October 1, If you have any questions, please feel free to contact my office. Thank you. Very truly yours,

Transcription

1 4 West llegan Street, Suite 000 Lansing, Michigan 489 T ( F ( Douglas J. ustin Michael E. Cavanaugh David E.S. Marvin Stephen L. Burlingame Darrell. Lindman Gary C. Rogers Mark. Bush Michael H. Perry Brandon W. Zuk Thomas J. Waters Michael S. shton H. Kirby lbright Graham K. Crabtree Michael P. Donnelly Edward J. Castellani Peter D. Houk Jonathan E. Raven Thaddeus E. Morgan nita G. Fox Elizabeth H. Latchana Brian P. Morley Max R. Hoffman, Jr. Thomas L. Sparks Paula J. Manderfield Marlaine C. Teahan Mark E. Kellogg Ryan K. Kauffman Jennifer Utter Heston Samantha. Kopacz Paul V. McCord Brian T. Gallagher Jonathan T. Walton, Jr. Laura S. Faussié Richard C. Vershave* Norbert T. Madison, Jr. Melisa M. W. Mysliwiec aron L. Davis Paul C. Mallon, Jr. Shaina R. Reed Jared. Roberts RETIRED Donald. Hines John J. Loose rchie C. Fraser ( Everett R. Trebilcock (98 00 James R. Davis ( Mark R. Fox (95-0 Peter L. Dunlap, P.C. *Licensed to Practice in Washington, Not licensed to practice in Michigan jheston@fraserlawfirm.com ( October, 08 Ms. Kavita Kale Michigan Public Service Commission 709 W. Saginaw Hwy. Lansing, MI 4897 RE: MPSC Docket No. U-04 Dear Ms. Kale: Enclosed herewith for filing in the above-referenced matter, please find the Rebuttal Testimony and Exhibits of manda M. lderson, along with the Certificate of Service. If you have any questions, please feel free to contact my office. Thank you. Very truly yours, Fraser Trebilcock Davis & Dunlap, P.C. JUH/ab Enclosures cc: ll counsel of record Jennifer Utter Heston FRSER TREBILCOCK DVIS & DUNLP PC LNSING DETROIT GRND RPIDS

2 STTE OF MICHIGN BEFORE THE MICHIGN PUBLIC SERVICE COMMISSION In the matter of the application of CONSUMERS ENERGY COMPNY for authority to increase its rates for the generation and distribution of electricity and for other relief Case No. U-04 Rebuttal Testimony and Exhibits of manda M. lderson On behalf of Hemlock Semiconductor Operations LLC October, 08 Project 064

3 manda M. lderson Table of Contents STTE OF MICHIGN BEFORE THE MICHIGN PUBLIC SERVICE COMMISSION In the matter of the application of CONSUMERS ENERGY COMPNY for authority to increase its rates for the generation and distribution of electricity and for other relief Case No. U-04 Table of Contents to the Rebuttal Testimony of manda M. lderson Page Response to Staff s Testimony... Response to BTE s Testimony... 8 Exhibit HSC-8 (M-8 Exhibit HSC-9 (M-9 BRUBKER & SSOCITES, INC.

4 manda M. lderson Page STTE OF MICHIGN BEFORE THE MICHIGN PUBLIC SERVICE COMMISSION In the matter of the application of CONSUMERS ENERGY COMPNY for authority to increase its rates for the generation and distribution of electricity and for other relief Case No. U-8 Rebuttal Testimony of manda M. lderson PLESE STTE YOUR NME ND BUSINESS DDRESS. manda M. lderson. My business address is 6690 Swingley Ridge Road, Suite 40, Chesterfield, MO RE YOU THE SME MND M. LDERSON WHO PREVIOUSLY FILED TESTIMONY IN THIS PROCEEDING? Yes. I filed Direct Testimony on behalf of Hemlock Semiconductor Operations LLC ( HSC WHT IS THE PURPOSE OF YOUR REBUTTL TESTIMONY? I will respond to the Michigan Public Service Commission ( Commission Staff s Direct Testimony of Mr. David W. Isakson, concerning Rate GPD distribution rate design. I will also respond to ssociation of Businesses dvocating Tariff Equity s ( BTE Direct Testimony of Mr. Jeffry Pollock concerning distribution cost allocation. BRUBKER & SSOCITES, INC.

5 manda M. lderson Page Response to Staff s Testimony PLESE SUMMRIZE YOUR RESPONSE TO STFF S TESTIMONY Staff s proposed Distribution Demand Charges for its Voltage Level,, and customers taking service under General Primary Demand, General Primary Time-of- Use, Energy Intensive Primary, and Large Self-Generator rates ( Rates GPD, et al. are not cost-based, for the same reasons that Consumers Energy Company s ( Consumers or Company Distribution Demand Charges proposed for these customers were not cost-based. Staff s proposed Distribution Demand Charges for Voltage Levels and are priced above cost, as calculated by Staff s own cost of service study ( COSS models, while the Voltage Level charge is set below cost of service. Further, Staff s rate design fails to reflect an appropriate allocation of the Substation Ownership Credits to all classes, and a proper proration between distribution and power supply rate recovery of the Skewing (Senior and Low Income revenue requirement. In the event Staff s COSS model is approved by the Commission in this proceeding, I propose adjusting the Distribution Demand Charges to better align with cost of service. Further, Staff supports Consumers proposed Substation Ownership Credits for Rate GPD, et al., which I address in my Direct Testimony. These Substation Ownership Credits are not cost-based, and in the event the Commission approves use of Staff s COSS model in this proceeding to develop distribution tariff rates, I recommend that the Substation Ownership Credits be calculated using the methodology that I presented in my Direct Testimony. BRUBKER & SSOCITES, INC.

6 manda M. lderson Page HVE YOU REVIEWED STFF S COSS? Yes, however, note that I do not take any position with regard to Staff s COSS model, except to indicate that the same distribution cost allocation errors that exist in the Company s COSS model also exist in Staff s COSS model, and should be corrected. I take no position on the cost allocation methodologies that differ between Staff and the Company s models. 7 8 PLESE EXPLIN WHY STFF S PROPOSED DISTRIBUTION DEMND CHRGES FOR RTES GPD, ET L. RE NOT COST-BSED cost-based rate uses allocated functionalized costs directly from the COSS, and divides those costs by class billing determinants in order to determine a tariff rate that is directly tied to cost of service, and is therefore fully cost-based. Comparing Staff s COSS results to its proposed Distribution Demand Charges shows that these charges are not cost-based. Exhibit HSC-8 (M-8 compares the total allocated distribution costs from Staff s COSS, found on Exhibit S-6 (SEG-, Schedule F-., with Staff s total proposed distribution revenue, for Rates GPD, GPTU and GPD GEI, found on Exhibit S-6, Schedule F-. These three classes are combined for ratemaking purposes. Rate EIP and GSG costs are not included in this analysis, because these classes are not subdivided into different service voltage levels within Staff s COSS model. Table below summarizes Exhibit HSC-8 (M-8, showing total revenue collected under Staff s proposed rates versus Staff s allocated distribution cost of service, by voltage level. Staff proposes over-recovering costs from Voltage Levels and, and under-recovering costs from Voltage Level. BRUBKER & SSOCITES, INC.

7 manda M. lderson Page 4 Voltage Voltage Voltage Total Total Staff Proposed Distribution Base Revenue $ 9,540 $ 6,7 $ 66,656 $ 9,569 Total Staff COSS Distribution Revenue Target $ 7,77 $ 4,45 $ 67,90 $ 89,54 Percent Overcollection bove/(below Cost % 4% -% % Source: Exhibit HSC-8 (M-8 TBLE Distribution Service - Staff Cost of Service vs. Proposed Revenue Rates GPD, GPTU, GEI - ($ PLESE DESCRIBE HOW YOU DEVELOPED EXHIBIT HSC-8 (M-8. The first section of Exhibit HSC-8 (M-8 provides Staff s total distribution proposed revenue for each voltage level of customers. Line 0 of Exhibit HSC-8 (M-8 shows the total distribution revenue proposed by Staff excluding the credits provided to customers for substation ownership. This total revenue excluding substation credits is the appropriate value for comparison to the COSS results because the COSS does not take into account the reduced cost for the Company based on customers owning their own substations. Further, the Company has indicated in discovery its agreement that the Substation Ownership Credit revenues should be collected from all other classes, similarly to how the Interruptible Credit and Self- Generation Capacity Credit are treated. Therefore, the proper revenue target for distribution cost recovery for Rate GPD should exclude the credit provided to customers for Substation Ownership Credits. Response to 04-HSC-CE-64, included in Exhibit HSC- (M-. BRUBKER & SSOCITES, INC.

8 manda M. lderson Page Section II of Exhibit HSC-8 (M-8 shows Staff s proposed COSS results for distribution demand and customer-related costs only. Line provides the post- COSS treatment of allocated Skewing, which represents the cost of the low income and senior citizen rate discount programs offered by Consumers. This additional revenue requirement is added after the COSS is performed, just as it is done in the Company s COSS. This revenue shift is shown on Exhibit S-6, Schedule F-., line 7. dding the COSS distribution revenue to the allocated Skewing amount provides the total distribution revenue target for Rate GPD, separated by voltage level on line 4 of Exhibit HSC-8 (M-8. This exercise, summarized on the previous page in Table, shows that Staff s proposed total distribution revenue from the Rate GPD class is % greater than the total distribution revenue target from Staff s COSS results. Voltage Level and Voltage Level proposed total distribution cost recovery is % and 4% higher, respectively, than the COSS results show, whereas Voltage Level proposed revenue is % less than Staff s COSS revenue target. The revenue-to-cost ratio is even more egregious for Voltage Level, as compared to that proposed by Consumers. s summarized on page 8 of my Direct Testimony in Table 4, Consumers proposed a revenue-to-cost ratio of only 6% for Voltage Level Rate GPD customers, whereas Staff s proposed distribution charges would overcollect allocated distribution costs by % DOES STFF S RTE DESIGN FOR RTES GPD, ET L. USE CONSUMERS PROPOSED COST LLOCTION OF THE POST-COSS REVENUE REUIREMENT DJUSTMENTS FOR SUBSTTION OWNERSHIP CREDITS ND SKEWING? Yes. Staff s rate design for Rates GPD, et al. reflect the same treatment of the Substation Ownership Credit and Skewing revenue requirement as Consumers uses. BRUBKER & SSOCITES, INC.

9 manda M. lderson Page 6 4 Staff s model restricts recovery of the Substation Ownership Credit revenue requirement to the Rates GPD, et al. classes only, and recovers the full amount of the Skewing Senior and Low Income Discount through distribution charges only, not through any component of power supply rates DID THE STFF FOLLOW THE COMMISSION DIRECTIVES FROM CONSUMERS LST TWO RTES CSES ND DEVELOP THE SUBSTTION OWNERSHIP CREDIT ON COST OF SERVICE? No. s I explained on page of my Direct Testimony, the Commission has previously indicated that the Substation Ownership Credit and Distribution Demand Charges should be cost-based. Staff s proposed rates are calculated similarly to the Company s, and for the same reasons that the Company s proposed rates are not cost-based that I described in my Direct Testimony, Staff s rates are also not costbased WHT DO YOU RECOMMEND? I recommended in my Direct Testimony that Consumers rate design model be adjusted to recover the Substation Ownership Credit across all other classes, just as the Interruptible Credit and Self-Generation Capacity Credit are treated in 8 development of base rates, a treatment with which Consumers agrees. I also 9 0 recommended that recovery of the Skewing amount be done both through production and distribution charges, as opposed to fully recovered through the Distribution Demand Charge as proposed by Consumers. I recommend that the Skewing amount allocated to the Rate GPD class be divided between production and distribution cost recovery on the basis of total Rate GPD cost of service. I make these same Id. BRUBKER & SSOCITES, INC.

10 manda M. lderson Page 7 recommendations in response to Staff s rate design model. Neither Staff nor Consumers followed the Commission directive to use cost of service in designing distribution rates and designing a Substation Ownership Credit HVE YOU CLCULTED COST-BSED RTE GPD DISTRIBUTION DEMND CHRGES USING STFF S COSS ND REFLECTING YOUR PROPOSLS CONCERNING DEVELOPMENT OF N PPROPRITE COST-BSED RTE? Yes. Exhibit HSC-9 (M-9 provides my proposed Rate GPD Distribution Demand Charges for each service voltage level based on Staff s COSS. Page, Section I of this exhibit develops the appropriate revenue target using Staff s COSS. Line shows the Skewing amount prorated for recovery of only the distribution-related amount of $44,000, which is then allocated to the voltage levels on the basis of total Rate GPD distribution cost of service. Section II then develops a cost-based rate, dividing the total distribution revenue target by distribution demand units. Line shows the cost-based Rate GPD Distribution Demand Charges for each Voltage Level. Page of Exhibit HSC-9 (M-9 provides the distribution base revenue total recovery from Rate GPD customers, using my cost-based Distribution Demand Charges under Staff s COSS. Line 8 shows the total base rate distribution recovery under cost-based proposed rates, and is summarized on Table below. BRUBKER & SSOCITES, INC.

11 manda M. lderson Page 8 TBLE Distribution Service - Cost-Based Using Staff's COSS - Revenue-to-Cost Ratio Rates GPD, GPTU, GEI - ($000 Voltage Voltage Voltage Total Cost-Based Rate Distribution Base Revenue $ 6,45 $,49 $ 65,04 $ 84,986 Staff COSS - Corrected Distribution Revenue Target $ 6,45 $,49 $ 65,04 $ 84,986 Percent Overcollection bove Cost 0% 0% 0% 0% Source: Exhibit HSC-9 (M-9, page DOES THIS CONCLUDE YOUR RESPONSE TO STFF S TESTIMONY? Yes, it does. Response to BTE s Testimony 4 5 PLESE SUMMRIZE YOUR RESPONSE TO BTE S TESTIMONY. BTE s testimony discusses Consumers ongoing study to alter its classification of 6 distribution plant costs between demand-related and customer-related costs. I 7 8 support BTE s testimony describing the dual nature of distribution plant cost causation as being both demand- and customer-related. Pollock Direct at BRUBKER & SSOCITES, INC.

12 manda M. lderson Page PLESE DESCRIBE THE DUL NTURE OF DISTRIBUTION PLNT COST CUSTION. The utility distribution system is sized not only to accommodate demand requirements but also to simply connect each customer to the system. This minimum customer connection cost is irrespective of size. The connection equipment necessary is above and beyond the service drop to a customer s premises because there must be an infrastructure to which the service drop can be connected. Consequently, while a customer s demand requirements will influence the particular size of the distribution facilities installed, the fact that some facilities of at least a minimum size must be constructed relates to the existence and location of customers within the service territory, the distance of conductor, and the number of transformers. Unless these factors are taken into consideration, the COSS will depart from cost causation. Therefore, the utility plans its distribution system, and incurs distribution costs, on the basis of both customer count and location, as well as customers localized demands on the system. There is both a customer- and demand-related component to poles, conductors, and transformers, as they directly connect to the customer meters. However, neither the NRUC Manual nor Consumers system planning support classification of distribution costs on an energy basis. 0 DOES THIS CONCLUDE YOUR REBUTTL TESTIMONY? Yes, it does. \\consultbai.local\documents\prolawdocs\sdw\064\testimony-bi\5076.docx BRUBKER & SSOCITES, INC.

13 Case No.: U-04 Exhibit No.: HSC-8 (M-8 Witness: manda M. lderson Date: October, 08 Page: of Consumers Energy Company Distribution Service - Staff's Cost of Service versus Proposed Revenue ($000 Voltage Voltage Voltage Total Line Description Rate GPD Rate GPTU Rate GEI Total Rate GPD Rate GPTU Rate GEI Total Rate GPD Rate GPTU Rate GEI Total Combined ($000 ($000 ($000 ($000 ($000 ($000 ($000 ($000 ($000 ($000 ( ( ( (4 (5 (6 (7 (8 (9 (0 ( ( ( I. Staff's Proposed Revenue Bundled Service Maximum kw $ 7,6 $ 4 $ 7,50 $ 9,907 $ 7 $ 0,80 $ 44,80 $ 5,854 $ 50,684 Substation Ownership Credit $ (8 $ (8 $ (66 $ (64 $ (800 Joint Substation Ownership Credit $ (,06 $ (,06 4 System ccess $ 8 $ Included in $ 84 $ 7 $ 8 Included in $ 0 $,75 $ 665 Included in $ 4,99 5 GEI Education $ (4 Rate GPD $ (4 $ (8 Rate GPD $ (8 $ (8 Rate GPD $ (8 RO Service 6 Maximum kw $,086 $,086 $ 5,78 $ 5,78 $ 0,95 $ 0,95 7 Substation Ownership Credit $ (6 $ (6 $ (50 $ (50 8 System ccess $ 6 $ 6 $ 08 $ 08 $ 79 $ 79 9 GEI Education $ ( $ ( $ (5 $ (5 $ (50 $ (50 0 Total Excluding Substation Credits ( $ 9,54 $ 6 $ - $ 9,540 $ 5,96 $ 4 $ - $ 6,7 $ 60,7 $ 6,59 $ - $ 66,656 $ 9,569 II. Staff's Cost of Service Study Distribution: Demand Related Cost $ 5,58 Included in $ 80 $ 5,48 $,547 Included in $ 96 $,47 $ 56,60 Included in $ 4,897 $ 6,057 $ 78,968 Distribution: Customer Related Cost $ 97 Rate GPD $ $ 98 $ 96 Rate GPD $ 6 $ 95 $,9 Rate GPD $ 76 $,669 $ 5,604 llocated Skewing - Senior & Low Income $,6 $ 990 $,664 $ 4,970 4 Total Revenue Target (B $ 7,77 $ 4,45 $ 67,90 $ 89,54 5 Percent Overcollection bove Cost of Service = /B - % 4% -% % Sources: ( Exhibit S-6, Schedule F-, pages 7- ( Exhibit S-6 (SEG-, Schedule F-., page, lines 7-8 ( Exhibit S-6, Schedule F-., line 7, allocated to voltage levels on total production and distribution cost of service

14 Case No.: U-04 Exhibit No.: HSC-9 (M-9 Witness: manda M. lderson Date: October, 08 Page: of Consumers Energy Company Cost-Based Distribution Demand Charge Using Staff's COSS ($000 Voltage Voltage Voltage Total Line Description Rate GPD Rate GPTU Rate GEI Total Rate GPD Rate GPTU Rate GEI Total Rate GPD Rate GPTU Rate GEI Total Combined ( ( ( (4 (5 (6 (7 (8 (9 (0 ( ( ( I. Staff's Cost of Service Study Distribution: Demand Related Cost $ 5,58 Included in $ 80 $ 5,48 $,547 Included in $ 96 $,47 $ 56,60 Included in $ 4,897 $ 6,057 $ 78,968 Distribution: Customer Related Cost $ 97 Rate GPD $ $ 98 $ 96 Rate GPD $ 6 $ 95 $,9 Rate GPD $ 76 $,669 $ 5,604 llocated Skewing - Senior & Low Income $ $ 66 $ 7 $ 44 4 Total Revenue Target $ 6,45 $,49 $ 65,04 $ 84,986 II. Cost-Based Rate Design 5 Total Distribution Revenue Target $ 6,45 $,49 $ 65,04 $ 84,986 6 Less: Staff Proposed System ccess Revenue $ (9 $ (48 $ (5,90 $ (5,77 7 Total Distribution Demand Revenue Target $ 6, $,07 $ 59,85 $ 79,59 Distribution Demand Units (MW 8 Bundled Service 7,90 4 Included in 7,04 5,64 94 Included in 5,59,94,605 Included in,899 9 RO Service,07 Rate GPD,07,980 Rate GPD,980,99 Rate GPD,99 0 Total 9,77 8,9 6,89 Cost-Based Distribution Charge Using Staff's COSS ($/kw $ 0.68 $.57 $.54 Sources: ( Exhibit S-6 (SEG-, Schedule F-., page, lines 7-8 ( Exhibit S-6, Schedule F-., line 7, distribution prorated amount allocated to voltage levels on distribution cost of service ( Exhibit S-6, Schedule F-, pages 7-

15 Case No.: U-04 Exhibit No.: HSC-9 (M-9 Witness: manda M. lderson Date: October, 08 Page: of Consumers Energy Company Distribution Service - Revenue-to-Cost Comparison - Staff COSS ($000 Voltage Voltage Voltage Total Line Description Rate GPD Rate GPTU Rate GEI Total Rate GPD Rate GPTU Rate GEI Total Rate GPD Rate GPTU Rate GEI Total Combined ( ( ( (4 (5 (6 (7 (8 (9 (0 ( ( ( Revenue to Cost Proof Total Staff Corrected Revenue Target $ 6,45 $,49 $ 65,04 $ 84,986 Distribution Demand Units (MW Included Bundled Service 7,90 4 in Rate 7,04 5,64 94 Included in 5,59,94,605 Included in,899 6,56 RO Service,07 GPD,07,980 Rate GPD,980,99 Rate GPD,99 8,047 4 Total 9,64 4 9,77 8, ,9 5,87,605 6,89 4,609 5 Cost-Based Distribution Charge ($/kw $ 0.68 $.57 $.54 6 Distribution Revenue $ 6, $,07 $ 59,85 $ 79,59 7 System ccess Reveue $ 9 $ 48 $ 5,90 $ 5,77 8 Total Base Distribution Revenue $ 6,45 $,49 $ 65,04 $ 84,986 9 Percent Overcollection bove Cost of Service 0% 0% 0% Sources: ( Exhibit HSC-9 (M-9 page, line 4. ( Id lines 8-0 ( Id line

16 STTE OF MICHIGN BEFORE THE MICHIGN PUBLIC SERVICE COMMISSION In the matter on the application of CONSUMERS ENERGY COMPNY for authority to increase its rates for the generation and distribution of electricity Case No. U-04 and for other relief. CERTIFICTE OF SERVICE ngela R. Babbitt hereby certifies that on the st day of October, 08, she served the Rebuttal Testimony and Exhibits of manda M. lderson and this Certificate of Service in the above docket on the persons identified on the attached service list by electronic mail. ngela R. Babbitt

17 Service List for U-04 dministrative Law Judge Honorable Sharon L. Feldman Counsel for The Kroger Company Michael L. Kurtz Jody Kyler Cohn Kurt J. Boehm Counsel for Consumers Energy Company Michael Rampe Bret. Totoraitis Robert W. Beach Kelly M. Hall Gary. Gensch nne M. Uitvlugt Theresa.G. Staley Counsel for Residential Customer Group Don L. Keskey Brian W. Coyer Counsel for the Commission Staff Daniel E. Sonneveldt Michael J. Orris Monica M. Stephens Heather M.S. Durian Counsel for ttorney General Joel King Celeste R. Gill Sebastian Coppola Counsel for Energy Michigan, Inc., Energy Innovation Business Council, ChargePoint, Inc. Timothy J. Lundgren Laura Sherman Counsel for Energy Michigan, Inc. & Energy Innovation Business Council Laura. Chappelle Counsel for ChargePoint, Inc. Justin K. Ooms Counsel for Michigan Energy Innovation Business Council Toni L. Newell Counsel for Environmental Law & Policy Center Margrethe Kearney Robert Kelter Charles Griffith

18 Counsel for Wal-Mart Stores East, LP Sam s East, Inc. Melissa M. Horne mhorne@hcc-law.com Counsel for Michigan Cable Telecommunications ssociation (MCT Michael S. shton nita G. Fox mashton@fraserlawfirm.com afox@fraserlawfirm.com Counsel for BTE Bryan. Brandenburg Michael J. Pattwell Jennifer M. Johnson Lauren K. Degnan bbrandenbrug@clarkhill.com mpattwell@clarkhill.com lmcpartlin@clarkhill.com jwilbrink@clarkhill.com jmjohnson@clarkhill.com LDegnan@clarkhill.com Counsel for Michigan Utility Workers Council, Utility Workers Union of merica (UWU, FL-CIO John R. Cazano jcanzano@michworkerlaw.com Counsel for Michigan Environmental Council (MEC, Sierra Club, Natural Resources Defense Council (NRDC Christopher M. Bzdok Tracy Jane ndrews Karla Gerds Kimberly Flynn chris@envlaw.com tjandrews@envlaw.com karla@envlaw.com kimberly@envlaw.com Counsel for City of Grand Rapids & City of Flint Christopher M. Bzdok chris@envlaw.com karla@envlaw.com kimberly@envlaw.com Jeffrey C. Pollock Billie S. LaConte Kitty. Turner jcp@jpollockinc.com BSL@jpollockinc.com KT@jpollockinc.com Counsel for Midland Cogeneration Ventures, LP Richard J. aron Jason T. Hanselman John. Janiszewski raaron@dykema.com jhanselman@dykema.com jjaniszewski@dykema.com