atlantic cit11 elect, c

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1 Philip J. Passanante Assistant General Counsel 92DC42 PO Box 6066 Newark, DE Telephone Facsimile philip.passanante@pepcoholdings.com atlantic cit11 elect, c An Exelon Company 500 N. Wakefield Drive atlanticcityelectric.com Newark, DE February 1, 2017 VIA FEDERAL EXPRESS and ELECTRONIC MAIL irene.asbury@bpu.nj.gov board.secretary@bpu.nj.gov Irene Kim Asbury, Esquire Secretary of the Board Board of Public Utilities 44 South Clinton Avenue, 3 rd Floor, Suite 314 P.O. Box 350 Trenton, New Jersey RE: In the Matter of the Petition of Atlantic City Electric Company to Reconcile and Update the Level of Its Non-Utility Generation Charge ( NGC ) and Its Societal Benefits Charge ( SBC ) (2017) BPU Docket No. Dear Secretary Asbury: On behalf of Atlantic City Electric Company ( ACE ), enclosed herewith for filing are three conformed copies of a Verified Petition and supporting testimony (and Schedules thereto) seeking to reconcile and update ACE s NGC and SBC tariff charges. 1 A draft Public Notice is also attached to the Petition as Exhibit C. ACE respectfully requests that the Board retain jurisdiction of this matter and render a decision thereon so that final rates can be put into effect by no later than June 1, Thank you for your consideration and courtesies. Feel free to contact me with any questions or if I can be of further assistance. Respectfully submitted, Enclosure cc: Service List /jpr Philip J. Passanante An Attorney at Law of the State of New Jersey 1 This filing has been made consistent with the Board s Order Waiving Provisions of N.J.A.C. 14:4-2, N.J.A.C. 14:17-4.2(a), N.J.A.C. 14:1-1.6(c), and N.J.A.C. 14:17-1.6(d), issued on July 29, 2016 in connection with In the Matter of the Board s E-Filing Program, BPU Docket No. AX

2 IN THE MATTER OF THE PETITION OF ATLANTIC CITY ELECTRIC COMPANY TO RECONCILE AND UPDATE THE LEVEL OF ITS NON-UTILITY GENERATION CHARGE AND ITS SOCIETAL BENEFITS CHARGE (2017) STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES BPU Docket No. VERIFIED PETITION ATLANTIC CITY ELECTRIC COMPANY (hereinafter referred to as Petitioner, ACE or the Company), a public utility corporation of the State of New Jersey, respectfully requests that the New Jersey Board of Public Utilities (herein, the BPU or the Board) approve proposed changes to the Company s Non-Utility Generation Charge (NGC), and two of its Societal Benefits Charge (SBC) components, as proposed and outlined herein. The net effect of adjusting the NGC and SBC, as proposed herein, including associated changes in Sales and Use Tax, is an overall annual rate decrease of approximately million 1. In support thereof, Petitioner states as follows: 1. The Company is engaged in the purchase, transmission, distribution, and sale of electric energy to residential, commercial, and industrial customers. ACE s service territory comprises eight counties located in southern New Jersey and includes approximately 547,000 customers. Brief Historical Summary of the SBC and the NGC 2. As a result of the Board s Final Decision and Order issued in connection with a matter entitled In the Matter of Atlantic City Electric Company - Rate Unbundling, Stranded Costs, and Restructuring Filing, BPU Docket Nos. EO , EO , and EO , the Company implemented unbundled rates that included a Market Transition Charge (MTC), a Net Non-Utility Generation Charge (NNC), and the Societal Benefits Charge 1 The anticipated decrease is based upon actual data through December 31, 2016, and estimated data for the period January through March, 2017, and is subject to true up for actual data through March 31,

3 (SBC) as rate components. Those rates were changed as a result of a Summary Order issued by the Board on July 31, 2003, in connection with BPU Docket No. ER The Board s Order in BPU Docket No. ER , dated July 8, 2004, maintained the NNC and MTC rates approved in the Summary Order. 3. The Company filed for an adjustment to the NNC and MTC on or about June 1, Changes to the NNC and the SBC were approved and implemented pursuant to the Board Order Adopting Initial Decision and Stipulation of Settlement issued in connection with Petitioner s 2003 base rate case, BPU Docket Nos. ER , ER , EO , and EM (OAL Docket No. PUC S) (released May 26, 2005), pursuant to which the NNC and MTC rates were adjusted and combined into the NGC, effective June 1, The NGC was further adjusted effective October 1, 2006, pursuant to the Board s Order in BPU Docket No. EM (dated July 21, 2006), approving the sale of the Company s Keystone and Conemaugh generating station assets. 4. The NGC and SBC were further reconciled and updated pursuant to a Board Order issued in connection with In the Matter of the Petition of Atlantic City Electric Company to Reconcile and Update the Level of Its Non-Utility Generation Charge and Its Societal Benefits Charge, BPU Docket No. ER (dated May 20, 2008). The NGC was reconciled again and put into effect on January 1, 2011, pursuant to the Board s Order dated December 22, 2010, in BPU Docket No. ER The NGC was subject to regulatory review and reconciliation pursuant to a Board Order dated February 19, 2014, and issued jointly in connection with BPU Docket Nos. ER and ER The next revision to the NGC was put into effect on a provisional basis on June 1, 2014, pursuant to a Board Order dated May 21, 2014 in BPU Docket 2

4 No. ER , and was subsequently made final by Board Order in the aforementioned docket dated January 21, 2015, which approved a Stipulation of Settlement that was entered into between the Company, Board Staff, and the Division of Rate Counsel (collectively, the Parties). 6. Further adjustments to the NGC and SBC were put into effect on a provisional basis on June 1, 2015 pursuant to a Board Order dated May 19, 2015 in BPU Docket No. ER , and were made final by a Board Order in the aforementioned docket dated September 11, 2015 (the September 2015 Order). 7. The current NGC and SBC were put into effect on a final basis by Order of the Board in BPU Docket No. ER , dated November 30, 2016 (the November 2016 Order), which Order approved a Stipulation of the Parties dated November 7, In addition to reconciling the NGC and SBC for actual data through May 31, 2016, the November 2016 Order provided certain credits to the NGC and SBC arising out of the Most Favored Nations (MFN) provision of the Joint Recommendations of the Parties approved by the Board by Order dated October 17, 2016 in BPU Docket No. EM MFN credits were applied to both the NGC and the SBC totaling approximately 16.7 million, with approximately 10 million being credited to the NGC, and 6.7 million credited to the Uncollectible component of the SBC. The NGC is currently designed to recover the above-market component of payments made under purchased power agreements (PPAs) with non-utility generators (NUGs) (i.e., the PPA payments less the revenue received from the sale of the NUG energy and capacity into the PJM market). Purpose of the Instant Petition 8. The purpose of the instant Petition is to reconcile and reset the levels of (i) the NGC; and (ii) the two components of the SBC. The SBC components to be changed include the Clean Energy Program (CEP) and the Uncollectible Accounts (UNC) charges. 3

5 9. The purpose of the NGC and SBC rate components is to allow the Company to recover, on an unbundled basis, certain utility costs and expenses. The NGC provides for recovery of the above-market component of payments made under a utility s NUG contracts and stranded costs associated with such commitments. The SBC is intended to assist utilities to recover costs related to (i) the CEP obligations; (ii) the UNC, and (iii) the Universal Service Fund and Lifeline social programs. Proposed Adjustment of the NGC Component 10. The Company is proposing to reset the NGC for the period June 1, 2017 through May 31, 2018 based on actual data through December 31, 2016, and projected expenses for the period January 1, 2017 through March 31, The detailed rate design for the proposed NGC rate is attached as Schedule TMH-1, page 1 of 3, of Exhibit A. 11. The detailed rate design for the NGC is provided in Schedule TMH-1, page 1 of 3 of Exhibit A. The proposed rate is designed to recover forecasted above-market NUG costs of million for the period of April 1, 2017 through March 31, It will also return the projected over-recovered balance of million at March 31, Schedule TMH-1, page 2 of 3, provides the detailed estimate of the NGC projected deferred balance through March 31, The projected deferred balance of million, subject to a true-up, is currently based on actual data through December 31, 2016, and projected data for the period of January 1, 2017 through March 31, The total forecasted recovery for this period is million, which is a decrease of approximately 32% from the prior year s total forecasted recovery of million as approved by the November 2016 Order. 12. As noted in the Direct Testimony of Company Witness Thomas M. Hahn (Exhibit A.), the primary drivers of the decrease in the forecasted recovery of the NGC are (i) 4

6 the decrease of million in projected above market costs as compared to the projected 2016 above market costs, and (ii) the swing in the NGC balance from a projected underrecovered position of million at June 1, 2016 to a projected over-recovered position of million at April 1, The million decrease in projected above market costs is primarily driven by the transition from a June 1 to May 31 reconciliation period to an April 1 to March 31 reconciliation period. Since rates approved in the November 2016 Order were designed to recover costs through May 31, 2017, there are two months in the new transition period of April 2017 March 2018 where revenue will be collected from ratepayers and applied to those costs (April and May 2017). The projected April and May 2017 revenue is expected to be million, which is being applied against those months above market NUG costs in the projected NUG costs for the April 2017 May 2018 period. (See Schedule TMH-1, page 1 of 3, line 7.) The swing in the NGC balance from a projected under-recovered position of million at June 1, 2016 to a projected over-recovered position of million at April 1, 2017 is primarily driven by the following. Pursuant to the November 2016 Order, rates effective January 1, 2017 were set in a manner designed to fully recover the million to ratepayers, and thereby reduce the deferred balance to 0 at June 1, Based on the timing of revenues and expenses during that rate recovery period, it was projected that the balance at March 31, 2017 would be an approximate over-recovery of million. Currently, with actuals through December 31, 2016 and projections through March 31, 2017, that over-recovery balance is million, an increase of approximately million. This increase in the over-recovery was primarily driven by actual sales greater than forecasted. 5

7 Adjusting the Cost Components of the Societal Benefits Charge 13. Petitioner proposes to modify specific cost components of the SBC as follows: a. The UNC rate for the period June 1, 2017 through May 31, 2018 will be reset to recover forecasted uncollectible expense for the period April 1, 2017 through March 31, 2018 totaling million, consistent with the rate design detailed on Schedule TMH-3, page 1 of 4, of Exhibit A. It will recover an additional under-recovered balance of million. Schedule TMH-3, page 2 of 4, provides the detailed estimate of the UNC deferred balance through March 31, The projected under-recovered deferred balance of million, subject to a true-up, is currently based on actual data through December 31, 2016, and projected data for the period of January 1, 2017 through March 31, The total forecasted recovery during the period is million. b. As noted in the Direct Testimony of Company Witness Hahn, the primary drivers of the increase in the forecasted recovery of the UNC component of the SBC are due primarily to (i) an accounting change for estimating ACE s Reserve for Uncollectible Accounts Receivable, and (ii) a significant increase in ACE s actual write-offs in 2016, which directly impacts the Company s bad debt expense, and, in turn, increases the reserves balance requirements. The specific details with respect to the drivers for the increase in the UNC can be found in the Direct Testimony of Julie Giese, submitted herewith in support of the UNC adjustment. (Ms. Giese s Direct Testimony is attached as Exhibit B.) 6

8 c. The CEP is designed to recover costs associated with the Company s New Jersey Clean Energy Program obligations. The CEP charge is being adjusted to reflect the projected deferred balances as of March 31, 2017, and forecasted costs for the period of April 1, 2017 through March 31, It is based upon actual expenditures through December 31, 2016 and projected expenses for the period January 1, 2017 through March 31, 2017, based on projected funding levels approved by the Board for fiscal year 2017 (July 2016 June 2017) in an Order dated June 29, 2016, in connection with BPU Docket No. QO January 1, 2017 to June 30, 2017 projections have been used as provided in the aforementioned Board Order. The monthly expenditures from the fiscal year 2017 projected funding levels as found in the approved Order were used to develop the monthly expenditures for the periods July 2017 to March 2018 as the Board will not have issued funding levels for time periods after June 2017 as of the date of this filing. The detailed rate design is provided in Schedule TMH-2, page 1 of 2, of Exhibit A, and includes million of projected expenses for the period April 1, 2017 to March 31, Schedule TMH-2, page 2 of 2, of Exhibit A provides an estimate of the CEP deferred balance through March 31, 2017, and indicates a projected over-recovery based on actuals through December 31, 2016 and projections for the period January 1, 2017 to March 31, 2017 of approximately million. The total forecasted recovery for this period is million. 7

9 14. Proposed tariff sheet revisions reflecting the changes outlined in this Petition are attached as Schedules TMH-5 and TMH-6 of Exhibit A, in redline and clean versions, respectively. 15. Communications and correspondence regarding this matter should be sent to Petitioner and its counsel at the following address: Philip J. Passanante, Esquire Assistant General Counsel Atlantic City Electric Company 92DC North Wakefield Drive Post Office Box 6066 Newark, Delaware with copies to the following representatives of the Company: Thomas M. Hahn Principal Rate Analyst Atlantic City Electric Company 63ML Harding Highway Mays Landing, New Jersey and Roger E. Pedersen Manager, New Jersey Regulatory Affairs Atlantic City Electric Company 63ML Harding Highway Mays Landing, New Jersey This Petition proposes an overall rate decrease for the combined effect of the proposed changes to the NGC and SBC. Taken by itself, however, the change to the SBC would result in a rate increase. Therefore, in the absence of consensus of the parties to the contrary, Petitioner intends to conduct a public hearing(s) with respect to the SBC component of the Petition. Attached hereto as Exhibit C is a proposed Public Notice to be published in local newspapers serving Petitioner s service territory. 8

10 WHEREFORE, the Petitioner, ATLANTIC CITY ELECTRIC COMPANY, respectfully requests that the Board of Public Utilities: A. approve the requested changes to the NGC and SBC as detailed in this filing for implementation by no later than June 1, 2017; and B. grant such other or further relief as the Board may deem just and reasonable. Respectfully submitted, on behalf of ATLANTIC CITY ELECTRIC COMPANY Dated: February 1, 2017 /jpr PHILIP J. PASSANANTE Assistant General Counsel Atlantic City Electric Company 92DC North Wakefield Drive Post Office Box 6066 Newark, Delaware (302) Telephone philip.passanante@pepcoholdings.com 9

11 IN THE MATTER OF THE PETITION OF ATLANTIC CITY ELECTRIC COMPANY TO RECONCILE AND UPDATE THE LEVEL OF ITS NON-UTILITY GENERATION CHARGE AND ITS SOCIETAL BENEFITS CHARGE (2017) STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES AFFIDAVIT OF VERIFICATION KEVIN M. McGOWAN, being duly sworn, upon his oath, deposes and says: 1. I am the Vice President of Regulatory Policy and Strategy of and for Atlantic City Electric Company ("ACE"), the Petitioner named in the foregoing Verified Petition. I am duly authorized to make this Affidavit ofverification on ACE's behalf. 2. I have read the contents of the foregoing Verified Petition to Reconcile and Update the Level of ACE's Non-Utility Generation Charge and Societal Benefits Charge. I verify that the statement of facts and other information contained therein are true and correct to the best of my knowledge, information, and belief. KEVIN M. McGOWAN WASHINGTON, D.C. ) SS: -~- SWORN TO AND SUBSCRIBED before me this My Commission Expires: "if/3{/41

12 Exhibit A Testimony and Schedules of Thomas M. Hahn

13 STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF ATLANTIC CITY ELECTRIC COMPANY TO RECONCILE AND UPDATE THE LEVEL OF ITS NON-UTILITY GENERATION CHARGE AND ITS SOCIETAL BENEFITS CHARGE (2017) BPU DOCKET NO. February 1, 2017 TESTIMONY OF Thomas M. Hahn ON BEHALF OF ATLANTIC CITY ELECTRIC COMPANY

14 Witness Hahn Q. Please state your name and position. A. My name is Thomas M. Hahn. I am a Principal Rate Analyst in the Regulatory Compliance Pricing Department of Pepco Holdings, LLC (PHI), an indirect, wholly owned subsidiary of Exelon Corporation (Exelon). I am testifying on behalf of Atlantic City Electric Company (ACE or the Company). Q. What is your educational and professional background? A. I possess a Bachelor of Science degree in Business Administration with a specialization in Accounting from Rowan College of New Jersey. I am also a Certified Public Accountant licensed in the State of New Jersey. Q. Please describe and summarize your employment experience in the utility industry. A. I joined PHI in 2005 as a Senior Accountant in the Revenue Accounting Department. Since that time, I have held positions as Accounting Coordinator, Revenue Accounting Supervisor, and Senior Account Manager Supplier Relations. In September 2012, I transferred into the Regulatory Compliance Pricing Department in the position of Regulatory Affairs Lead. In June 2014, I was promoted to Senior Regulatory Affairs Coordinator. As a result of the merger of Exelon and PHI, my title has changed to my current position of Principal Rate Analyst. Q. What is the purpose of your testimony? A. The purpose of my testimony is to describe the Company's proposed changes to the levels of the (i) Non-Utility Generation Charge (NGC); and (ii) the two components of the Societal Benefits Charge (SBC). The SBC components to 1

15 Witness Hahn be adjusted include the Clean Energy Program (CEP) and the Uncollectible Accounts Charges (UNC). If approved by the Board of Public Utilities (the Board or BPU) as proposed in my testimony and in the Petition of which this testimony is a part, these changes will result in an annual decrease in customer rates of approximately million. Q. Please provide a summary of the NGC. A. The current NGC rate was put into effect on January 1, 2017, pursuant to an Order issued by the Board dated November 30, 2016 in BPU Docket No. ER (the November 30, 2016 Order). The NGC is designed to recover the above-market payments made pursuant to BPU approved Purchase Power Agreements (PPAs) with Non-Utility Generators (NUGs) (i.e., the PPA payments less the revenue received from the sale of the NUG energy and capacity into the PJM market). The current NGC rate was made final by the November 30, 2016 Order, which approved a Stipulation of Settlement that was entered into by and among the Company, Board Staff, and the Division of Rate Counsel (Rate Counsel) (collectively, the Parties). Q. Please provide a summary of the mechanism approved in BPU Docket No. ER for updating the NGC and SBC rates. A. The rates that were put in to effect pursuant to the November 30, 2016 Order included forecasted costs for the NGC, CEP, and UNC components for the period of June 1, 2016 through May 31, These rates also included the then projected net under-recovered balances for the NGC, CEP, and UNC components as of May 31, In addition, the rates for the NGC and UNC components 2

16 Witness Hahn included a credit of approximately 10 million for the NGC and 6.8 million for the UNC resulting from an Order issued by the Board dated October 31, 2016 in BPU Docket No. EM (the MFN Order), which approved the joint recommendation of the Parties for settlement of the Most Favored Nation issue included in that proceeding. As part of the November 30, 2016 Order, the Board approved a change in the annual period for the Company s 2017 NGC/SBC update and reconciliation filing. The Parties agreed and the Board approved that the Company's 2017 Petition would be based on actual data through December 31, 2016 with estimated data through March 31, 2017, which date would be the end of the 2017 NGC/SBC reconciliation period. This represents a departure from earlier NGC/SBC reconciliation filings that provided estimated data through May 31 st. This was agreed upon by the Parties with the expectation that, by ending the reconciliation period two months earlier than previously, the Parties would be able to conclude a review of the actual data for the reconciliation period in time for revised, final NGC rates to become effective on June 1, Q. Please explain if the Company s approach in this filing is consistent with the terms of the Stipulation of Settlement and the revised mechanism for reconciling historical NGC/SBC costs as approved in the November 30, 2016 Order. A. Yes, the Company s approach is consistent with the requirements of the November 30, 2016 Order. ACE has continued to monitor the forecasted deferred balances and has kept the Board, Board Staff, and Rate Counsel (i) advised of the status of the balances; (ii) provided a variance analysis of actual data to that 3

17 Witness Hahn forecasted for the NGC and SBC in its quarterly reports; and (iii) provided written updates regarding possible opportunities for mitigation of the costs of the NUG contracts. The filing of this Petition also complies with the November 30, 2016 Order that ACE s annual update/reconciliation Petition be filed with the Board at least 120 days prior to the proposed effective date in this case, June 1, Q. What specific modifications is the Company proposing to the NGC rate? A. The Company is proposing to reset the NGC for the period June 1, 2017 through May 31, 2018 based upon current forecasts of revenues and expenses, as well as sales projections for the period of April 1, 2017 through March 31, The detailed rate design for the NGC is provided in Schedule TMH-1, page 1 of 3. The proposed rate is designed to recover forecasted above-market NUG costs of million for the period of April 1, 2017 through March 31, It will also return the projected over-recovered balance of million at March 31, Schedule TMH-1, page 2 of 3, provides the detailed estimate of the NGC projected deferred balance through March 31, The projected overrecovered deferred balance of million, subject to a true-up, is currently based on actual data through December 31, 2016, and projected data for the period of January 1, 2017 through March 31, The total forecasted recovery for this period is million, which is a decrease of approximately 32% from last year s total forecasted recovery of million. 4

18 Witness Hahn Q. Please describe the primary drivers which result in a decrease to the forecasted recovery in the NGC. A. The primary drivers of the decrease in the forecasted recovery of the NGC are (i) the decrease of million in projected above market costs as compared to the projected 2016 above market costs, and (ii) the swing in the NGC balance from a projected under-recovered position of million at June 1, 2016 to a projected over-recovered position of million at April 1, The million decrease in projected above market costs is primarily driven by the transition from a June 1 to May 31 reconciliation period to an April 1 to March 31 reconciliation period. Since rates approved in the November 30, 2016 Order were designed to recover costs through May 31, 2017, there are two months in the new transition period of April 2017 March 2018, where revenue will be collected from ratepayers and applied to those costs (April and May 2017). The projected April and May 2017 revenue is expected to be million, which is being applied against those months above market NUG costs in the projected NUG costs for the April 2017 May 2018 period. (See Schedule TMH-1, page 1 of 3, line 7.) The swing in the NGC balance from a projected under-recovered position of million at June 1, 2016 to a projected over-recovered position of million at April 1, 2017 is primarily driven by the following. Pursuant to the Stipulation of the Parties -- which was approved by the November 30, 2016 Order -- rates effective January 1, 2017 were set in a manner designed to fully recover the million to ratepayers, and thereby reduce the deferred balance to 0 at June 1, Based on the timing of revenues and expenses 5

19 Witness Hahn during that rate recovery period, it was projected that the balance at March 31, 2017 would be an approximate over-recovery of million. Currently, with actuals through December 31, 2016 and projections through March 31, 2017, that over-recovery balance is now at million, an increase of approximately million. This increase in the over-recovery was primarily driven by actual sales greater than forecasted. Q. Please detail the proposed change to the CEP component of the SBC. A. The CEP is designed to recover costs related to the Company s New Jersey Clean Energy Program obligations. The current CEP rate was put into effect on January 1, 2017, pursuant to the November 30, 2016 Order. In the instant filing, the Company is proposing to reset the CEP charge to reflect the projected deferred balance as of March 31, 2017, and forecasted costs for the period April 1, 2017 through March 31, 2018, based on the projected funding levels approved by the Board on June 29, 2016 for fiscal year 2017 (July 2016 June 2017) in BPU Docket No. QO The funding levels for January 1, 2017 to June 30, 2017, as provided in the aforementioned Board Order, have been 17 used for projections in the filing for those periods. In addition, monthly expenditures from the fiscal year 2017 projected funding levels as found in the approved Order were used to develop the monthly expenditures for the period from July 2017 to March 2018, as the Board will not have issued funding levels for time periods after June 2017 as of the date of this filing. The detailed rate design is provided in Schedule TMH-2, page 1 of 2, and includes million of projected expenses for the period April 1, 2017 to March 31, Note that 6

20 Witness Hahn this amount is impacted by the transition from a June 1 to May 31 reconciliation period to an April 1 to March 31 reconciliation period. Since rates approved in the November 30, 2016 Order were designed to recover costs through May 31, 2017, there are two months in the new transition period of April 2017 March 2018 where revenue will be collected from ratepayers and applied to those costs (April and May 2017). The projected April and May 2017 revenue is expected to be million, which is being applied against those months projected expenditures for the April 2017 May 2018 period. (See Schedule TMH-2, page 1 of 2, lines 5 and 6.) Schedule TMH-2, page 2 of 2, provides an estimate of the CEP deferred balance through March 31, 2017, and indicates a projected overrecovery based on actuals through December 31, 2016 and projections for the period January 1, 2017 to March 31, 2017 of approximately million. The total forecasted recovery for this period is million. Q. Please detail the proposed change to the UNC component of the SBC. A. The current UNC rate was put into effect on January 1, 2017, pursuant to the November 30, 2016 Order. The Company is proposing to reset the UNC for the period June 1, 2017 through May 31, The detailed rate design for the UNC is provided in Schedule TMH-3, page 1 of 4. The proposed rate is designed to recover forecasted uncollectible expense for the period of April 1, 2017 through March 31, 2018, totaling million. Note that this amount is impacted by the transition from a June 1 to May 31 reconciliation period to an April 1 to March 31 reconciliation period. Since rates approved in the November 30, 2016 Order were designed to recover costs through May 31, 2017, there are 7

21 Witness Hahn two months in the new transition period of April 2017 March 2018 where revenue will be collected from ratepayers and applied to those costs (April and May 2017). The projected April and May 2017 revenue is expected to be million, which is being applied against those months projected expenditures for the April 2017 May 2018 period. (See Schedule TMH-3, page 4 of 4, lines 2 and 3.) It will also recover the projected under-recovered balance of million as of March 31, Schedule TMH-3, page 2 of 4, provides the detailed estimate of the UNC deferred balance through March 31, The projected under-recovered deferred balance of million, subject to a trueup, is currently based on actual data through December 31, 2016, and projected data for the period of January 1, 2017 through March 31, The total forecasted amount to be recovered during the period is million. Q. Please describe the primary driver for the increase to the forecasted recovery in the UNC component of the SBC. A. The primary driver of the increase in the forecasted recovery of the UNC component of the SBC is the swing in the UNC balance from a projected overrecovered position of million at June 1, 2016 to a projected underrecovered position of million at April 1, Rates that took effect January 1, 2017 were set to collect forecasted UNC costs of million for the period of June 1, 2016 May Based on the timing of revenues and expenses during that rate recovery period, it was projected that the balance at March 31, 2017 would be an approximate over-recovery of million. Currently, with actuals through December 31, 2016 and projections through 8

22 Witness Hahn March 31, 2017, that balance is now an under-recovery of million, an increase of approximately million. The major drivers of the higher uncollectible expenses are primarily due to (i) a new process for estimating ACE s Reserve for Uncollectible Accounts Receivable and (ii) a significant increase in ACE s actual write-offs in 2016, which has led directly to increased bad debt expense and increased reserve needs. As noted in the Direct Testimony of Company Witness Julie Giese, Exhibit B to the instant Petition, the new process for estimating ACE s Reserve for Uncollectible Accounts Receivable has been implemented across all of PHI and better reflects the level of uncollectible risk in the Company s AR balance. Q. What is the overall impact of the rate changes being proposed in this filing? A. The net impact of adjusting the NGC, CEP, and UNC rate(s), including associated changes in Sales and Use Tax, is an overall annual decrease in rates and charges of approximately million. This amount includes the return of the NGC and CEP, and recovery of the UNC deferred balances at March 31, 2017, and the going-forward recovery of all components for the period April 1, 2017 through March 31, This is summarized on Schedule TMH-4, page 1 of 4. For an average residential customer using approximately 1,000 kwh per month, this represents a decrease of approximately 3.30 or 1.73% on a total monthly bill as shown in Schedule TMH-4, page 4 of 4. Schedule TMH-4, pages 2 of 4 through 4 of 4, provide(s) a calculation of the residential bill impact by season and annually. 9

23 Witness Hahn Q. Are there any other attachments to your testimony? A. Yes. Schedule TMH-5 and Schedule TMH-6 provide proposed Tariff Sheet revisions in redline and clean versions, respectively. Q. Does this conclude your testimony? A. Yes, it does. 10

24 Schedule TMH-1

25 Atlantic City Electric Company Net Non-Utility Generation Charge (NGC) Rate Design Rates Effective For Period June May 2018 Updated for Actuals through December 2016 Schedule TMH-1 Page 1 of 3 Line 1 Table 1 Forecasted NUG Costs 2 3 Apr 17 * May 17 * Jun-17 Jul-17 Aug-17 Sep NGC Costs Market -Based Revenue (000) Retail Revenue Collected in Current Rates 11,621,743 2,586,132 9,584,810 11,942,016 2,926,057 9,031,464 13,375,151 4,065,772 14,049,444 5,673,596 14,763,858 5,683,918 13,663,244 4,034,878 8 Above Market NUG Costs (000) (549,199) (15,504) 9,309,379 8,375,848 9,079,940 9,628, Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-17 to Mar NGC Costs 12,710,302 12,481,522 14,120,180 14,553,349 13,717,897 12,868, ,867, Market -Based Revenue (000) 3,167,118 3,171,421 5,374,661 5,519,098 4,503,323 3,221,967 49,927, Retail Revenue Collected in Current Rates 18,616, Above Market NUG Costs (000) 9,543,184 9,310,101 8,745,519 9,034,250 9,214,574 9,646,810 91,323, Projected Contract Cost (000) 159,867,483 = Line 5 + Line Forecasted Market -Based Revenue (000) 49,927,941 = Line 6 + Line Retail Revenue Collected in Current Rates 18,616,274 = Line 7 + Line Forecasted Above Market NUG Costs (000) 91,323,269 = Line 18 - Line 19 - Line Projected Over Recovered Balance At April 1, 2017 (1,982,653) Schedule TMH-1 Page 2 Col 9 Line Total Period NGC Costs 89,340,616 Line 21 + Line Table 2 NGC Rate with Voltage Level Loss Adjustment 28 Voltage Level Loss Factor 29 Secondary ( Volts) Primary (4,000 & 12,000 Volts) Subtransmission (23,000 & 34,500 Volts) Transmission (69,000 Volts) Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 = Col. 3 Lines / = Col. 4 x Sum (Lines = Col. 6 x 35 = Col. 1 x Col. 2 Col. 3 Line ) = Col. 5 / Col. 2 ((1/( ))-1) = Col. 6 + Col. 7 = Col. 8 x Customer Bulk System - Allocated Revenue BPU Assessment Final NGC Rate Final NGC Rate w/ 36 Rate Class Loss Factor (kwh) Including Losses Allocation Factor Requirements NGC Rate (/kwh) (/kwh) (/kwh) SUT(/kWh) 37 RS ,171,964,933 4,470,218, ,417, MGS Secondary ,152,950,462 1,235,374, ,722, MGS Primary ,456,016 25,518, , AGS Secondary ,917,585,029 2,054,673, ,496, AGS Primary ,955, ,807, ,663, TGS ,786, ,583, ,925, SPL/CSL ,240,385 78,476, , DDC ,621,752 13,524, , Total 8,845,560,805 9,415,176, ,340, * - April 2017 and May 2017 Above Market NUG Costs represent above market NUG costs less projected retail revenue to be collected.

26 Atlantic City Electric Company Summary of Non Utility Generation (NGC) Deferral Rates Effective For Period June May 2018 Updated for Actuals through December 2016 Schedule TMH-1 Page 2 of 3 Col. 1 Line No Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 6a Joint Settlement Retail NGC PJM Interchange Most Favored Nation Month Revenues Revenues Expenses Provision (MFN) Actual Apr-16 9,301,027 6,174,690 15,875,800 Actual May-16 8,415,643 6,130,919 16,839,510 Actual Jun-16 10,861,584 5,631,762 17,509,679 Actual Jul-16 13,816,242 8,089,491 18,058,173 Actual Aug-16 16,543,794 8,412,824 19,117,707 Actual Sep-16 16,157,320 5,161,783 15,158,292 Actual Oct-16 6,728,000 4,269,223 13,277,773 Actual Nov-16 8,763,407 3,644,161 12,204,089 9,984,316 Actual Dec-16 9,843,703 5,185,679 14,077,282 Projected Jan-17 11,745,871 4,695,181 14,123,481 Projected Feb-17 10,923,002 4,458,636 13,776,032 Projected Mar-17 10,406,773 3,154,394 12,806,028 Total Interest Aug2016-Mar2017 Total Over/(Under) Recovered Balance at April 1, 2017 >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Col. 7 Stipulated Amortization Adjustments Expenses = - (2,703,399) (2,702,171) Col. 8 Deferral (3,103,482) (4,995,118) (1,016,333) 3,847,560 5,838,911 6,160,811 (2,280,550) 10,187, ,100 2,317,572 1,605, ,139 Col. 9 Pre-Tax Cumulative Deferral (21,361,154) (26,356,273) (27,372,605) (23,525,046) (17,707,582) (11,546,772) (13,827,322) (3,639,527) (2,687,427) (369,855) 1,235,751 1,990,890 (8,237) 1,982,653 Col. 10 Interest Rollover (21,447) Col. 11 After-Tax Cumulative Deferral (12,635,123) (15,589,735) (16,190,896) (13,915,064) (10,474,035) (6,829,915) (8,178,861) (2,152,780) (1,589,613) (218,769) 730,947 1,177,611 Col. 12 After-Tax Average Monthly Balance (11,717,268) (14,112,429) (15,890,316) (15,052,980) (12,194,550) (8,651,975) (7,504,388) (5,165,821) (1,871,197) (904,191) 256, ,279 Col. 13 Annual Interest Rate 0.42% 0.41% 0.41% 0.36% 0.33% 0.23% 0.27% 0.26% 0.32% 0.32% 0.32% 0.32% Col. 14 Interest (4,101) (4,822) (5,376) (4,516) (3,343) (1,685) (1,673) (1,119) (499) (241) (8,237)

27 Atlantic City Electric Company Schedule TMH-1 Amortization of Under Recovered NGC Balance Page 3 of 3 Amortization for Period July 2012 to May 2016 Amortization Rate to be Effective For Period July May 2016 Updated for Actuals through December 2016 Line 1 Total Under Recovered To Be Amortized 126,973,199 Settlement ER Schedule 1 Page 3 of Interest Rate (Pre-Tax) 0.92% Settlement ER Schedule 1 Page 3 of 4 4 Interest Rate (After-Tax) 0.55% Settlement ER Schedule 1 Page 3 of 4 5 Amortization Period (Years) 3.9 Settlement ER Schedule 1 Page 3 of 4 6 Amortization 7 Total Annual Balance Per Year 32,418,689 Settlement ER Schedule 1 Page 3 of Column Totals 126,973,199 1,355, Col. 1 Col. 2 Col. 3 Col. 4 Col Total Total Monthly Total Total 13 Period Month Starting Balance Amortization Interest Ending Balance 14 Deferral Starting Balance 126,973, Jul ,973,199 2,701,557 57, ,271, Aug ,271,641 2,701,557 55, ,570, Sep ,570,084 2,701,557 54, ,868, Oct ,868,527 2,701,557 53, ,166, Nov ,166,969 2,701,557 52, ,465, Dec ,465,412 2,701,557 50, ,763, Jan ,763,854 2,701,557 49, ,062, Feb ,062,297 2,701,557 48, ,360, Mar ,360,739 2,701,557 47, ,659, Apr ,659,182 2,701,557 46,034 99,957, May-13 99,957,625 2,701,557 44,807 97,256, Jun-13 97,256,067 2,701,557 43,579 94,554, Jul-13 94,554,510 2,701,557 42,352 91,852, Aug-13 91,852,952 2,701,557 41,124 89,151, Sep-13 89,151,395 2,701,557 39,896 86,449, Oct-13 86,449,838 2,701,557 38,669 83,748, Nov-13 83,748,280 2,701,557 37,441 81,046, Dec-13 81,046,723 2,701,557 36,214 78,345, Jan-14 78,345,165 2,701,557 34,986 75,643, Feb-14 75,643,608 2,701,557 33,758 72,942, Mar-14 72,942,050 2,701,557 32,531 70,240, Apr-14 70,240,493 2,701,557 31,303 67,538, May-14 67,538,936 2,701,557 30,076 64,837, Jun-14 64,837,378 2,701,557 28,848 62,135, Jul-14 62,135,821 2,701,557 27,621 59,434, Aug-14 59,434,263 2,701,557 26,393 56,732, Sep-14 56,732,706 2,701,557 25,165 54,031, Oct-14 54,031,148 2,701,557 23,938 51,329, Nov-14 51,329,591 2,701,557 22,710 48,628, Dec-14 48,628,034 2,701,557 21,483 45,926, Jan-15 45,926,476 2,701,557 20,255 43,224, Feb-15 43,224,919 2,701,557 19,027 40,523, Mar-15 40,523,361 2,701,557 17,800 37,821, Apr-15 37,821,804 2,701,557 16,572 35,120, May-15 35,120,246 2,701,557 15,345 32,418, Jun-15 32,418,689 2,701,557 14,117 29,717, Jul-15 29,717,132 2,701,557 12,890 27,015, Aug-15 27,015,574 2,701,557 11,662 24,314, Sep-15 24,314,017 2,701,557 10,434 21,612, Oct-15 21,612,459 2,701,557 9,207 18,910, Nov-15 18,910,902 2,701,557 7,979 16,209, Dec-15 16,209,345 2,701,557 6,752 13,507, Jan-16 13,507,787 2,701,557 5,524 10,806, Feb-16 10,806,230 2,701,557 4,297 8,104, Mar-16 8,104,672 2,701,557 3,069 5,403, Apr-16 5,403,115 2,701,557 1,841 2,701, May-16 2,701,557 2,701, Jun Notes: 1) Monthly Amortizations = Amortization Balance Per Year / 12 Months (Adjusted for 47 month Amortization) 2) Interest = Average Monthly Balance * Interest Rate Per Month Average Monthly Balance = (Prior Month Balance + Current Month Balance) / 2 Interest Rate Per Month = Interest Rate (After Tax) / 12 months

28 Schedule TMH-2

29 Atlantic City Electric Company NJ Clean Energy Program Funding Rate Design Rates Effective For Period June May 2018 Updated for Actuals through December 2016 Schedule TMH-2 Page 1 of 2 Line No. 1 Table 1 Projected Comprehensive Resource Analysis Program Expenditures April March Month Projected Expenditure 4 5 Apr-17 (42,895) * *Represents Expenses for April and May 17 minus projected retail revenue to be collected in current rates. 6 May-17 32,117 * 7 Jun-17 2,515,930 Projected based on NJBPU QO Order 8 Jul-17 3,195,841 dated 6/29/2016 FY2017 Annual Expenditures 9 Aug-17 3,426, Sep-17 3,144, Oct-17 2,490, Nov-17 2,228, Dec-17 2,401, Jan-18 2,722, Feb-18 2,582, Mar-18 2,487, Total 27,185, Table 2 Clean Energy Program Funding Rate Design June May Total Period Expenditures 27,185,776 =Line Return of NJ Clean Energy Program Funding Deferral Balance (232,279) Schedule TMH-2, Page 2, Col. 7 Row Total Clean Energy Program Recovery 26,953,497 =Line 23 + Line Projected Delivered Sales June May ,845,560, Clean Energy Program Funding Rate (/kwh) BPU Assessment Rate without SUT (/kwh) Rate Including SUT (/kwh)

30 Atlantic City Electric Company Summary of Clean Energy Program Deferral Rates Effective For Period June May 2018 Updated for Actuals through December 2016 Schedule TMH-2 Page 2 of 2 Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 Col. 10 Col. 11 Col. 12 After-Tax Pre-Tax After-Tax Average Annual Deferral Interest Deferral Monthly Interest Line No. Month Revenues Expenses Deferral Cumulative Rollover Cumulative Balance Rate Interest 1 Actual Apr-16 2,204,763 2,164,816 39, ,201 81,155 69, % 24 2 Actual May-16 2,004,892 2,275,386 (270,494) (133,293) (78,843) 1, % 0 3 Actual Jun-16 2,607,563 2,557,317 50,246 (83,046) (49,122) (63,982) 0.41% (22) 4 Actual Jul-16 3,273,529 2,632, , , , , % 42 5 Actual Aug-16 3,905,672 3,924,783 (19,111) 540,662 1, , , % 89 6 Actual Sep-16 3,822,532 3,201, ,788 1,161, , , % 96 7 Actual Oct-16 1,572,333 2,494,609 (922,277) 239, , , % 93 8 Actual Nov-16 2,084,043 2,308,390 (224,348) 14,826 8,769 75, % 16 9 Actual Dec-16 2,332,565 2,366,608 (34,043) (19,218) (11,367) (1,299) 0.32% (0) 10 Projected Jan-17 2,855,934 2,722, , ,280 67,597 28, % 7 11 Projected Feb-17 2,656,473 2,582,671 73, , ,250 89, % Projected Mar-17 2,531,776 2,487,938 43, , , , % Total Interest Aug2016-Mar Total Over/(Under) Recovered Balance >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 232,279

31 Schedule TMH-3

32 Atlantic City Electric Company Schedule TMH-3 Uncollectible Charge Rate Design Page 1 of 4 Rates Effective For Period June May 2018 Updated for Actuals through December 2016 Line No. 1 Projected Uncollectible Expense (April March 2018) 17,439,396 Schedule TMH-3, Page 4 Line Under Recovered Balance At April 1, ,293,942 Schedule TMH-3 Page 2, Column 7 Line Total Uncollectible Recovery 34,733,338 Line 1 + Line Projected Delivered Sales June May ,845,560,805 8 Uncollectible Rate (/kwh) BPU/RPA Revenue Assessment Final Uncollectible Rate (/kwh) Final Uncollectible Rate including SUT (/kwh)

33 Atlantic City Electric Company Summary of Uncollectible Account Deferral Rates Effective For Period June May 2018 Updated for Actuals through December 2016 Schedule TMH-3 Page 2 of 4 Col. 1 Line No Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 6a Prior Period & Uncollectible Uncollectible Joint Settlement Stipulated Accounts Accounts Most Favored Nation Adjustments Month Revenues Expenses Provision (MFN) Expenses Are (-) Actual Apr , ,827 (233,733) Actual May , ,285 (233,627) Actual Jun-16 1,117,023 1,002,370 - Actual Jul-16 1,459,105 1,306,307 - Actual Aug-16 1,710,857 1,689,284 - Actual Sep-16 1,674,393 4,007,357 - Actual Oct , ,565 - Actual Nov ,862 14,095,111 6,753,135 - Actual Dec-16 1,021,719 (965,687) - Projected Jan-17 1,211,548 8,425,475 - Projected Feb-17 1,126,932 (1,455,179) - Projected Mar-17 1,074, ,653 - Total Interest Aug2016-Mar2017 Total Over/(Under) Recovered Balance at April 1, 2017 >>>>>>>>>>>>>>>>>>>>>>>> Col. 6b Net Uncollectible Deferral (97,729) (89,769) 114, ,798 21,574 (2,332,964) (181,766) (6,429,114) 1,987,406 (7,213,927) 2,582, ,381 Col. 7 Pre-Tax Cumulative Deferral (6,163,790) (6,253,559) (6,138,906) (5,986,108) (5,974,142) (8,307,106) (8,488,872) (14,917,986) (12,930,580) (20,144,507) (17,562,396) (17,279,016) (14,926) (17,293,942) Col. 8 Interest Rollover (9,608) Col. 9 After-Tax Deferral Cumulative (3,645,882) (3,698,980) (3,631,163) (3,540,783) (3,533,705) (4,913,653) (5,021,168) (8,823,989) (7,648,438) (11,915,476) (10,388,157) (10,220,538) Col. 10 After-Tax Average Monthly Balance (3,616,978) (3,672,431) (3,665,071) (3,585,973) (3,537,244) (4,223,679) (4,967,410) (6,922,578) (8,236,213) (9,781,957) (11,151,817) (10,304,348) Col. 11 Annual Interest Rate 0.42% 0.41% 0.41% 0.36% 0.33% 0.23% 0.27% 0.26% 0.32% 0.32% 0.32% 0.32% Col. 12 Interest (1,266) (1,255) (1,240) (1,076) (973) (810) (1,118) (1,500) (2,607) (2,198) (2,974) (2,748) (14,926)

34 Atlantic City Electric Company Amortization of Under Recovered UNC Balances Amortization for Period July 2012 to May 2016 Amortization Rate to be Effective For Period July May 2016 Updated for Actuals through December 2016 Schedule TMH-3 Page 3 of 4 Line Total Under Recovered UNC Balance 10,977,980 Settlement ER Schedule 3 Page 3 of 4 Interest Rate (Pre-Tax) Interest Rate (After-Tax) Amortization Period (Years) 0.92% 0.55% Amortization 8 UNC Annual Balance Per Year 2,802, Col. 1 Column Totals Col Period Month Total Starting Balance 14 Deferral Starting Balance 15 1 Jul-12 10,977, Aug-12 10,744, Sep-12 10,510, Oct-12 10,277, Nov-12 10,043, Dec-12 9,810, Jan-13 9,576, Feb-13 9,342, Mar-13 9,109, Apr-13 8,875, May-13 8,642, Jun-13 8,408, Jul-13 8,175, Aug-13 7,941, Sep-13 7,707, Oct-13 7,474, Nov-13 7,240, Dec-13 7,007, Jan-14 6,773, Feb-14 6,540, Mar-14 6,306, Apr-14 6,072, May-14 5,839, Jun-14 5,605, Jul-14 5,372, Aug-14 5,138, Sep-14 4,905, Oct-14 4,671, Nov-14 4,437, Dec-14 4,204, Jan-15 3,970, Feb-15 3,737, Mar-15 3,503, Apr-15 3,270, May-15 3,036, Jun-15 2,802, Jul-15 2,569, Aug-15 2,335, Sep-15 2,102, Oct-15 1,868, Nov-15 1,635, Dec-15 1,401, Jan-16 1,167, Feb , Mar , Apr , May , Jun-16 0 Notes: 1) Monthly Amortizations = Amortization Balance Per Year / 12 Months 2) Interest = Average Monthly Balance * Interest Rate Per Month Average Monthly Balance = (Prior Month Balance + Current Month Balance) / 2 Interest Rate Per Month = Interest Rate (After Tax) / 12 months To Settlement ER Schedule 3 Page 3 of 4 Settlement ER Schedule 3 Page 3 of 4 Settlement ER Schedule 3 Page 3 of 4 Settlement ER Schedule 3 Page 3 of 4 10,977, ,227 Col. 3 Col. 4 Col. 5 Total Monthly Amortization 233, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,574 - Total Interest 4,935 4,829 4,723 4,617 4,511 4,405 4,298 4,192 4,086 3,980 3,874 3,768 3,662 3,556 3,449 3,343 3,237 3,131 3,025 2,919 2,813 2,706 2,600 2,494 2,388 2,282 2,176 2,070 1,964 1,857 1,751 1,645 1,539 1,433 1,327 1,221 1,114 1, Total Ending Balance 10,977,980 10,744,406 10,510,832 10,277,258 10,043,683 9,810,109 9,576,535 9,342,961 9,109,387 8,875,813 8,642,239 8,408,665 8,175,091 7,941,517 7,707,943 7,474,369 7,240,795 7,007,221 6,773,647 6,540,073 6,306,499 6,072,925 5,839,351 5,605,777 5,372,203 5,138,629 4,905,055 4,671,481 4,437,907 4,204,333 3,970,759 3,737,185 3,503,611 3,270,036 3,036,462 2,802,888 2,569,314 2,335,740 2,102,166 1,868,592 1,635,018 1,401,444 1,167, , , , ,