Before the Minnesota Public Utilities Commission State of Minnesota. Docket No. E002/GR Exhibit (LRP-2) Decoupling and Sales True-Up

Transcription

1 Rebuttal Testimony and Schedule Lisa R. Peterson Before the Minnesota Public Utilities Commission State of Minnesota In the Matter of the Application of Northern States Power Company for Authority to Increase Rates for Electric Service in Minnesota Docket No. E00/GR-- Exhibit (LRP-) Decoupling and Sales True-Up September, 0

2 Table of Contents I. Introduction II. RDM and the Settlement III. Response Regarding the RDM Extension and Cap Proposals IV. Sales True-Up V. Conclusion Schedule Xcel Energy Response to OAG Information Request No. 0 Schedule i Docket No. E00/GR--

3 0 0 I. INTRODUCTION Q. PLEASE STATE YOUR NAME AND OCCUPATION. A. My name is Lisa R. Peterson. My title is Principal Pricing Analyst. Q. HAVE YOU PREVIOUSLY PROVIDED TESTIMONY IN THIS PROCEEDING? A. Yes. I filed Direct Testimony on behalf of Northern States Power Company ("Xcel Energy" or the "Company") presenting the Company s implementation plan for the Revenue Decoupling Mechanism ("RDM") approved by the Minnesota Public Utilities Commission ("Commission") in Docket No. E00/GR--. I also discussed the Company s proposals regarding the RDM term length and surcharge cap in the event that a multi-year rate plan ("MYRP") was approved in this case. Q. DID ANY INTERVENORS PROVIDE DIRECT TESTIMONY REGARDING THE COMPANY S PROPOSALS FOR THE RDM INCLUDED IN YOUR DIRECT TESTIMONY? A. Yes. The following witnesses provided testimony related to the Company s proposal for the RDM included in my Direct Testimony: Minnesota Department of Commerce, Division of Energy Resources (Department) witness Christopher T. Davis; and AARP witness Nancy Brockway. Q. WHAT IS THE PURPOSE OF YOUR REBUTTAL TESTIMONY? A. I discuss the RDM as it relates to the August, 0 Stipulation of Settlement ("Settlement"). I also respond to the Direct Testimony of AARP witness Ms. Nancy Brockway regarding the RDM. Specifically, I respond to Docket No. E00/GR--

4 0 0 comments related to the RDM Pilot extension and the surcharge cap. I also discuss the sales true-up mechanism provided for in the Settlement. Q. HOW IS YOUR REBUTTAL TESTIMONY ORGANIZED? A. I present my testimony in the sections as outlined below. Section II discusses the RDM in the Settlement. Section III is my response to AARP regarding the RDM extension and cap. Section IV is my discussion regarding the sales true-up mechanism as filed in the Settlement. II. RDM AND THE SETTLEMENT Q. DOES THE SETTLEMENT INCLUDE ANY CHANGES TO THE COMPANY S RDM PILOT? A. The Settlement extends the term of the currently-approved RDM Pilot to four years, ending in 0. This extension allows the RDM Pilot to match the four-year term of the MYRP. 0 weather-normalized actual sales and customer counts will be used to set the RDM base year. Because weathernormalized actual sales and customer counts will be used to set final rates, the 0 RDM will only capture differences in revenue related to actual weather in 0. The annual cap on surcharges will remain at the currently-approved level of three percent for the four-year term. Docket No. E00/GR--

5 0 0 III. RESPONSE REGARDING THE RDM EXTENSION AND CAP PROPOSALS Q. DID AARP WITNESS MS. BROCKWAY ADDRESS YOUR PROPOSAL TO EXTEND THE RDM TO MATCH THE TERM OF THE MYRP? A. Yes. AARP witness Ms. Brockway does not support the extension. She argues that the Commission approved a three-year pilot that will not be extended automatically. Ms. Brockway contends that if the proposed extension is approved it will eliminate the Commission s opportunity to review the RDM Pilot. Q. DOES THE COMMISSION HAVE THE AUTHORITY IN THIS PROCEEDING TO EXTEND THE RDM PILOT FOR A TERM GREATER THAN THREE YEARS? A. Yes. Minn. Stat. B., subd. allows for a decoupling pilot program to be extended beyond three years. Specifically, the statute reads as follows: A pilot program may not exceed three years in length. Any extension beyond three years can only be approved in a general rate case, unless that decoupling program was previously approved as part of a general rate case. Q. WILL THERE BE AN OPPORTUNITY FOR REVIEW AND POSSIBLE MODIFICATION OR TERMINATION IF THE RDM PILOT IS EXTENDED? A. Yes. The Company will file annual RDM Pilot compliance reports for the Commission to review based on the Commission-approved reporting requirements. The Commission has the authority to suspend or modify the RDM Pilot at any time based on annual review, per Criteria of the Commission's ORDER ESTABLISHING CRITERIA AND STANDARDS TO BE Docket No. E00/GR--, FINDINGS OF FACT, CONCLUSIONS AND ORDER, May, 0, Order Point 0. Docket No. E00/GR--

6 0 0 UTILIZED IN PILOT PROPOSALS FOR REVENUE DECOUPLING. Specifically, the Order provides as follows: Review: All utility pilot proposals shall be reviewed yearly. If the Commission determines that the pilot is harming ratepayers and/or failing to meet objectives, the Commission may suspend the pilot at any time or recommend modifications. Q. IS THE COMPANY IN AGREEMENT WITH MS. BROCKWAY REGARDING THE RDM CAP? A. In Direct Testimony, I proposed raising the cap if the RDM Pilot was extended beyond three years. For the purposes of Settlement, the Company has agreed to keep the cap at the currently-approved level for the duration of the MYRP. As a result of the Settlement, Ms. Brockway and I are in agreement that the cap should remain at the current RDM cap amount. IV. SALES TRUE-UP Q. PLEASE EXPLAIN HOW THE SALES TRUE-UP WOULD OPERATE. A. As discussed in the Settlement, Attachment, the following steps show how the sales true-up would work: Steps to calculate 0 Revenues and 0 Final Rates:. After 0 actual State of Minnesota jurisdictional sales are available in January 0, the Company will provide the actual 0 customer counts, weather-normalized sales, and resulting revenues in a compliance filing consistent with the method used in Docket No. E00/GR--. Revenues will be calculated using rates currently in Docket No. E,G/CI-0-, ORDER, June, 00, Criteria. Docket No. E00/GR--

7 0 0 effect, excluding the interim rate factor. The use of sales and customer counts at rate code detail will capture the increase in firm service sales and revenue from customers that canceled or reduced their interruptible service contracts using the 0 cancellation charge waiver.. 0 actual weather-normalized revenues for all classes will be compared to 0 test year present revenues to determine the sales true-up adjustment, either upward or downward.. The sales true-up adjustment will be incorporated into the final 0 revenue deficiency at the completion of the case. The agreed-to settlement revenues are in addition to the sales true-up adjustment.. 0 final rates will be calculated using the final 0 revenue requirement and 0 actual weather-normalized sales for all classes. Steps to calculate 0 Non-Decoupled Sales True-Up:. After 0 actual sales are available in January 0, the Company will provide the actual 0 customer counts, weather-normalized sales, and resulting revenues by class for all classes in a compliance filing consistent with the method used in Docket No. E00/GR--. Revenues will be calculated using final rates.. 0 actual weather-normalized revenues for non-decoupled classes will be compared by class to 0 test year final present revenues to determine the 0 sales true-up adjustments, either upward or downward. If the 0 revenues are greater than the approved plan year level, the difference will be deferred as a regulatory liability and refunded to customers. Docket No. E00/GR--

8 0 0 If the 0 revenues are lower than the approved plan year level, the difference up to the cap will be deferred as a regulatory asset and collected from customers. The cap is measured as three percent of the 0 compliance base revenue excluding fuel and riders. The refund or collections are measured by class, and the caps will be applied at the class level. A refund or surcharge factor will be calculated for each class based on the deferral amount and the current sales forecast. These factors will be placed on customer bills effective April, 0 for months. The sales true-up mechanism for 0 and 0 would work in the same manner as 0, and will include any over or under collection from the prior year s true up. The Company s response to OAG Information Request No. 0, provided as Schedule to my Rebuttal Testimony, Exhibit (LRP-), further discusses the sales true-up and the differences and similarities between the sales true-up and the RDM. V. CONCLUSION Q. PLEASE SUMMARIZE YOUR TESTIMONY. A. The RDM Pilot program extension agreed to in the Settlement is reasonable, given that the Pilot program is subject to annual review and the Commission has the authority to suspend or modify it if it is not in ratepayer interest. The sales true-up will be applied as outlined in the Settlement. Q. DOES THIS CONCLUDE YOUR REBUTTAL TESTIMONY? A. Yes, it does. Docket No. E00/GR--

9 Northern States Power Company Non Public Document Contains Trade Secret Data Public Document Trade Secret Data Excised Public Document Docket No. E00/GR-- Exhibit (LRP-), Schedule Page of Xcel Energy Docket No.: E00/GR-- Response To: Office of Attorney General Information Request No. 0 Requestor: Joseph C. Meyer Date Received: September, 0 Question: For all responses show amounts for Total Company and the Minnesota jurisdictional retail unless indicated otherwise. Total Company is meant to include costs incurred for both regulated and non-regulated operations. Reference: Partial Settlement Agreement. Provide all the similarities and differences between the true-up proposal for nondecoupled classes and the true-up that occurs for decoupled classes. Provide a numerical example(s) that demonstrate these similarities and differences in a live Excel spreadsheet with all links and formula intact. Response: The similarities between the sales true-up for non-decoupled classes and the true-up calculation for decoupled classes are as follows: Measurement timeframe: The sales true-up and decoupling adjustments are both measured on a calendar-year basis for the four-year multi-year rate plan. Timing of compliance reporting: The Company will file sales true-up and decoupling compliance reports for 0 within 0 days of the Commission s final order in this Rate Case, and in February each year for 0 through 0 reporting. Calculation of cap: For both mechanisms, the cap on surcharges is measured as three percent of the compliance base revenue excluding fuel and riders. The caps are calculated and applied by class on an annual basis. Factor calculation: Refund or surcharge factors will be calculated for each class based on the deferral amount and the sales forecast for the months in which the factor will be effective (April through the following March each year, with the exception of the first year as described below).

10 Northern States Power Company Timing of billing factors: The resulting collection or refund factors will be placed on customer bills from April through the following March, with the exception of the first year as described below. The differences are as follows: Docket No. E00/GR-- Exhibit (LRP-), Schedule Page of Basis for calculations: o Rate Level: The RDM mechanism is based on the authorized sales revenue per customer and includes any revenue increases approved in this case. The sales true-up mechanism is based on present rates without any revenue increases approved in this case. o Weather Normalization: The RDM uses actual sales data that has not been weather-normalized. The sales true-up uses weather-normalized actual sales data. Both of these methods were approved by the Commission s Order in Docket No. E00/GR--. o Growth: The case and settlement (Stipulation of Settlement Attachment, page ) incorporated different sales and revenues for non-decoupled classes as the reference case. The sales true-up calculation will include this reference point in the adjustment calculation. In contrast, the case did not include revenues for growth for the non-decoupled classes and the Base Year will continue to be 0. 0 deferral: The 0 sales true-up adjustment will be incorporated into the final revenue deficiency, and the three percent cap limitation is not applied. The 0 RDM deferral will be collected from or refunded to customers through the RDM factor placed on customer bills from the date final rates are effective until March, 0, per the Commission s August, 0 Order in Docket No. E00/GR--. The 0 RDM includes the three percent cap limitation. Witness: Lisa R. Peterson Preparer: Lisa R. Peterson Title: Principal Pricing Analyst Department: Regulatory Affairs Telephone: () 0- Date: September, 0