Before the Minnesota Public Utilities Commission State of Minnesota. Docket No. E002/GR Exhibit (LRP-1) Decoupling

Transcription

1 Direct 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 November, 0

2 Table of Contents I. Introduction and Qualifications II. Decoupling Implementation III. Decoupling and a Five-Year MYRP IV. Summary and Conclusion Schedules Statement of Qualifications Schedule i

3 0 0 I. INTRODUCTION AND QUALIFICATIONS Q. PLEASE STATE YOUR NAME AND TITLE. A. My name is Lisa R. Peterson. My title is Principal Pricing Analyst. Q. PLEASE SUMMARIZE YOUR QUALIFICATIONS AND EXPERIENCE. A. My qualifications include more than years of experience with Xcel Energy and its predecessors in the areas of gas and electric pricing, resource planning, and real time system operations. A detailed statement of my qualifications and experience is provided as Exhibit (LRP-), Schedule. Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY? A. I discuss the Company s implementation plan for the Revenue Decoupling Mechanism (RDM) approved by the Minnesota Public Utilities Commission (Commission) in Docket No. E00/GR--. It is important to state at the outset that the Company requests no changes to the approved RDM structure for the three-year Decoupling pilot timeframe. The implementation plan I discuss follows and reflects the Commission s May, 0 and August, 0 Orders in that docket. I simply discuss our implementation plan in this proceeding to demonstrate that implementation of the Commission s Orders can occur seamlessly with the implementation of our three-year multi-year rate plan (MYRP) proposal. However, I do propose changes to the Decoupling term and cap for 0 and 00 if a five-year MYRP is pursued. Q. ARE YOU PROPOSING TO CHANGE THE STRUCTURE OF THE DECOUPLING RIDER DURING 0-0? A. No, the Company is not proposing any changes to the approved structure for 0-0. Docket No. E00/GR--

4 0 0 Q. WHAT IS THE STATUS OF DECOUPLING COMPLIANCE? A. The Company filed its compliance tariff sheets on September, 0, and its plan for implementing an education and outreach program on October, 0 in Docket No. E00/GR--. Q. HOW IS YOUR TESTIMONY ORGANIZED? A. I present my testimony in the following Sections: Section II describes the Company s implementation of Decoupling deferrals during the interim rate period and proposed factors upon implementation of final rates; and Section III proposes changes to the Decoupling term and cap under a five-year MYRP scenario. II. DECOUPLING IMPLEMENTATION Q. WHAT WAS THE COMMISSION S ORDER REGARDING DECOUPLING IMPLEMENTATION FROM DOCKET NO. E00/GR--? A. The Commission approved a three-year Decoupling pilot, with the calculation of over- or under-recovery of nonfuel costs to begin after the final compliance order authorizing implementation of final rates in that docket is received, but not sooner than January, 0. Baseline fixed revenue per customer and baseline fixed energy charges are to be set using the authorized revenues from final rates if the Company files a test year 0 rate case. Q. PLEASE DESCRIBE THE DECOUPLING DEFERRAL CALCULATIONS DURING THE INTERIM RATE PERIOD. Docket No. E00/GR--

5 0 0 A. The Company will begin calculating monthly decoupling deferrals in January 0, at the same time interim rates are in effect. As required by the Commission, monthly baseline fixed revenue per customer and baseline fixed energy charges will be calculated using 0 test year sales and rates, including interim rates, in effect during each month of the deferral. On a monthly basis throughout the interim rate period, authorized revenues are calculated using the baseline fixed revenue per customer and actual monthly customer counts. Actual revenues are calculated using the baseline fixed revenue per customer and actual monthly sales. The Decoupling deferral is equal to the over- or under-recovery between authorized and actual revenues each month. The deferral calculation is detailed in Volume, Notice of Change in Rates and Interim Rate Petition of the rate case Application, see Tab RDM Deferral. Q. PLEASE DESCRIBE THE CALCULATION OF THE 0 PROPOSED RDM ADJUSTMENT FACTORS. A. Again as required by the Commission, at the time of final rate compliance for this current rate case, the 0 deferral will be recalculated using the approved percentage increase in revenue instead of the interim rate percentage increase. The Company will file proposed RDM factors based on the recalculated 0 annual deferral and the sales forecast in place at that time. The 0 monthly deferrals will also be recalculated for the interim rate period, using the approved final rates in place of 0 interim rates. Q. PLEASE DESCRIBE THE IMPLEMENTATION SCHEDULE FOR THE RDM FACTORS. A. The Company will file proposed RDM factors for 0 with final rate compliance in this case. The proposed effective date will be the same date as proposed for final rate implementation. Depending on the timing, the factors Docket No. E00/GR--

6 0 0 may be calculated based on annual deferrals spread over a partial year of sales, similar to other riders. For example, if final rates are approved in June 0, the Company may propose RDM factors for the 0 deferral to be surcharged or credited over eight months (from August, 0 through March, 0). This timing allows for the 0 RDM deferrals to be surcharged or credited on customer bills beginning on April, 0 per Commission Order. Q: DOES THE DECOUPLING MECHANISM AFFECT HOW THE INTERIM RATE REFUND IS CALCULATED? A: No, they are separate mechanisms designed to adjust revenues for different purposes. The interim rate refund calculation is a measure of the revenue difference due to the change from interim rate levels to approved final rate levels. The decoupling mechanism is a measure of the difference in revenues due to differences in sales, based on approved final rate levels. In other words, the interim rate refund adjusts revenue based on the difference between interim and approved final rates at actual sales levels, and decoupling further adjusts the revenue based on approved final rates and test year sales levels. Q. HOW DOES THE COMPANY S PROPOSAL TO MOVE THE TRANSMISSION COST RECOVERY (TCR) RIDER COSTS INTO BASE RATES AT THE END OF THIS PROCEEDING IMPACT THE DECOUPLING DEFERRAL CALCULATION? A. The TCR Rider costs are not included in the interim rate increase, but they will be included in the calculation of final rates at the conclusion of the case. Correspondingly, the TCR Rider costs are not included in the interim rates used for the RDM deferral calculations submitted with the interim rate petition, but they will be included in the final rates used in the recalculation of the final RDM deferral at the conclusion of the case. This same process will occur for Docket No. E00/GR--

7 0 0 any costs that are not included in the interim rate increase but are included in final rates. Q. DO YOU HAVE ANY CONCERNS ABOUT DOUBLE-RECOVERY OF THE TCR RIDER COSTS THROUGH BASE RATES AND THE DECOUPLING MECHANISM? A. No. The RDM deferral is based on the difference between allowed sales revenues and actual sales revenues. In the final RDM deferral calculation, final rates (including the TCR Rider costs) will be used to calculate the revenue level that we are allowed to recover based on test year sales. Final rates will also be used to calculate the revenue level based on actual sales. The difference between the allowed revenues and actual revenues does not include recovery of the TCR Rider costs. Thus, the decoupling deferral only includes the revenue impact due to changes in sales, and the TCR Rider cost recovery will occur through base rates. Q. DOES THE SALES TRUE-UP THAT COMPANY WITNESS MS. JANNELL E. MARKS PROPOSES IMPACT THE RDM OR THE IMPLEMENTATION OF DECOUPLING? A. By definition, the sales true-up for our non-decoupled classes discussed by Ms. Marks will not impact the implementation of decoupling or the RDM. For the Decoupled classes, if a test year 0 true-up to actual weathernormalized sales is approved (given that this actual data will be available during the course of this proceeding) then the baseline fixed revenue per customer and baseline fixed energy charge calculations would be recalculated using the final approved sales and customer count data. If this additional true-up occurs, the only adjustment in the RDM would be due to changes in sales related to weather. Docket No. E00/GR--

8 0 0 Q. SO DOES THE IMPLEMENTATION OF THE RDM DURING A MYRP AND INTERIM RATE PERIOD PRESENT ANY CHALLENGES? A. No. The Company s plan allows for implementation of the RDM as ordered by the Commission during the MYRP and interim rate period. III. DECOUPLING AND A FIVE-YEAR MYRP Q. HAVE YOU IDENTIFIED ANY ISSUES WITH DECOUPLING UNDER THE FIVE-YEAR MYRP DISCUSSED BY COMPANY WITNESS MR. AAKASH H. CHANDARANA? A. Yes, the currently approved RDM has a three-year term. If the five-year MYRP is approved, the Company proposes to match the term of the RDM to the MYRP term. In addition, the cap would need to be expanded to account for the potential increase in sales variance over five years instead of three. Q. WHY IS IT IMPORTANT TO MATCH THE TERM? A. Aligning the term of the Decoupling pilot with the MYRP term provides customers, the Company and the Commission with a consistent five-year plan. Q. WHY WOULD THE CAP NEED TO BE ADJUSTED? A. The further we move away from the baseline test year, the larger the cumulative energy savings impact from conservation and energy efficiency will be. The minimum requirement for making a Decoupling surcharge adjustment is that the Company must achieve. percent energy savings each year. The 0 test year sales forecast captures the first year energy savings, so the minimum sales reduction in the decoupling pilot year two would be. percent. If the Company continued to achieve the annual minimum energy savings, by year four there would be a. percent reduction in sales, and a corresponding. percent Docket No. E00/GR--

9 0 0 reduction in sales-related revenues. The revenue surcharge cap is calculated on base revenues excluding the fuel clause and other riders, of which. percent are sales-related revenues. By year four, the cumulative minimum energy savings of. percent would cause a. percent reduction in total revenues without fuel or riders. Minimum cumulative energy savings would impact revenues enough to reach the cap by the fourth year of the program, as shown in Figure below. Reduction in Total Revenues without Fuel or Riders.0%.0%.0%.0%.0% 0.0% Figure Revenue Reductions at Minimum Threshold for Surcharge Revenue Reduction at Minimum Energy Savings Current Cap The Company has the ability to petition for future recovery of costs above the cap, but that may just push cost recovery into years where we are even further above the cap. It would also push recovery on to future ratepayers. Raising the cap in the fourth and fifth year removes any potential disincentive to the continued pursuit of further conservation and would allow for a smoother bill impact for the customer instead of pushing recovery into years where the Company may be more likely to have higher cumulative energy savings impacts. I propose raising the cap to five percent in the fourth and fifth years of the Docket No. E00/GR--

10 0 Decoupling pilot to accommodate the cumulative impact of the minimum energy savings goals. IV. SUMMARY AND CONCLUSION Q. PLEASE SUMMARIZE YOUR TESTIMONY. A. The Company will implement decoupling deferral calculations using interim rates until final rates and revenue levels are available, in the manner ordered by the Commission. If the five-year MYRP is approved, the Company proposes that the Decoupling pilot is extended to match the MYRP term, and the Decoupling surcharge cap is raised from three percent to five percent in the fourth and fifth years to account for the cumulative impact of conservation and energy efficiency. Q. DOES THIS CONCLUDE YOUR TESTIMONY? A. Yes, it does. Docket No. E00/GR--

11 Northern States Power Company Docket No. E00/GR-- Exhibit (LRP-), Schedule Page of Statement of Qualifications Lisa R. Peterson Principal Pricing Analyst, Regulatory Analysis I have been employed by Northern States Power Company since 0, in the areas of System Operations, Resource Planning, and Gas and Electric Pricing. In my current role as Principal Pricing Analyst in the Regulatory Analysis area, I am responsible for developing pricing strategies and rate design proposals to maintain effective price structures for Xcel Energy s electric and gas operations in Minnesota, North Dakota, and South Dakota. I provided analysis in support of the Company s Decoupling witness in Docket No. E00/GR--, as well as support for the Company s Class Cost of Service and Rate Design witnesses in the past several rate cases in Minnesota, North Dakota, and South Dakota. EMPLOYMENT 0-present Principal Pricing Analyst Regulatory Analysis 00-0 Principal Pricing Analyst Gas Pricing -00 Analyst Resource Planning - Engineer Real Time Systems/System Operations 0- Student Engineer Electric Supply Planning EDUCATION Bachelor of Science Electrical Engineering University of Minnesota-Twin Cities