S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * *

Transcription

1 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the Commission s own ) motion, to consider changes in the rates ) of all the Michigan rate-regulated ) Case No. U-0 electric, steam and natural gas utilities ) to reflect the effects of the federal Tax ) Cuts and Jobs Act of 0: ) DTE GAS COMPANY files an ) application for determination of Credit B ) as described in order U- ) ) REBUTTAL TESTIMONY OF CHARLES E. PUTNAM, CPA MICHIGAN PUBLIC SERVICE COMMISSION September, 0

2 REBUTTAL TESTIMONY OF CHARLES E. PUTNAM, CPA CASE NUMBER U-0 Q. Please state your name and business address. A My name is Charles E. Putnam and my business address is 0 West Saginaw Highway, Lansing, MI. 0 0 Q. Are you the same Charles E. Putnam that filed direct testimony on behalf of the Michigan Public Service Commission (MPSC or Commission) Staff (Staff) in the instant case? A. Yes. Q. What is the purpose of your rebuttal testimony? A. The purpose of my rebuttal testimony is to reply to the position of Residential Customer Group (RCG) witness William A. Peloquin. Q. Are you sponsoring any exhibits in this case? A. Yes. I am sponsoring Exhibit S-.: Credit B Refund with Compounded Interest. Q. On what issue does Staff disagree with RCG? A. Staff disagrees with RCG s recommendation to use the.% overall rate of return from DTE s U- gas rate case order, with compounding. Under the Company s proposal, The Credit B amount that accumulated in January 0, would be refunded with simple interest in January 0. The same pattern would hold for the Credit B amounts incurred from February through June 0. The Credit B amounts would be refunded within a year after they had been incurred. This would make them a current liability (a short-term debt) and the use of a short-term interest rate is appropriate. The use of the overall rate of return would be punitive. Q. Is there a short-term debt component in the overall rate of return? A. Yes, per Staff s exhibit No. S-, Schedule D- in Case No. U-, that rate was.%.

3 REBUTTAL TESTIMONY OF CHARLES E. PUTNAM, CPA CASE NUMBER U-0 0 Q. Does Staff propose to use the.% short-term debt rate in computing interest on the Credit B amounts? A. No. The short-term interest rates change over time. The company s proposal to use actual short-term rates for January June 0 and a forecasted rate for future months is appropriate. Q. Did Staff use compounding interest in its Exhibit S-. A. No, Staff used simple interest. It was Staff s position that the effect of compounding interest was immaterial and added another level of complexity to the case. Staff did prepare Exhibit S-. using compounded interest for informational purposes. Q. What is the effect of using compounded interest? A The effect of using compounded interest instead of simple interest is to raise the total refund by $, from $,, to $,00,. This is an increase of 0.0%. Q. Does Staff propose that the Credit B refund be calculated using compounded interest? A. As the effect is immaterial, Staff would support either method for calculating interest. Q. Does this conclude your testimony? A. Yes.

4 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter of the Commission s own ) motion, to consider changes in the rates ) of all the Michigan rate-regulated ) Case No. U-0 electric, steam and natural gas utilities ) to reflect the effects of the federal Tax ) Cuts and Jobs Act of 0: ) DTE GAS COMPANY files an ) application for determination of Credit B ) as described in order U- ) ) EXHIBIT OF CHARLES E. PUTNAM, CPA MICHIGAN PUBLIC SERVICE COMMISSION September, 0

5 DTE Gas Company Case: U-0 Credit B Refund With Compounded Interest Witness: CEPutnam Exhibit S-. Date: // Page of MCF A A GS- GS- S ST LT XLT XXLT Total Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly TCJA Actual Volume Volume Volume Volume Volume Volume Volume Volume Volume Volume Jan- 0,,,,,, 0,0,,0,0,,,0,,,,0 Feb-,,,0,0, (,) 0,,,,,0,,,,,, Mar-,,,,, 0,0,,0,,,,0,,,,,0 Apr-,, 0,,,,,,,,,,,,,,, May-,, 0,,,00,,,,,,,,,,,, Jun-,,,,00,,,,,,,,,, 0,0,0 Total,0,,,0,0,,,0,0 0,,,0,,,,,0,0, Credit A rate A A GS- GS- S ST LT XLT XXLT Total Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly TCJA Credit Credit Credit Credit Credit Credit Credit Credit Credit Credit B Jan- $,, $, $,, $, $0, $, $0, $, $, $,, Feb- $,0, $,0 $,0, ($,) $, $, $,0 $,0 $, $,, Mar- $,, $, $,, $, $, $, $, $, $0,0 $,, Apr- $,0, $, $,0 $0, $, $, $,0 $0,0 $, $,0, May- $,0 $,00 $, $, $, $, $, $, $,0 $,, Jun- $,0 $, $, $,00 $, $,0 $, $,0 $,0 $,0, Total $,0, $,0 $,,0 $, $0,0 $,0,0 $0, $,0 $00, $,, MCF A A GS- GS- S ST LT XLT XXLT Total Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly TCJA Forecasted Volume Volume Volume Volume Volume Volume Volume Volume Volume Volume Jan-,,,0,0,0,,,,,,0,,,0,0,0,0 Feb-,0,,,,,,,,,,,,,,,,0 Mar-,, 0,,,0,,,,0,,,,,,,,0 Apr-,,0,,,,,0,,,,,,0,0, 0,, May-,,,,,,,,,,,0,0,,,,, Jun-,0,00,,0,,,0,,,,,,0, 0,0, Total,,,,,,0 0,,00, 0,,,0,0,,,0,,, Interest Allocate A A GS- GS- S ST LT XLT XXLT Total Principal $,0, $,0 $,,0 $, $0,0 $,0,0 $0, $,0 $00, $,, %.%.%.% 0.% 0.%.%.%.%.0% 00.0% Allocated $, $, $, $,00 $, $, $, $,0 $0, $, P&I $,, $, $,, $0, $, $,0, $, $, $,0 $,00, Credit B Rate $0. $0. $0. $0.0 $0. $0.0 $0.00 $0.0 $0.0 A A GS- GS- S ST LT XLT XXLT Total Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Total Refund Refund Refund Refund Refund Refund Refund Refund Refund Refund Jan-,,,,,0,0,,,,,0,, Feb-,,,,,,0 0,,, 0,,,, Mar-,,,0,,,,0 0,,0,0,,, Apr-,0,,,,,0,,0,,00,0, May-,, 0,,,,, 0,,,,0 Jun-,,0 0,,, 0, 00,,,0,0,0 Total,,0,,,0 0,,,0,,,,0 $,00, Interest Beginning Current Mo. Interest Interest Days Monthly Ending Calc. Balance Activity Base Rate Interest Balance Jan- $0 $,, $,,.0% $, $,,0 Feb- $,,0 $,, $,,00.% $, $,, Mar- $,, $,, $,0,0.% $, $,, Apr- $,, $,0, $,,.% 0 $, $,, May- $,, $,, $,,.% $, $,0, Jun- $,0, $,0, $,0,00.% 0 $,0 $,, Jul- $,, $0 $,,.% $, $,, Aug- $,, $0 $,,.% $,0 $,, Sep- $,, $0 $,,.% 0 $,0 $,0, Oct- $,0, $0 $,0,.% $, $,, Nov- $,, $0 $,,.% 0 $, $,, Dec- $,, $0 $,,.% $, $,0, Jan- $,0, ($,,) $,,.% $0, $,0, Feb- $,0, ($,,) $,,0.% $, $,, Mar- $,, ($,,) $,0,0.% $, $,, Apr- $,, ($,0,) $,,.% 0 $,0 $,, May- $,, ($,,0) $,,.% $, $,0, Jun- $,0, ($,0,0) $,.% 0 $ ($) Jul- ($) ($,) $,

6 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * In the matter on the Commission s own ) motion, to consider changes in the rates ) of all the Michigan rate-regulated ) electric, steam, and natural gas utilities ) to reflect the effects of the federal Tax ) Case No. U-0 Cuts and Jobs Act of 0: ) DTE GAS COMPANY files an application ) for determination of Credit B as described ) in order U- ) ) QUALIFICATIONS AND REBUTTAL TESTIMONY OF NICHOLAS M. REVERE MICHIGAN PUBLIC SERVICE COMMISSION September, 0

7 QUALIFICATIONS OF NICHOLAS M. REVERE CASE NUMBER U-0 PART I 0 0 Q. Please state your name and business address. A. My name is Nicholas M. Revere. My business address is 0 West Saginaw Hwy, Lansing, Michigan. Q. By whom are you employed and in what capacity? A. I am employed by the Michigan Public Service Commission (MPSC or Commission) as the Manager of the Rates and Tariff Section of the Regulated Energy Division. Q. Would you briefly describe your academic background? A. I received a Bachelor of Arts degree in Political Science and a Bachelor of Arts degree in Economics from Michigan State University in 00. In August of 00 and 00, I completed the annual National Association of Regulatory Utility Commissioners (NARUC) regulatory studies program at Michigan State University, which included courses on ratemaking, rate case auditing, regulatory policy, and other regulatory issues. In September of 00, I completed the Institute for Public Utilities Advanced Regulatory Studies Program. In October 0, I completed the Association of Edison Illuminating Companies Advanced Course in Load Research. Q. What are your current responsibilities at the MPSC? A. As Manager of the Rates and Tariff Section, I supervise the members of and oversee the responsibilities of the section. The responsibilities of the section include, but are not limited to, analyzing utility reports, financial records, and rate case filings to determine the appropriate level of rates for regulated energy utilities, utilizing laws, regulations, and Commission policies. The section is charged with conducting MPSC Staff (Staff) Cost of Service allocation studies (COSS) and rate designs for gas and electric utilities and reviewing special contracts, gas storage rates, and Act intrastate pipeline rates. The

8 QUALIFICATIONS OF NICHOLAS M. REVERE CASE NUMBER U-0 PART I 0 0 section is also involved in customer complaint and inquiry processing, updating electric and gas comparison spreadsheets for the MPSC website, and tariff administration. Q. Have you previously filed testimony in any cases before the Commission? A. Yes. I filed testimony in the following cases: Case Company Case Type U- Consumers Energy Electric Rate Case U- MichCon Gathering v. Highmount Act Complaint U- Detroit Edison/DTE Electric Rate Case U- MichCon/DTE Gas Rate Case U- Consumers Energy Gas Rate Case U- SEMCO Gas Rate Case U- Consumers Energy Electric Rate Case U- Consumers Energy Electric RDM Recon U- Upper Peninsula Power Company RDM Recon U-0 Detroit Edison/DTE Electric RDM Recon U-0 Wisconsin Electric Power Company Rate Case U- Detroit Edison/DTE Electric ECIM Recon U- MichCon/DTE Gas Rate Case U- Consumers Energy Gas Rate Case U- Consumers Energy Electric Act U- Detroit Edison/DTE Electric Act U-0 MichCon/ DTE Gas IRM U- Consumers Energy Electric Rate Case

9 QUALIFICATIONS OF NICHOLAS M. REVERE CASE NUMBER U-0 PART I 0 0 U- Detroit Edison/DTE Electric Rate Case U- Consumers Energy Gas Rate Case U-0 Consumers Energy Electric Rate Case U-0 Detroit Edison/DTE Electric Rate Case U- Consumers Energy Gas Rate Case U- Upper Michigan Energy Resources Corporation CON U- Consumers Energy Electric SRM U- Detroit Edison/DTE Electric SRM U-0 Consumers Energy Electric Securitization U- Upper Michigan Energy Resources Corporation SRM U- Upper Peninsula Power Company SRM U- Detroit Edison/DTE Electric Rate Case U- Cloverland Electric Cooperative SRM U- Consumers Energy Electric Rate Case U-0 Indiana Michigan Power Company Rate Case U- DTE Gas Rate Case U-0 Upper Peninsula Power Company TCJA Credit A U-0 Michigan Gas Utilities TCJA Credit A U-00 Upper Michigan Energy Resources Corporation SRM U-0 Upper Peninsula Power Company SRM U-0 Cloverland Electric Cooperative SRM

10 REBUTTAL TESTIMONY OF NICHOLAS M. REVERE CASE NUMBER U-0 PART II 0 0 Q. Did you file direct testimony in the instant case? A. No. Q. What is the purpose of your rebuttal testimony in this case? A. The purpose of my rebuttal testimony is to respond to certain positions and proposals put forward by Residential Customer Group (RCG) witness William A. Peloquin and Attorney General (AG) witness Sebastian Coppola. Q. Are you sponsoring any exhibits? A. No. Q. What does RCG witness Peloquin propose related to the Credit B refund? A. Witness Peloquin proposes that Credit B be calculated individually for each customer and returned in one month. Q. Does Staff agree with RCG witness Peloquin s proposal? A. No. While Staff recognizes the Commission s desire to quickly return the Credit B amounts, Staff also (unlike RCG) recognizes the Commission s desire to be deliberate in the return of Credit B amounts. The Commission adopted the Staff s proposal for all three credits, which stated: Staff recommends that this credit be spread over no longer than six months, and interest be applied to the un-refunded balance of Credit B at the short-term interest rate. Once the refund is issued, within months of its creation, Credit B would end. Credits A and B allow an incremental approach to the final calculation of the impacts of the TCJA, while allowing ratepayers to receive the benefits in a timely MPSC Case No. U-, //0 Order, p. 0.

11 REBUTTAL TESTIMONY OF NICHOLAS M. REVERE CASE NUMBER U-0 PART II 0 0 matter. MPSC Case No. U-, STAFF S REPLY COMMENTS AND OPPOSITION TO RCG S MOTION FOR REHEARING OR CLARIFICATION, p.. By approving Staff s proposal, and stating that such a proposal would result in timely and deliberate refunds, the Commission acknowledged that a refund of Credit B amounts over six months was consistent with the Commission s desire that these amounts be refunded quickly. Q. Are there other reasons that the six-month refund period is appropriate? A. Yes. The refund period proposed by the DTE Gas Company (the Company) reflects the same months over which the initial overcollection occurred. Due to the seasonality and month-to-month variations of gas usage, such a refund period is more likely to return funds to customers in a manner similar to that in which they were originally collected. Therefore, the Company s proposed refund period should be approved. Q. What is Staff s position on the RCG proposal to return, in a single month, precisely the amount that was overcollected to each individual customer? A. While it is true that this method would be even more accurate than the Company proposal supported by Staff, there are two main reasons why this method is untenable. First, while RCG witness Peloquin claims that [a]ll DTE needs to do is sum up each customer s Mcf usage for January through June 0 and multiply by the applicable surcharge to determine each customer s base Credit B refund, this calculation is far from the simple activity implied when implemented for more than,000,000 customers. In fact, the Commission MPSC Case No. U-, //0 Order, p. 0. William A. Peloquin Direct Testimony, p..

12 REBUTTAL TESTIMONY OF NICHOLAS M. REVERE CASE NUMBER U-0 PART II 0 has repeatedly found that such a proposal is fatally flawed and too administratively burdensome to implement. Second, the implementation of a six-month over collection in one month would cause significant swings in customer bills. To avoid dramatic month-tomonth changes in customer bills, it makes sense to spread the amount over a longer time period. Therefore, RCG s proposal should be rejected. Q. What does AG witness Coppola recommend for the refund period? A. AG witness Coppola recommends the Credit B amounts be refunded over November and December of 0. Staff disagrees with this proposal for the same reasons as RCG s proposal. Q. What does AG witness Coppola recommend with regard to Credit B for the Investment Recovery Mechanism (IRM)? A. AG witness Coppola recommends that there should be an IRM Credit B refund. Q. Does Staff agree? A. No. Contrary to AG witness Coppola s assertion that the Company proposed no Credit B refund for the IRM because more was spent than collected, no refund was proposed because none is required. As stated by Company witness Jennifer C. Schmidt: [t]he IRM surcharges in effect from January 0 through June 0 reflect only 0 IRM costs, not 0 and 0 IRM costs. Jennifer C. Schmidt Direct Testimony, p.. As the surcharges charged during the period of January through June 0 only included the 0 See, for example, In re Detroit Edison Co Application, Mich App, ; NWd (0) (affirming PSC decision that implementing individual refunds would result in burdensome administrative costs that would have to be addressed in a future rate case).

13 REBUTTAL TESTIMONY OF NICHOLAS M. REVERE CASE NUMBER U-0 PART II revenue requirement, and the tax rate in 0 was %, not %, there is no overcollected amount to be refunded through Credit B. Q. Does this complete your testimony? A. Yes, it does.

14 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter, on the Commission s own motion, to consider changes in the rates of all the Michigan Case No. U-0 rate-regulated electric, steam, and natural gas utilities (E-File Paperless) to reflect the effects of the federal Tax Cuts and Jobs Act of 0: DTE GAS COMPANY files an application for determination of Credit B as described in order U-. / STATE OF MICHIGAN ) ) ss COUNTY OF EATON ) PROOF OF SERVICE Jennifer M. Brooks, being first duly sworn, deposes and says that on September, 0, she served a true copy of MPSC Staff Rebuttal Testimony and Exhibit Putnam, Revere, upon the following parties via only: Administrative Law Judge Hon. Sally Wallace Administrative Law Judge Michigan Public Service Comm. 0 W. Saginaw Hwy., rd Floor Lansing, MI wallaces@michigan.gov Attorney General Bill Schuette Joel B. King Assistant Attorney General Special Litigation Unit P. O. Box 0 Lansing, MI 0 kingj@michigan.gov ag-enra-spec-lit@michian.gov Association of Businesses Advocating Tariff Equity Bryan A. Brandenburg Michael J. Pattwell E. Cesar E. Chavez Avenue Lansing, MI 0 bbrandenburg@clarkhill.com mpattwell@clarkhill.com DTE Gas Company David S. Maquera Lauren D. Donofrio DTE Energy One Energy Plaza, WCB Detroit, MI david.maquera@dteenergy.com lauren.donofrio@dteenergy.com mpscfilings@dteenergy.com

15 Residential Customer Group Don L. Keskey Brian W. Coyer Public Law Resource Center PLLC University Office Place Albert Ave., Ste. East Lansing, MI Jennifer M. Brooks Subscribed and sworn to before me this th day of September, 0 Pamela A. Pung, Notary Public State of Michigan, County of Clinton Acting in the County of Eaton My Commission Expires: --0