RESPONSIVE TESTIMONY

Transcription

1 ~ BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOM A IN THE MATTER OF THE APPLICATION OF CENTERPOINT ENERGY RESOURCES CORP., D/B/A CENTE RPOI NT ENERGY OKLAHOMA GAS, FOR APPROVAL OF ITS PERFORMANCE BASED RATE CHANGE PLAN CALCULAT IONS FOR THE TWELVE M ONTHS ENDED DECEMBER 31,2007 CAUSE NO. PUD ' I C MAY 3 p Zav 8 COURT CLERK 'S OFFICE - OKC CORPORATION commini o N OF OKLAHOMA RESPONSIVE TESTIMONY OF ROYA Z. S OLTANI ON BEHALF OF OKLAHOMA ATTORNEY GENERAL MAY 30, 2008

2 Respons ive Testimony of Roya Z. Soltani 1 Q : Please state your name and business address. 2 A: My name is Roya Z. Soltani. My business address is 313 N.E. 21st Street, 3 Oklahoma City, Oklahoma, Q : By whom and in what capacity are you employed? 6 A : I am employed by the Public Utility Unit of the Oklahoma Office of Attorne y 7 General ("AG" as a CPA/Auditor. 8 9 Q : Please briefly state your educational and professional qualifications. 10 A: I am a Certified Public Accountant with a Bachelor of Business Administratio n 11 degree in Accounting and a Bachelor of A rts in Journalism from the University of 12 Oklahoma. I also hold the professional designation of Ce rtified Rate of Retur n 13 Analyst as conferred by the Society of Utility and Regulato ry Financial Analysts. 14 This designation is awarded based upon experience and successful completio n 15 of a written examination. I began my employment with the Office of Attorne y 16 General on December of I have worked for a number of governmenta l 17 entities in various positions including auditing, accounting, budgeting, and 18 financial analysis. I have also served in the Energy Group of the Public Utility 19 Division of the Oklahoma Corporation Commission (the "Commission " Q : Have you previously testified before th is Commission and have you r 22 credentials been accepted? 1

3 Responsive Testimony of Roya Z. Soltan i 1 A : Yes, I have testified before this Commission and my credentials have been 2 accepted. 3 4 Q : What is the purpose of your testimony in this proceeding? 5 A: The purpose of my testimony is to address the Centerpoint Energ y 6 Resources Corp., D/B/A Centerpoint Energy Oklahoma Gas (th e 7 "Company" request for the Commission authorization to accelerate th e 8 amortization of ce rtain Company expenses, in effect offsetting the credit s 9 resulting from the calculation of the 2007 Test Year rates Q : Please give a background summa ry of the Company 's PBRC Cause 12 Filings. 13 A : The Company 's PBRC plan was initially approved by Order No , 14 issued in Cause No. PUD , and modified by Order No issued in Cause No. PUD , and Order No issued i n 16 Cause No. PUD The PBRC plan is a mechanism that provide s 17 for the Commission to make an annual adjustment of base rates dependin g 18 on actual operating results as measured by return on equity for the mos t 19 recent calendar year. Order No established the following fou r 20 changes to the PBRC Plan : Calculations will be based on actual revenues instead of weather - 22 normalized revenues. 2

4 Centerpo i nt Energy Resources Corp. Cause No. PUD Responsive Testimony of Roya Z. Soltan i 1 2. The allowed return on equity was reduced by 50 basis points to 9.75% 2 from 10.25%. Therefore the Dead-band was lowered to the range of % to % from the higher range of % to 10.75% The amount of bad debt expense was capped at 1.2% of test year 5 revenues, inclusive of gas costs The term of the PBRC Plan was extended for one additional year. 7 8 Q : Please summarize the Company 's current PBRC Fil ing. 9 A: The Company seeks the Commission's approval of its PBRC calculations 10 for the 2007 Test Year in this filing. The calculation shows an earned return 11 on equity which is above the % upper limit of the allowed return o n 12 equity. The Company proposes in its testimony that the Commission shoul d 13 authorize adjustments to ce rtain Company expenses to offset the credit s 14 resulting from this filing. Fu rthermore, the Company proposes that the 15 Commission may wish to consider the addition of a Weather Normalizatio n 16 Adjustment clause ("WNA" to the Company 's tariff Q : Do you have any comments regarding the add ition of a WNA clause to 19 the Company's tariff? 20 A : With the WNA, gas utilities recover the correct amount of fixed costs. 21 Weather that is colder than normal will not cause over-recovery of costs an d 22 weather that is warmer than normal will not cause under-recovery of costs. 3

5 Cause No. PUD Responsive Testimony of Roya Z. Soltan i 1 The Commission approves rates and charges for gas utility companies i n 2 order that they can cover their operating expenses that are necessa ry to 3 provide service to the customers. During a rate case, a forecast is made t o 4 determine future sales for the utility. This process involves adjusting 5 forecasted sales levels for normal weather conditions. This normal weathe r 6 data is usually comprised of an average of weather for a period of thirt y 7 years. However, the Company has provided calculations that indicate th e 8 most recent 10-year period data is more beneficial to its customers Q : Do you agree with Mr. Gastineau's suggestion to accelerate th e 11 amortization of certain expenses and in effect to eliminate the credit t o 12 be distributed to customers resulting from th is filing? 13 A : No. I don 't. Mr. Gastineau on his direct testimony, page 10, lines 11 to states, " If the recognition of the accelerated amortization this year help s 15 ave rt a 2008 calendar test year increase when calculated in 2009, then 16 customers would have experienced no increases in rates for three year s 17 and one year of credits for the first four test years of the PBRC trial, whic h 18 would be a testament to its success." For the ratepayers, no increases i n 19 rates for two years and two years of credits for the first four test years of the 20 PBRC show success also. The PBRC Plan is a pilot program that provide s 21 incentives for the Company to manage its costs efficiently to maintai n 22 earnings rather than raising rates. The purpose of the pilot program is to 4

6 Responsive Testimony of Roya Z. Soltani 1 compare the outcomes of each year and to evaluate the effectiveness of the 2 PBRC. By advancing the expenses and bringing the earnings into the 3 approved band, the Company will not credit its customers this year. As it 4 stands, $407,893 is to be returned to the ratepayers, if this adjustment is 5 approved, and the rates stay within the band for the next two years, 6 ratepayers could loose pa rt of this refund permanently. Each year's actual 7 outcome should not be changed in order to make the outcome fit the band 8 so the evaluation of the PBRC at the end is meaningful Q : What are your recommendations regarding the Company 's Performance Based Rate Change Plan (" PBRC Plan"? 12 A: I recommend that the Commission approve the Company's calculations an d 13 resulting credit to customers, pursuant to the Company's Rider Schedule No PBRC Plan. The 2007 Test Year calculation results in an earned return o n 15 equity above the upper limit of the allowed return on equity ; therefore, the 16 Company should implement a credit to its customers of 75 % of the earning s 17 above the allowed return on equity plus any amount that remains to be credit t o 18 customers as a result of prior PBRC plans. I also recommend that th e 19 Commission reject the Company 's request to accelerate the amo rtization of 20 ce rtain expenses to eliminate the credit to be distributed to its ratepayers. 5

7 Cente rpo i nt Ene rg y Resou rc es C orp. Respons ive Test imony of Roya Z. So lta ni Q : Does th is conclude your testimony? A : Yes, it does.