheet 23 entitled
" Continuity of Electric Service".nerein TESCO is exemoted fr:m liability for intentional seavice inter upticas when such interruptions are deemed necessary in TESC3's " sole Judgment.* TIEC argued that this provision is inconsistent with TESCO's statutory ecligation to :rovide c:ntinuous and reliable se*vice to the public. Brief of TIEC at 15.
TIEC urged that the Coassission med1(y TESCO's tarif f and substitute the =ced
- reasonable
- for the wert " scie *, and that TESCO te required to make reasonable efforts to provide notice to custaners prior to service interruptiens.
In several recent electric c:ccerative rate cases, the Commission has ordered that similar limitation of 11atili ty provisicas be reeved from all utility tariffs.
Aeolication of Merth plains Elect-ic Coccerstive. Tec., Docket No. Eg34, 5 P.U.C. BULL.
513 (April 2g,1980) and Aeolication cf Centent Texas Electric Cocee-ative. ! c., Oceket No. 3170 (June 27,1980) (unreported). Mcwever, in its most recent proncuncement en this issue, Aeolicatien Of Geaeral Telechene Co. Of tne Southwest Oceket No. 30g4 (August 3, 1930) (unrescrted), the Comission refrained fr:m striking General's limitation of 11ao111ty provisions pending the final Order in Pno pencing cases which expressly address the peceriety of such clauses -- Aeoliention ef Central power and Lfent Co., Occket No.
~
In lignt of 3198 and Aeolication of Southwestem 3e11 Telechene Co., Occket No. 3234 this recent decision cf the Commissien, the-Examiner reem6 : that no action te currently taken en this issue but that TESC3 te Ordered to mentt:r Ocekets Mc. 3193 ano 3234 and to send its tariff, if necessary, to catoly witn the final Crcer in taese deckets.
Docket No. 3250 Page 31 TESCO argued that it should not be required to anend its tariff to comport nita the Order in Cockets No. 3198 and 3234 until its next rate case. This would give TESCO the opportunity to assess the new magnitude Of the risk that would be imposed. 3rief Of TE$CO at 15.
Since TESCO is a party to Occkets No. 3198 and 3234, it is aware of the Consission's actions in those dockets and should be ordered to comply with whatever tariff penenent time schedule the Comission establishes in those dockets. If no time schedule is established therein, TEICO should be ordered to eend its tariff, if necessary, within 30 days of the rendition of an Order in those dockets.
Finally, the Examiner concurs eith TIEC and recommends that TESCO's' tariff be pended as suggested regarding service interruptions.
.However, most service interruptions are involuntary and/or are of short duration and, in such cas'es, it would not be reasonable or expedient to order TE!CO to notify all customers of such interruptions. On the other hand, since the Commission's Rules require that all se-vice interruptions in excess of four hours be reported, the Examiner rec:mmends that TESCO te ordered to take all reasonable efforts to notify its custoners of planned service interruptions of an anticipated duration of four hours or more.
Such notice is es;ecially :ritical to certain manuf acturing and industrial customers and residential cust: ars with s;ecial health pr:blems. For customers with known special service needs, the Cxpany should make special efforts to give notice of anticipatad service interruptions.
S.
Service Extension Policy Tariff Sheets 19-22 and Se-vice Agrecents.
TESCO's Tariff $2C6.10 provides that = hen a customer requests non-standard service and such service is not covered in other sections of the tariff, TESCO may provide service to the custoner based upon the estimated cost of pr:viding non-standard sertice in excess i
- f the cost of ;roviding standard service. As a conditien of service uncer Tariff 52C6.10, the customer :ust fulfill one or both cf the following (TESCO Exhibit 1. Tariff at 19):
(a) Custom e makes a one-time non-refundaele :ntribution to Comoany equivalent to the exces s cost and including charges for maintenance, depreciation, ad valorem taxes, and other a:plicicle taxes.
j (b) Customer coroletes c:ntractual arrargeents eith Croany, anich l
includes a monthly excess facilities charge of 2-1/at cf the i
excess cost.
Such charge is subject to redetermination upon expiration of the Agrement for Electric Service.
For standard single phase se vice from overhead distribution lines, TESCO ;rovides free se-vice c:nnections for the first 750 feet Of distri ution line. After 750 feet, the custaner :ust make a :ne-time non-refundaole c:ntribution in aid of constructicn f:r the ad=1tional installation costs. For three ; nase or undergrouno sersica. c:ntributions in aid Of c:nstr4ction are collected to recover the differences betwet9 ine cost :# these special se vices and single ; nase overhead distribution seesics. These c:ntributi:ns are also 9:nrefundaale.
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e Docket No. 3250 Page 32 Service under TESCO's line catension policies are all subject to its standard allowable expenditure formula which is used to deter'nine if a requested service extension is cost justified. That formula provides (TESCO Exhibit 1, Tariff at 21):
(KW x Revenue Requireent of Allowable Expenditure = EAR Allocated Investment oer Ca rieturn r actor.
E!.R - Estimated annual revenue from Custzer computed fra estimated demand and KW, but not incluoing fuel adjustment cost and sales taxes.
KW - Customer's estimated maximum sumner KW.
Revenue Requireent of Allocated Investment per KW - Revenue recuire-ment based on Cotrpany's capacity investment cost allocated ;er KW of Customer's d eand.
Return Factor - The revenue recuirment necessary to support the service extension based on the expected time period service is to be provided.
In those instances where the extension costs exceed the allowable expenditure under the.
formula, Tariff $207.40 requires the customer to fulfill one or both of the fellMng requireents as a condition of service (TESCO Exhibit 1, Tariff at 22):
(a) Custoner makes a one-time nonrefundable contribution to Comoany equivalent to the ' capital expenditure not succorted by revenue and including charges for maintenance, depreciation and ad valorem taxes 01 the unsupported capital expenditure plus any other applicable taxes.
(b) Customer completes contractual arrangements with Czoany, which includes a special monthly minimum bill or minimum billfng demand based on the annual revenue reouirment of the estimated caaltal expenditure and fuel cost.
The Cocos voiced several cbjections to TESCO's line extension policy and tne use of the standard alicwable expenditure formula. First", while TESCO's tariff provisions speak of the " distribution systa,' TESCO's application of the formula includes all facilities including transmission level facilities. Cocos Exhibit 1 at 4a-45 and Coops Exhibit 2 at Schedule J1.0. Second, the Cocps contended that they have never 'oeen given a choice of payment methods under $206.10(a) and (b), but have been consistently required to make contributions in aid cf construction whfie being billed under a minimum demand rate.
Third, the Cocps claim that they have never been given credit for the salvage value of plant dedicated to their use. Fourtn, the Cocos are concerned that the formula does not track investment.
Fifth, in applying the formula TE3CO adds 2C% for what it characterizes as certain fixed costs. Coce Exhibit 2 at Schedule J1.0. The Cecos claim this factor shculd be' closer to St.
The Cocos are also concerned that TEICO is charging them for facilities lef t idle at anotner service ;oint. This charge is not set forth in TESCO's pecposed tariff out.as included in TEICO's sammle contribution in aid of construction calculation sutmitted as
~
an answer to a request for information. Seventa, the Cocos feel that TE!CO has not ;roven
s o
Occtet No. 1241 Pas **
that the allocated plant investment tracks Cast to seeve. Eignta, the C003s Cantend that the transmission allocation fact:P is a functfen of demand and signt result in a d:uble recovery fr:m large wholesale customers. Last, the Cocos argued that the formula does not rec:gnize load growth at the delivery point but reflects only the first year's demand. For all taese reasons, the Cooos contend that they should be allowed to estan1' a a minimum bill under $207.4(b) or be 411cwed to own the facilitfes se ving there. f ::s Exnibit I at 51 No,ctaer party adduced evidence on this issue, although Staff witness.5.atssa did testify tnat TESCO's pre osed service charges *are at or below cest, set reasonacle a
level, and comaare favorably with similar enarges of other utt11 ties.",taff Exalbit 3 at 4 Hewever, in several recent cases,3-_tn Plains Electric Cecce dve, tre., sg and Central Texas Electric Cecce-ative, ine., su:ra, the Commissi'. has directed other electric utilities to caarge :nly ::ntributions in tid of construt. fen to collect excess ifne extensiin ecsts instead of charging in:reased minimes bil',.
These cecisions ere bolsteres by the c3=ents of C mmissioner Garrett Morris at '.e Final Ceders w tting of e
June 27,1983, when he announced his desire to estabitsn r unif:rm ;olicy cf as:r:ving only centributions in aid of c:nstruction charges in ife of increased enthly minimus bills as a deterent to customer snit: hovers. The Cor.issicn has also mandated that a recata ; ltcy ac::many :ntribution in afd of c:ns*.etica pecgrsas wnen the facilities so financed may reascnably be anticipated to tt used to se-ve other cust:mers in the future. TESCO strongly co;csed the implerent, tion of any type of recate policy on :ne gr:unds f difficulty and c:st :f adstnistratten. Brief cf TESCO at 11-13.
It is the Examiner's recormendation tnat TESC3's tariff be modified to provide tr.at all addificnal installation c sts over and abcve the fret 733 feet of distributien line or any sther additional installation costs under the standard allcsable ex;enditure fermula :e co1*e:ted only as a c:ntribution in aid of ::-struction and not as an increased mor.taly minicus bill. In cases in which such a policy creates a financial hardship en the cust:mer, a c:ntrac*.ual deferred payment plan =ay be entered f ato. Further, 'tae Examiner f ails to find suffletent evidence in the rec:rd to dete-sine that TESC3's standard a11cwaale ex;enditure f:rmula is an fmerecer metnod to calculate these contributions.
l Additionally, the Examiner fines no justification for crdering TESC3 to allow =nclesale custs ers to cwn all service fa:111tfes dedicated to their use.
In conjunction with this c:ntributions in aid of c:nstruction reco=endatten, the Examiner.culd rec:mmend ade;tien of the felicwing recate ;rovision. This rebate f:er.ula was a: proved in Central Texas Electric C cce-ative. Inc., sucra, and the Examiner finds e
it a ;recriate f:r TE!C3.
I
i Oncket No. 3250 Page 34 Paynents necessary for constructicn of facilities wnich.111 be used exclusively by the appi teant (or a;;plicant's successors in interess) are contributions in aid cf construction and are not refundable. That portion of prepaymnts, necessary for construction cf facilities which are reasonaoly likely to te used by custrers other than applicant (or his successors in interest) are advances in aid of construction and ara reimourseante pursuant to the folloning formula:
f xM A=
A=
Annus! Ref::cursenent 0=
Dent service payuents during utility's most recent fiscal year.
R=
Utility's gross revenues fran the sale of electric energy during the ecs recent fiscal year.
M=
Revenues from billings to soplicant or customers served by transmission or distribution lines financed by acplicant's advances.
Reimourtenant shall be paid within 50 days subsequent to the annual anniversary date of the installation of the first meter utilizing the facilities constructed with applicant's advance. Reimoursenent shall be paid annually thereafter until a total of 20 paynents are rtade or-until the soplicant has received the mount of his advance, whichever occurs first.
Contributions in aid of construct"on for f acilities which are initially used exclusively by th e appl icant and which are subsequently used by any other custrer within 20 years of the date of the installation of the first meter utilizing such facilities, shall be rec!assified as advances, subject to the refunds in accordance nith the foregoing formula applied to all revenues received within the 20 year period from electric energy sales to applicant and such other cust33er or cust3ers.
C.
Field Collection and Meter Reading Fees, Tariff Sheet 51 When TEK3 oispatches service personnel to collect a delin::uent bill, a $a.00 service charge is made at the time of collection. Whenever a custwer retuests an out-of-cycle meter reading..a $16.00 charge is made. TEK3 argued that these charges are cost based and are easily collected. Mcwever, in recent electric cases, the Cannission has adopted the position that these are special indivioually required custrer services and that customers requiring these services should bear their cost.
To this end, the Cmmission has estaclished the following tariff provision for collection fees which the I
Exasiner recommends for adoption. A siellar provision should also be adopted for the meter reading service.
If personnel is dispatched to disconnect servica for non.caynent and paynent is made to said ;ersonnel at that time, a service charge of $5.00 plus $3.20 per alle shall be included in the custaner's nest zonthly 3111tng. If collections are made from more than ene castrer l
on one trip, the total mileage charge snall be divided etually amcco l
all cust3ners fr34 anon ecllections aere made.
a Doctet No. 1250 Page 35 V.
Summary In sunnary, the Exaniner finds that TEICO has a revenue deficiency of approximately
$66,321,135. TESCO's rate design proposals, as amended in IIV of this Report, are reasonaole and precer for ratanaking steposes in this decket. The Examiner.culd furtner recemnend Comission adcotien Of the fo11cwing Exaniner's Pr: posed Findings of Fact, Conclusions of 1.sw and pro;osed Order.
It should be noted that ACCRM subnitted 10 Findings of Fact, set forth below, nene of which are suppcrted by the recced. The Examiner reconnends denial of all of these pr:cosed findings.
aCCRN'S PRCPOSE3 FINDINGS OF FACT 1 TESCO's c:nstruction progesa is based en c nversion to Icwer cost fuel and not for current growth in peak deriand.
2.
Ac311 cation cf Cr. Coyle's A&E3 method of aficcating TE503's adjusted rate base and adjusted test year costs pr::erly rec:gnized the energy considerations in the ccmoany's invest..ent in generating, transmission and distribution plant.
3.
The ecmcany's ;roposed cast of se-vice study does not accurately ref lect costs in that it does not incer; orate tne ;recosed adjust.9.ents to the test year revenues and cost cf service and it d:es not ;reperly allocate invest:nent to rate classes.
4 The company's allocation methodology and rate design are centrarv to the goals cf efficiency, censervation and equitable rates estaclisned by Pt:RPA.
l S.
Constructicn work in pregress, nuclear fuel st:ck, and plant held for future use are not cost itens unich are presently used by or useful to TESCO's ratepayers.
I S.
In detenining whether to place C'4IP in the rate base it is a=;r::riate to evaluate the relative casn ficus under AFUCC and C'JIP by
- discounting
- and detenining the time value of money.
7.
The inclusion of C'AIP in the rate base of TESCO is particularly inequitable to ACCRM citizens.
8.
Inclusion of construction work in progress in the rate base of TESCO is not necessary to the financial integrity of the.many-l 9.
The exoany has failed to mv: its turden Of pre:f to sustain inclusion in :ne c:si cf service of 302,C50.00 in enaritante c:ntributions.
- 10. The creany has failed to meet its burd.n Of ;rcef to sustain tne adjustment fer Ofice and aesther elastietty.
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a Occket No. 3250 Page 35-
,EuMINER'S MCPOSED FINDINGS CF MCT 1
Texas Electric Service Company (TESCO), a wnolly-owned operating subsidiary of Texas Utilities Cescany (TU), is an electric uttitty comoany which provides retail and enolesale electric utility service in 18 c: unties in north, central, and wer*ern Texas. It does so under a Certificate of Convenience and Mecessity issued by tne Commission.
2.
On May 15,1980, TESCO flied its statenent of intent to increase its rates systen-wide for all custaner classes effective June 19, 1930.
3.
TESCO ;r::osed to increase its rates $157,771,422, or 22.75: of test year revenues.
4 TESCO filed simultaneous rate increase a:plications with all unici-palities having criginal ratenaking jurisdiction over the utility.
5.
Apceals were filed, and c:nsq11 dated with the PUC envir:ns rate case fr:m the folicwing cities: Ceancma, Jolly, Stue Mound, Sansom Park, De Leon, Dean, Se11evue, Ackerly, Saettnater, Holliday. Haslet, Kennedale, German, Fersan, Snyder, Lakeside City, and Fort Wc-th.
6.
TESCO's pregosed decreciatien ratas and ;racticas are reasonaofe and
- r
- :cer for ratemaking pur;oses. Those depreciation rates are not excessive and adecuately recover invest =ent in plant. Those rates are as follons:
Fyretienal Classif fcation Preccsed tates (t)
Production Plant Lignite 3.53 Gas /011 4.52 Old Ocean Fuel Co.
3.14 Transmissien Plant 2.13 Distributi:n Plant 3.24 General Plant 4.73 These depreciation rates result in annual depreciation ex;ense cf
$50,926,Ca9.
7.
TESCO nas net current cast cf $1.957,053,251, the com:enents of nien are:
Current Cast
! 3,073,732,461 Adjustment for Age and Canciti:n (1,116.56a.:001 set Current Cast s 1,357 Ma.251 t
Docket No. 3250
. Page 37 8.
TESCO has invested capital of $1,367,936,3C8, the etynoonents of wnich are:
Plant in Service
$1,483,200,353 Accumulated Depreciation (382,244.994)
Met Plant
$1,100,955,464 CWIP 259,039,980 Plant Held for Future Use 3.943.445.
Nuclear Fuel in Process 25.531,796 Worting Capital 51,067,984 Customer Deposits (3,920,772)
Accanu14ted Deferred FIT (59,758.t08)
Reserve for Insurance and Casualties (1,302,321)
Other (7.175,350)
Total Investad Capital
$1,357,935.308 9.
Construction Wort in Progress, Nuclear Fuel in Process, and plant Held for Future Use as set forth in Finding of Fact No. 7 are used and useful to TE!CO's ratepayers to insure continuous, reliable, and adequate electricity utility service to the puolic at all timet as required by the Act, 10.
CWIP of 1259,039,930, or 50% of TESCO's requestad CWIP, is necessary to maintain TESCO's financial integrity. Failure to include this riount of CWIP in TESCO's ratebase will drco TESCO's financial indicators to levels unacceptable to TESCO's capital investors. Such capital investment is necessary to the const uction and cperation of the utiltiy.
11 The inclusion cf CWIP in TESCO's rate base is not particularly inequitable to any ; cup of customers since its financial turden is reasonably 1:nposed on all custeiers. The benefits derived from the inclusion of CWIP in TESCO's rate base are received by all customers.
One such benefit is a reduction in fuel costs and the usage of alternative fuel sources.
12.
CWIP must be calculated in the manner proposed by the Cysission Staff to be a valid deteratination of TE!,CO's financial integrity. ACCRN's method of calculating CWIP would distort the financial indicators relied upon by investors.
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Occket Mo. 3250 Page 33 13.
TESCO requires a rate base.orking capital allowance of $51,067,984, the components of wnich are:
Materials and Supplies 5 9,577,417 Merenandise (292,514)
Net Materials and Suppites
$ 9,284,303 Fuel Stock 19,354,254 Prepayments 4.583,502 Werting Funds 4,241,098 Cash Working Capital 12.999,327 Total Worting Capital
$ 51,057,984 14 A proper net original cost and net current cost mix to use in calculating TESCO's adjusted value of invested capital is 63.S75% net criginal cost and 36.125% net current cost because this six procerly acccunts for inflation. Using this mix, TESCO's adjested value of invested capital is $1,677.207,55$, the compenents of wnich are:
Net Plant - Original Cost
$1,100,955,464 Percentage Mix 63.375% $ 703,235,303 Net Plant - Current Cost
$1,957,063.251 Percentage Mix 36.125 7C6,990,909 CWIP 259,039,930 Plant Held for Future Use 3,948,445 Nuclear Fuel in Process 25,581,796 Working Capital 51,067,984 Customer Genosits (3,920,772)
Accumulated Oeferred FIT (69,753,408)
Reserve for Insurance and Casualties (1,302,321)
Other (7,175,260)
Adjusted Value of Invested Capital
$1,577,207,556 15.
TESCO has a capital structure as set out below. The costs of each campenent cf that capital structure are reasona31e and proper and will maintain t.Me financial integrity of the utility:
Canoonent Weighted Cost Iten Amount 1 of Total Cost of Cacitsi Long Term Deot
$ 690,195,916 41.79:
S.32t%
3.479 Notes Payable 359,097
.05 6.I89%
0.003 Preferred Stock 209,523,359 12.59 S.110%
1.029 Common Equity 653,798,504 39.58 15.225%
6.025 Acc. Def. Inv. Tax Credit 97.352,327 5.89 11.197%
.660 Total
$1.551,329.703 100.00%
11.197%
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Doctet No. 3250 Page 39 16.
A return of 9.17% on TESCO's adjusted value of invested capital, or
$153,831,327, is reasonable and should be ad:pted because it provides a return sufficient to maintain TE300's financial integrity and provides a reasonable return on stockholders' and bencholders' investments without being unduly burdensone on consumers.
17.
A return of 11.19% on - TESCO's invested capitsi is ressenable and snould be ad:pted for the reasons set forth in Finding cf Fact No.16.
18.'
TESCO has an adjusted cost of service of 5753,257,950, the c:mponents of which are set forth below. Given this c:st of service and TEICO's
$271.437,310 fuel and other revenues, TESCO has a base rate revenue requir eent of $431,320,540.
Fuel 5 257,060,559*
Operatiens I. Maintenance 146,442,523 De:reciation 50.985,049 Taxes Other than Income 49,351,020 Federal Incone Taxes 85,303,531 Interest en Customer Deposits 292,336 Return 153,331,327 Total Cost cf Service
- 753,257,950 Fuel and Other Revenues (271,437,310)
Base Rate Revenue 1 481,320,540 Test Period Base Rate Revenues (414,999,505)*
Base Rate Revenue Deficiency 66,321.135
- These items reflect the Staff's price elasticity adjustments which do not reflect the Exminar's recommended cost of service and must te mended as discussed in this Re;crt.
19.
The cast :f senice adjustments re::rsented by the Exniner and utilized in deriving Finding of Fact No.17 are reasonable and shculd be adcoted for the ress ns set fcrth in this Report. W/ita the
/
exceptiens fcund in the Staff's testimony, as ad:cted by the Exsiner, there is insufficient evidence in this record to conclude that any financial transactions tet een TESCO and its affiliate or any other TU affiliates violate the standar:s of PURA, 541(c)(1).
'alth the exception of those centributions excluded by the Staff, as adepted by the Exniner, there is insufficient evidence to conclude that a9y remaining contributions In TE5CO's cost of service violate the Commission's Rules.
20.
Given TESCO's adjusted c:st f service and revenues set for th in Finding of Fact No. '9, subject to the cavest noted therein, TEICO has a base rate revenue deficiency cf 166,321,125.
This reverue deficiency is $36,083,225 Tess than TESCO's ;recosed rate increase as sat ferth in its statutory stateent of intent and is $30,350,237 less than TESCO's ;r:;osed rate increase as that increase eas :alculated by the Staf f.
e Ocetet No. 3253 Page A3 2!.
The c:s aliccatiens and r.tte structures precosed ny TEK3, if pre erly amended to conf:r:s s ne cost allocatien and rate design rec:mnendations and guidelines stated by the Exsainer in 5tv cf this Re:crt, will te based on sound ratemaking principles and should te ad:sted.
Suca rates are net unreasonacly discriminat ry, preferential, er prejudicial. They will a11:w TEK3 to recover frem each cust:mer class mest :f the c:sts ass:ciated wita ;reviding service to that class without creating an unreasonante burden upon any single class =f cust:rners. Saca rates =111 te censistent anong esca cust:mer within any given class and will rec:ver nat custcmer's centrisutions to nis class' ::st cf seavice.
22.
A:endments to TEK3's preposed seavice rules and regulatiens.nich c:nfers wita :ne rec:x= 4ndations and guidelines stated by the Exniner in 57 :f this Recert, will result in n:ndiscriminat:ry and non;referential service to all TE%3 cust =ers.
The non-service related caarges rec 3 mended by the Exciner tnerein allt result in eac3 cust mer saying his fair snare cf the c:st cf individuali:ed servicts recuire2 by that custz:er.
23.
There is insufficient evideace in this record to make TEK3-s;ecific PGPA findings. 5(nee no sucn 'Indings are ;cssiale, no intervence F gr:up is entitled to reiscurse:ent cf their rate case ex:entes.
C:nclusiens f taw
.1 TEK3 is classified as a public utility under 53(c)(1) cf the Putlic Utility Regulat:ry Ac:, TEX. REY.CIV.5 TAT.MM. art.1416c.
2.
The 03nmissicn nas ratenai'n; jurisdiction in tais case nita res:ect to all custoters act subject to the original jurisdiction of ary municipality, ;ursuant to PURA, 517(e), and wita res:ect ts custsers within the unici;alities IIsted in Finding f Fact Num er 5, :ursuant to PGA, 525(a). The rates a:; roved ny the Commission in this decket may net te charged to tacsa cust:mers within eun!cipalities anfen navt not surrendered their Original ratesaking jurisdiction over RK3 and unich are not listed in Finding cf Fact 1c :er 5.
s
e Ocetet Mo. 3250 Page 41 3.
Pt.;RA, 527(b) charges tne Commission alth fixing ;reser and a:eautte rates and metacds of decreciation, ascetization, er depletien of tne several classes of pr::erty of each puelle utility.
Under. this provisien cf the Act, TESCO's preposed depreciaticn, amortization, and decletion rates, except where the same differs fran the Examince's recommendations, are pec:er and must be ac:sted.
4 Pursuant' to PURA, 540(b), TESCO Mas the burden of ;reving that its procesed rates are just and reasonaale. To the extent recomenced by the Examiner, TESCO has met this burden cf ;rcef.
5.
Pursuant to PURA, 554C(b) and 41(c)(1), TESCO bears the turden f
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proving that papents to affiliated interests fer c:sts of services, or of any pre erty, right, er thing, r interest ex;ense tre no ht;ner than ; rices charged by the su;;1ying affit tate ta its other affiliates er divisions fer the same iten er items as charged to unaffiliated
- ersons er c
- r:crations. With the exceptiens n:ted by Me Exefner, TESC3 has established a prima facia case constituting the pre cnderance of the credible evidence en such issues. Such a prima f acia case reets TESCO's bur:en of ;roef in this. docket.
6.
The Examiner's reconmendatiens herein will alicw TESCO to recover its reascnasle and pr:;er coerating ex:enses t:getner with a reasona31e return en its -Invested capital pursuant to PURA, 539, but will not yield more Man a f air return en TESCO's adfusted value of investad ca: ital as required by PURA, 540(a).
7.
Rates designed acc:rding to th e guidelines recommenced by the Ex niner, if precerly implemented, are reasonaale - and non-discriminat:ry and shculd te a: proved by the Csmissica for c:r:clying with the ratemaking criteria of Article VI of tne Act.
8.
TEIC3's present rates for service in uninc:r; crated areas and within the municipalities cver which tne C:enis s ion is authori:ed to exercise its Original and a;;ellate furisdictions are insufficient t:
provide TE503 nith the revenues a: proved hertin and sneufd tnerefore be ar,l justed to c:cfors to the rates estabitsned herein for each class cf semice.
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Docket No. 3250 Page a2 9.
Uncer the definition of rates found in PURA, 53(d), service rules and regulati.ns constitute rates. Under FURA, 5537 and 33, tne Commission is charged with the review cf such service rules and regulations for compliance with the Act. Under PURA, 516: the Comnission is enarged with regulating and suoervising the business of every utility to insure that all utilities coerate in the puolic interest; therefore, the Commission is autherf red to establish coerational policies with which a ut111ty's servi,c,e rules and regulations must conferm.
Acccedingly, the reconmenced changes to TESCO's service rules and regulations found in 5V cf this Report are pecper for the reasons cited therein.
Additionally, pursuant to 516 cf ' the Act, the Cc= mission may order a utility to monitor the Commission's holding in a docket in wnich that utility is a party and may order the utility to modify its tariff, if necessary, to conport with such rulings.
10.
Under the terms of the Public Utility Regulatory Policy Act cf 1973, the Conmission is charged with dete-mining whe ther or not the appilcation of the various statutory standards recited therein is appre;riate for designing the rates of and/or regulating the operations cf electric utilities of a statutorily defined si:e. TESCO is such an electric utility; however, there is insufficient evidence in this record to mate such a determination and one cannet be made.
11 Pursuant to PURPA, 5122, an intervence who, through his advecacy of a PURPA standard, sucstantiallf Lentributes to the accotion of that standard by the Comtission for the utility in question, may have his retscnable rate case expenses reicursed by the utility. However, if there is insufficient evidence in the record to itake PURPA findings, no intervence group is eatitled to such concensation.
Respectfully suomittad,
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Vivik n. LErPA //
HE/v11MGS EXAMING APP 90VE3 on this the 9 % day of SEPT D 2ER, 1930.
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coCxtT no. 3250
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ATTACHMENT
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DOCKET NO. 3250 APPLICATION OF TEXAS ELECTRIC I-PUBLIC UTILITY C.Arg$$h"'!
SERYICE COMPANY FOR AUTHORITY I
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4/St OF TEXA TO CHANGE RATES' I
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STIPULATION 6
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This Stipulation is made and entered into by and betweenT Applicant, Texas Electric Service Company ("TESCO"), the five intervenor electric cooperatives ("CCOPS"), Brazos Electric Power Cooperative ("BRAZOS") and Community Public Service Company
(" CPS"),
for the purpose of compromising, settling and agreeing upon certain cost of service allocation and rate design issues existing among and between them, as parties in this proceeding.
The undersigned parties, acting by and through their respective officers, stipulate and agree as follows:
l I-
. This Stipulation shall be filed jointly as an exhibit and mada a part of the record in these proceedings.
By the making and filing of this Stipulation the parties jointly. propose and request that the matters stipulated to herein be approved, adopted and made a l
l part of the final order issued in this proceeding by the Commission.
The matters agreed to herein are settled and ccmpromised solely for the purpose of this proceeding, and shall not be deemed to be admissions or agreements binding upon any party for the purposes of or use in any proceeding other than this Public Utility Com-mission Cocket No. 3250, and any judicial appeals or rehearings resulting therefrom.
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.II Cost of Service Allocations i
The parties agree and stipulate that the cost of service allo-l cation method and proposed allocations, as contained in the pre-i~
filed testimony and exhibits of Staff witness Lee are just, reason-
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able and appropriate and should he adopted in the final order in l
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this proceeding.
III i
General Rate Design The parties agree and stipulate that the final order in this proceeding should adopt t.he folicwing rate design structures, which are just, reasonable and appropriate:
- 1. TESCO's proposed 80/30 rate for resale customers, including proposed transmission service credit (as affected by final revenue recovery awarded, but to be not less than -20C per KW) and.cther features as proposed therein, and elimination of~ conjunctive billing.
- 2. TESCO's extension policy, as set forth in TESCO's proposed i.
Service Regulation.
- 3. TESCO's Resale Rate W tariff shall be modified to include the following:
(a) " NET MONTHLY SILL
"$1.00 per KW for each current month maximum KW in excess of the maximum' electrical load specified in the agree-ment for electric service."
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This language shall be deemed in lieu of any similar pro-vision existing in outstanding agreements for electric service between TESCO and resale customers.
(b) " DEMAND The current month maximum KW, provided, however, that for customers having not less than one full month of
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on-peak KW history the KW thus determined may not exceed the sum of the maximum on-peak KW plus 30% of the amo'unt
, by which the current month maximum KW exceeds the max-imum on-peak KW; but not less than 80% of the maximum on-peak KW; nor, during the initial 12 months of service following connection of the point of delivery. less than 50% of the contract KW for that point of delivery."
- 4. The price elasticity coefficient factor, and the application thereof to rate classes, as proposed in the pre-filed testi-many and exhibits of Staff witness Vogel.
IV Resale Rate W Design For the purposes of designing a wholesale rate applicable tc l
members of TESCO's resale customer class, the parties agree that TESCO shall design.a rate to recover frca such class its respective I
share of total revenue requirement, as awarded by the final order in this proceeding, in the following manner:
- 1. A base rate revenue requirement frem the proposed resale class shall be determined, based upon a relative rate of return for l
l that class which bears the same approximate relationship to the l
l total TESCO return as originally proposed in this proceeding.
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- 2. TESCO shall ten run a cost of sarvien udy for the COOPS and BRAZOS (herein called the, " COOP GROUP")
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and a cost of service for CPS and the cities included in the proposed resale class (herein called the "NON-COOP GROUP"), applying to both the COOP GROUP and NON-COOP GROUP a rate of return equal to the rate of return used to develop the base rate requirement in the pre-ceding paragraph 1.
The ratio which the resulting base rate revenue requirement for each of thh COOP GROUP and the NON-CCOP GROUP bears to the total of the base rate revenue requirements developed for each group shall be multiplied times the base rate revenue requirement developed in paragraph 1 to arrive at the-revenue objective for each group.
The determination of base rate revenues shall mean total revenues, le's's fuel and "other."
- 3. TESCO shall then atte=pt to design a resale base rate which will yield frem each group an amount equal to its respective base rate revenue objective.
If TESCO is able to design a resale 4
base rate which yields from each group an amount of revenue which does not vary from that group's revenue objective by an amount in excess of 0.5% times the base rate revenue objective of the group having the largest revenue objective, then that resale base rate shall beccme the applicable base rate for i
j each member of ' the resale class.
1
- 4. If TESCO is unable to design a resale base rate which will meet such condition (i.e., a variance of less than 0.5%),
then TESCO shall establish a ccop resale class, cceposed of the COOPS and BRAZOS, and a CPS resale class, composed of CPS, and'another resale class, ccmposed of the Cities of Bowie and Goldsmith.
TESCO shall then design and establish a
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separato rosale rate for each such class; provided, that the three resale rates sha'11 be designed to produce an essentially
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ecual relative rate of return for each such class, and each party agrees that it shall not seek a relative rate of return for its class different frem the relative rate of retur$ for the other two classes.
V Miscellaneous
- 1. TESCO shall provide to resale custe=ers icad research data, to he delivered monthly, on non-returnable magnetic tape, at TESCO's costs as set forth in Office Me=o dated July 22, 1980, and attached to this Stipulation as Exhibit "A".
TESCO's Rate M Miscellanecus Service Charges shall be amended to set forth those charges detailed in said. Exhibit "A".
- 2. TESCO also agrees to make available to the other parties.to this Stipulation the data listed in attached Exhibit "B" no later than the day on which TESCO files its tariffs in ec=pli-ance with the final order in this preceeding.
l TEXAS ELECTRIC SERVICE COMPANY By vice-Prestce..t I
I LYNTEGAR ELECTRIC CCOPERATIVE, INC.
By Manager CAP ROCK ELECTRIC CCC?E?.ATIVE, INC.
By Manager
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e MIDWEST ELECTRIC COOPERATIVE, INC.
Py Manager
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TAYLOR ELECTRIC COOPERATIVE, INC.
By Manager I
LONE WOLF ELECTRIC COOPERATIVE, INC.
By Manager BRAZOS ELECTRIC POWER COOPERATIVE, INC.
By Executive vice-Presicent COMMUNITY PUBLIC SERVICE COMPANY By vice-President
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case July 22, 1930 i
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L. Watson h1 C.
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Johnston From kE:
Load Research Data for 5 Western Co-ops Tesco will furnish 15-minute interval.lcad research data for all points of delivery of the above co-ops on a monthlv basis (one non-returnable magnetic tape) under the following terms and conditions:
- 1. A one-time i=plementation fee of $2500.
This fee (subject to change) vould be required again each time Tesco changes its current system (planned for early 1981).
- 2. A monthly fee of S4.00 per point of delivery (based on the assumption that the 5 Western Co-ops would want data for all points of delivery).
This fee would be subject to change as costs increase and would be a part of P. ate M Miscellaneous Charges.
- 3. Co-ops would have to understand and agree that mag-netic tapes do not always produce 100% correct and complete data.
- 4. Tesco reserves the right to terminate providing
=cnthly data for all or any poinr of delivery in the event that Tesco, in its sole judgment, requires the use of the tape recorder (s) at other locations.
This Tesco option could only be' exercised at points where co-op has'not paid company to install tape
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recorders.
R E C E I V E D.
JUL 221980 EXECUTIVE CEPI.
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EXHIBIT'"B" TESCO DOCKET NO. 3250
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TESCo will provide the following data:
- 1).For the actual test year usage for each point of delivery:
a)
Actual metered maximum demand b)
Billing demand under existing and proposed rate c)
Actual metered enargy and billing energy if different 2)
Adjusted energy billing units for each class, i.e.,
Cooperatives and other.
Also an explanation as to how the adjustments are developed.
3)
Billing under the existing and proposed rates for actual test year usage for each point of delivery.
The billing analysis will show base rate revenue only.
4)
Development of billing under proposed rates for adjusted test year revenue for Cooperatives and other.
Also provide an explan-ation as to how using data from #2 and #3 the revenue under 'the proposed rates for adjusted test year usage is developed.
5)
Monthly fuel f actors used for actual and adjusted test year usage.
6)
Copy of cost of service studies used to compute the revenue requirements for the entire wholesale class and the Cooperatives and others.
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7)
Components of total revenue for Cooperatives and others under proposed rates:
t a)
Base rate c
b)
Fuel j
c)
Other t
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DOCKET NO. 3250 ATTACHMENT IdII7 dele !
DOCLET tio. 3250 Page 1 of AcC t. No.
Description Classification Rationale for Staff Classification TISCO STAFF 105 Plant Ifeld for Future Use Proportional to sum of Generation This plant pertains to items that can be Demand Accts. 310 - 399 Transelssion broken down by function as shown on SHT.5. Generation and transmission Olstribution Proportional to sum of plant are required to serve all custo-Accts. 362 - 373 mers and distribution plant relates to distribution customer. This also makes it consistent ulth classification of CWIP.
10F Customer Deposits Customer Customer Espend almost *01 of t/ Company's (All customers)
(41stributton secondary deposits are received from residential customers only) customers. Therefore, the cost should be allocated te distribution secondary customers.
506 Production Operation Demand Proportional to sum of This expense relates to occurence of Hiscellaneous Espenses Accts. 502, 505 and 567 costs in Accts. 502, 505 and 507 and should tee Classified on a Composite of their total.
904 Uncollectible Accounts Customer Customer Almost 85% of the uncollectible accounts (All customers)
(Distribution secondary arise from the residential customers, customers only)
This also makes it consistent with the classification of Acct. 10F, Customer Deposits.
J 924 Property Insurance Proportional to sum of Proportional to sum of This empense relates to all plants in i
AfG Acets. 500 - 916, Acets. 310 399 service. This method of allocation encept for Acct. 501 also makes it consistent =lth the classi.
fication of Acct. 10G, Insurance Reserve, i
403 Depreciation and Proportional to sum of. Proportional to sum of each The Company books record depreciation Amorttaation Espense Accts. 310 - 399 functional group.
and amorttaation empense by function Accts. 310 - 316, 350 - 358, and each generation, transmission.
362 - 373, 389 - 399 distribution and general empense f or Acct. 403 should be classified proper.
tionally to sum of plant in service.
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d DCCXET *to. 3250 APPLICATICM CF TEJAS ELECTRIC P'XIC UTIL!n CCr?'!$31CN say!CE CC.*PAM FCR A AATE INCAEASE CF TEIA$
CRCD In public meeting at its offices in Austin, Texas, the Public utility Comeissten rf Texas f1ncs that, after statut:rtly required notice was provided to the puolfe and to interested parties, the anove-styled and docxetec satter was heard by s Comeission Hearings Examiner who prepared and flied a Resort centaining Ffndings of Fact and Conclusions cf Law, whics Recert is hereoy expressly adopted and made a part hereef. The Comnission furtner issues the following Creer:
1 The petition of Texas Ele <tric service comoany (TEICC) is herecy granted in part and dented in ; art, as set out in the Exarsiner's I
Recert.
2.
TESCO is hereey ordered to rer9n its cost of service stucy, as modif fed to reflect the cost of service and c:st allocatten enanges reemenended by tae Exminer, and using the revenue adjustments approved herein. TESCO snail within 20 days frora the date herect submit the results of this study to tne Camelssion for its review, sacwing how rsvenues alll te allocated mong rate classes. The c:st of service study, unen rerun, shall inccrporate all changes in rates, j
schedules, and service rules cr:ered herein. A c:oy of the study snail be served upon each Of the parties hereto at the 19ee it is fited with the Casatssion.
3.
TEICO snall file five c:of es of its tariff, revised in ae:cedanct eith the Exasiner's Repcrt and the terms of this Ceder, and suff fcient to generate revenues no greater tnan tnose prescribed in that Asocrt and this Crder, with the Comissten Secretary and one cecy with esen of the Intenriors within 20 days of the date nereof. The Commission Staff shall nave 20 days from the date of the filing to review anc to approve or reject the tariff. All parties to this cocket sna11 Nave 10 days from the date of that filing to flie their objections, if any, to the revised tariff. The tarf ff shall be deced accroved and snail tecome effective uson the expiration of 20 days Ifter filing, or scener upon actification :f accr: val by the Commissten secretary. In tnt event of rejection. TESC3 sna11 nave 15 4:dittenal days ta f11e an amenced tariff, alta the same review precacures to again a:cly.
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Occhet lo. 3253 C40ER Page 2 4
The revised and a:;r:ved rates shall ta cMarges only f:r service resceres in areas over enten tats Caustssion is exertising its crf;tnal and a: pellate furtsstetten as :f the adfeur sent :f tae hearing on ut sertts heretn, and said rates may te caarged :nly f:r servfee reedered af ter the tariff a::coval date.
5.
This Crier is cesses is te final 2:en the cate of renett!:n. A::reval
- f tae revises tariff in comof f ance alta tais Creer sna11 e teamed to t
te final :n tae cate f its effectiveress either ty Oceratics of this 4
Crcer er by notification frees t3e Caseissten Secretary, nicaever shall first oc:/.
6.
TE 00 is ex;ressly creared to senit:r the Cawission's mol:teg in Ocekets No. 3118 and an: 3234 and ta file m:1ficatt:ss to its tariff.
if necessary, as *et:rimendec by the Emanifier.
7.
The C3:sission ex:ressly fin:s that there is insufficient eviceace in this re :rs to make f fntings uncer the Pu lle t;ttitty tegulat:ry j
Policy Act of 1973 as it a: plies to TE5;3. Fce tats reas:n, the Casstssion fines tnat no party herein is entitief to retmurseent of its este case ex;enses under that Act.
3.
All ctt:es, retuests, a::ltettices and ;re:: sed Flacings of Fac: Or I
con:Tusicas :f Law net ex;ressly ytsted herein are cented far east :f reelt and f:r teing unsu:;crted by the ;re:Or erance of the creditle
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evidence in the re::rt ef tais d:cket. The Corssissics ex;ressly finds that es:n and every :ne :f tse ten ;r:cosed Fincings of Fact f:und in tMe !rtef Of ICRA at 13-19 are unsg::Orted by t.9e ;re: ncerance Of the crectale evide=:ce in the ree:rg cf this cectet. Fce tais reas:n, es:n and every :ne :f ACOR1's 10 ;r:::ses Findings :f Fa:t is teniet.
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REMOERE3 AT A:571.1 TE MS, en tais the day c'
, 1980.
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