A CMS Energy Company March 15, 2011 Ms. Mary Jo Kunkle Executive Secretary Michigan Public Service Commission 6545 Mercantile Way P.O. Box 30221 Lansing, MI 48909 General Offices: LEGAL DEPARTMENT One Energy Plaza Jackson, MI 49201 Tel: Fax: (517) 788-0550 (517) 768-3644 JAMES E BRUNNER Senior Vice President and General Counsel *Washington Office: 1730 Rhode Island Ave. N.W. Tel: (202) 778-3340 JON R ROBINSON Suite 1007 Vice President and Washington, DC 20036 Fax: (202) 778-3355 Deputy General Counsel Utility Law and Writer s Direct Dial Number: (517) 788-0698 Regulation Writer s E-mail Address: jrrobinson@cmsenergy.com Shelley J Ruckman Kimberly C Wilson Michael G Wilson Assistant General Counsel David E Barth H Richard Chambers Neil R Fellows Gary L Kelterborn Deborah Ann Kile M Bryan Little Kathrine M Lorenz Eric V Luoma Raymond E McQuillan Rhonda M Morris Deborah A Moss* Mirče Michael Nestor Robert M Neustifter Jeffrey D. Pintar Vincent P Provenzano Susan L Rasmussen John C Shea Scott J Sinkwitts Charlotte A Walls Attorney Re: Case No. U-16564 - In the matter of the application of Consumers Energy Company for reconciliation of costs recoverable pursuant to MCL 460.10a(16) and the former MCL 460.10d(4) Dear Ms. Kunkle: Enclosed for filing in the above-captioned proceeding are the supplemental testimony and exhibit of Consumers Energy Company s witness Daniel S. Alfred. This is a paperless filing and is therefore being filed only in a PDF format. I have enclosed a Proof of Service showing electronic service upon the parties. Sincerely, Jon R. Robinson cc: Hon. Theresa A. Sheets, Administrative Law Judge Parties per Attachment 1 to Proof of Service fl0311-2-224 www.consumersenergy.com
S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for reconciliation of costs recoverable ) Case No. U-16564 pursuant to MCL 460.10a(16) and the ) former MCL 460.10d(4) ) ) SUPPLEMENTAL TESTIMONY OF DANIEL S. ALFRED ON BEHALF OF CONSUMERS ENERGY COMPANY March 2011
DANIEL S. ALFRED SUPPLEMENTAL TESTIMONY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Q. Are you the same Daniel S. Alfred who sponsored direct testimony and exhibits in this case? A. Yes. Q. What is the purpose of your supplemental testimony and exhibit? A. The purpose of my supplemental testimony and exhibit is to provide additional clarification on the relationship of the Commission approved model to actual collections. In the original Case No. U-14148 proceeding, the Commission approved recoverable amounts that had been generated using a model that had been developed by the Commission Staff. My direct testimony and exhibits in this reconciliation case utilize that same model in order to maintain consistency in approach. While that model generated the appropriate level of actual Section 10d(4) costs, it did not take into account the actual monthly collections or sales levels that the Company experienced. Therefore the model produces a difference in the total amount of carrying charges applied throughout the 5 year collection period. The Commission approved model simply calculates the actual 10d(4) costs and amortizes them using a straight line method shaped in the same way as the original surcharges. When considering actual monthly sales and collection patterns the recoverable costs are approximately $335 million versus the $341 million referenced in my direct testimony. Q. Are you sponsoring any exhibits in connection with your testimony? A. Yes. I am sponsoring the following exhibit: Exhibit A-10 (DSA-9) Regulatory Asset Collections Q. Was this exhibit prepared by you or under your direction? A. Yes. ste0311-dsa 1
DANIEL S. ALFRED SUPPLEMENTAL TESTIMONY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Q. Please describe Exhibit A-10 (DSA-9). A. This exhibit summarizes the actual costs, carrying charges, and collections regarding 10d(4). While very similar to my Exhibit A-4 (DSA-4), there are additional totals presenting the details on the actual 10d(4) costs required to be recovered, including carrying charges applied to the unrecovered costs not yet collected from customers. Line (a) presents the $254.8 million in actual costs at the end of year 2005 sourced from the Commission approved model used to calculate the $333 million authorized in Case No. U-14148. Line (b) presents the same model, updated for actual expenditures through 2005, which resulted in $268.7 million of actual costs sourced from the Commission approved model used to calculate the $341 million. The amounts on line (b) also serve as the actual 10d(4) balances which are the starting point for the calculation of carrying charges and collections which began in year 2006. Actual collections total approximately $337.7 million as shown on line 18. Line 19 is the net of the two customer classes which were over-collected and the under-collection of the small C&I customer class. If the Commission approves the refunds back to the large C&I and residential classes while also approving the reinstatement of the small C&I surcharge, the Company will have recovered the appropriate $335 million in 10d(4) costs and carrying charges as shown on line 20. Q. Does this conclude your supplemental testimony? A. Yes, it does. ste0311-dsa 2
S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for reconciliation of costs recoverable ) Case No. U-16564 pursuant to MCL 460.10a(16) and the ) former MCL 460.10d(4) ) ) EXHIBIT OF DANIEL S. ALFRED ON BEHALF OF CONSUMERS ENERGY COMPANY March 2011
Consumers Energy Company Case No. U- 16564 Regulatory Asset Collections Witness DSAlfred Years 2006 through 2010 Exhibit A-10 (DSA- 9) Date March 2011 Page 1 of 1 Source: Exhibit A- 4 (DSA-4) Large C&I Small C&I Residential Line Year Description Amount Rate Amount Rate Amount Rate Total Source a Final Order $ 56,838,000 $ 6,663,000 $ 191,324,000 $ 254,825,000 WP-DSA-13 b Dec-05 Updated model $ 62,219,000 $ 7,140,000 $ 199,373,000 $ 268,732,000 WP-DSA-27 1 2006 Collections $ (12,497,036) $ (1,058,288) $ (37,872,918) $ (51,428,242) Total line 1 2 Cost of Money $ 5,166,075 9.23% $ 610,182 9.23% $ 16,654,293 9.23% 3 EOY Balance $ 54,888,039 $ 6,691,894 $ 178,154,375 4 2007 Collections $ (15,346,400) $ (1,378,815) $ (47,810,293) $ (64,535,508) Total line 4 5 Cost of Money $ 4,329,601 9.17% $ 550,428 9.17% $ 14,144,654 9.17% 6 EOY Balance $ 43,871,240 $ 5,863,507 $ 144,488,736 7 2008 Collections $ (19,120,339) $ (1,755,189) $ (62,217,742) $ (83,093,270) Total line 7 8 Jan - June Cost of Money $ 1,573,163 9.17% $ 228,604 9.17% $ 5,198,467 9.17% 9 July - Dec Cost of Money $ 1,638,354 9.55% $ 238,077 9.55% $ 5,413,889 9.55% 10 EOY Balance $ 27,962,417 $ 4,574,999 $ 92,883,349 11 2009 Collections $ (16,228,726) $ (1,450,315) $ (56,105,448) $ (73,784,489) Total line 11 12 Jan - Nov Cost of Money $ 1,737,532 9.55% $ 337,022 9.55% $ 5,675,381 9.55% 13 December Cost of Money $ 161,762 9.78% $ 31,376 9.78% $ 528,370 9.78% 14 EOY Balance $ 13,632,985 $ 3,493,082 $ 42,981,652 15 2010/2011 Collections $ (15,761,067) $ (1,495,606) $ (47,621,240) $ (64,877,913) Total line 15 16 Cost of Money $ 562,939 $ 291,129 $ 1,368,992 9.78% 17 Balance $ (1,565,143) $ 2,288,605 $ (3,270,596) 18 Annual collections Total collections $ (337,719,422) 19 Over/under collections at end of collection period Net overcollection $ 2,547,134 Line 17 net 20 Net collections needed to cover all costs and carrying charges Net total collections $ (335,172,288) Rates of Return - MPSC Final Orders 9.23% U-10685 & U-14347: blended 9.17% U-14347 9.55% U-15245 9.78% U-15645 9.84% U-16191
S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for reconciliation of costs recoverable ) Case No. U-16564 pursuant to MCL 460.10a(16) and the ) former MCL 460.10d(4) ) ) PROOF OF SERVICE STATE OF MICHIGAN ) ) SS COUNTY OF JACKSON ) Sharon K. Davis, being first duly sworn, deposes and says that she is employed in the Legal Department of Consumers Energy Company; that on March 15, 2011, she served an electronic copy of the supplemental testimony and exhibit of Consumers Energy Company s witness Daniel S. Alfred upon the persons listed in Attachment 1 hereto, at the e-mail addresses listed therein. She further states that she also served a hard copy of same upon the Honorable Theresa A. Sheets at the address listed in Attachment 1 hereto by depositing the same in the United States mail in the City of Jackson, Michigan, with first-class postage thereon fully paid. Sharon K. Davis Subscribed and sworn to before me this 15 th day of March, 2011. Judy A. Jones, Notary Public State of Michigan, County of Eaton My Commission Expires: 10/25/15 Acting in the County of Jackson
ATTACHMENT 1 TO CASE NO. U-16564 (Parties to Case No. U-16191) Administrative Law Judge Hon. Theresa A. Sheets Administrative Law Judge 6545 Mercantile Way, Suite 14 P.O. Box 30221 Lansing, MI 48909 E-Mail: sheetst@michigan.gov Counsel for the Michigan Public Service Commission Staff Kristin M. Smith, Esq. Anne M. Uitvlugt, Esq. Bret A. Totoraitis, Esq. Tina L. Bibbs (Assistant) Assistant Attorneys General Public Service Division 6545 Mercantile Way, Suite 15 Lansing, MI 48911 E-Mail: smithk20@michigan.gov uitvlugta@michigan.gov totoraitisb@michigan.gov bibbst@michigan.gov mpscredratecase@michigan.gov Counsel for Energy Michigan Eric J. Schneidewind, Esq. Varnum, Riddering, Schmidt & Howlett LLP The Victor Center, Suite 810 201 N. Washington Square Lansing, MI 48933 E-Mail: ejschneidewind@varnumlaw.com Counsel for the Kroger Company Michael L. Kurtz, Esq. Kurt J. Boehm, Esq. Boehm, Kurtz & Lowry 36 East Seventh Street, Suite 1510 Cincinnati, OH 45202 E-Mail: mkurtz@bkllawfirm.com kboehm@bkllawfirm.com Counsel for the Kroger Company (Cont d) Anthony J. Szilagyi, Esq. Law Offices of Anthony J. Szilagyi, PLLC 110 South Clemens Avenue Lansing, MI 48912 E-Mail: szilagyilaw@sbcglobal.net Counsel for Constellation NewEnergy, Inc. John M. Dempsey, Esq. Jennifer L. Copland, Esq. Dickinson Wright, PLLC 215 S. Washington Square, Suite 200 Lansing, MI 48933 E-Mail: jdempsey@dickinsonwright.com jcopland@dickinsonwright.com Ms. Carrie Cullenhitt Mr. Bob Korandovich Constellation NewEnergy, Inc. 250 East Broad St., Suite 1400 Columbus, OH 43215 E-Mail: carrie.cullenhitt@constellation.com bob.korandovich@constellation.com Counsel for Midland Cogeneration Venture Limited Partnership ( MCV ) Richard J. Aaron, Esq. Warner Norcross & Judd LLP 120 N. Washington Sq., Ste. 410 Lansing, MI 48933 E-Mail: raaron@wnj.com Gary B. Pasek, Esq. Midland Cogeneration Venture LP 100 Progress Place Midland, MI 48640 E-Mail: gbpasek@midcogen.com sl0311-1-224 Page 1 of 3
ATTACHMENT 1 TO CASE NO. U-16564 (Parties to Case No. U-16191) Counsel for the Association of Businesses Advocating Tariff Equity ( ABATE ) Robert A. W. Strong, Esq. Clark Hill PLC 151 S. Old Woodward Ave., Suite 200 Birmingham, MI 48009 E-Mail: rstrong@clarkhill.com Counsel for Hemlock Semiconductor Corporation Jennifer Utter Heston, Esq. Fraser, Trebilcock, Davis & Dunlap, P.C. 124 West Allegan Street, Ste. 1000 Lansing, MI 48933 E-Mail: jheston@fraserlawfirm.com Counsel for Attorney General Bill Schuette Donald E. Erickson, Esq. Michael E. Moody, Esq. Assistant Attorney General Environment, Natural Resources, and Agriculture Division 6 th Floor Williams Building 525 W. Ottawa Street P.O. Box 30755 Lansing, MI 48909 E-Mail: moodym2@michigan.gov ericksond@michigan.gov Counsel for the Municipal Coalition Roderick S. Coy, Esq. Leland R. Rosier, Esq. Clark Hill PLC 212 E. Grand River Avenue Lansing, MI 48906-4328 E-Mail: rcoy@clarkhill.com lrrosier@clarkhill.com Counsel for the Michigan State Utility Workers Council, Utility Workers of America, AFL-CIO David C. Gregory, Esq. Steven D. Weyhing, Esq. Kelley Cawthorne, PLLC 208 N. Capitol Avenue, Third Floor Lansing, MI 48933-1356 E-mail: dgregory@kelley-cawthorne.com sweyhing@kelley-cawthorne.com Counsel for the Michigan Cable Telecommunications Association David E. S. Marvin, Esq. Fraser, Trebilcock, Davis & Dunlap, P.C. 124 West Allegan Street, Ste. 1000 Lansing, MI 48933 E-Mail: dmarvin@fraserlawfirm.com Counsel for the Michigan Environmental Council ( MEC ), Natural Resources Defense Council ( NRDC ), and the Environmental Law and Policy Center ( ELPC ) Christopher M. Bzdok, Esq. Olson, Bzdok & Howard, P.C. 420 E. Front Street Traverse City, MI 49686 E-Mail: chris@envlaw.com James Clift Michigan Environmental Council 119 Pere Marquette Drive, Suite 2A Lansing, MI 48912 E-Mail: james@environmentalcouncil.org sl0311-1-224 Page 2 of 3
ATTACHMENT 1 TO CASE NO. U-16564 (Parties to Case No. U-16191) Counsel for the Michigan Community Action Agency Association ( MCAAA ) Don L. Keskey, Esq. Public Law Resource Center PLLC 505 N. Capitol Avenue Lansing, MI 48933-1209 E-Mail: donkeskey@publiclawresourcecenter.com Counsel for the Residential Ratepayer Consortium ( RRC ) David L. Shaltz, Esq. Attorney at Law Chalgian & Tripp Law Offices PLLC 1019 Trowbridge Road East Lansing, MI 48823 E-Mail: dshaltz@sbcglobal.net sl0311-1-224 Page 3 of 3