PECO ENERGY COMPANY STATEMENT NO. BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION PENNSYLVANIA PUBLIC UTILITY COMMISSION v. PECO ENERGY COMPANY ELECTRIC DIVISION DOCKET NO. R-0-1 DIRECT TESTIMONY WITNESS: RICHARD A. SCHLESINGER SUBJECT: PROPOSED CHANGES TO PECO ENERGY COMPANY ELECTRIC DIVISION TARIFF DATED: MARCH, 0
TABLE OF CONTENTS I. INTRODUCTION AND PURPOSE OF TESTIMONY... 1 Page II. PROPOSED CHANGES TO EXISTING TARIFF RULES AND REGULATIONS... III. SECTION SURCHARGE MECHANISMS... IV. RATE CHANGES... 1 V. RIDER CHANGES... VI. MISCELLANEOUS... VII. CONCLUSION... -i-
DIRECT TESTIMONY OF RICHARD A. SCHLESINGER I. INTRODUCTION AND PURPOSE OF TESTIMONY 1. Q. Please state your name and business address. A. My name is Richard A. Schlesinger. My business address is PECO Energy Company, 01 Market Street, Philadelphia, Pennsylvania 1.. Q. By whom are you employed and in what capacity? 1 A. I am employed by PECO Energy Company ( PECO or the Company ) as Manager, Retail Rates. In that capacity, I am responsible for the management and oversight of PECO's electric and gas retail and supplier service tariffs, and oversee numerous filings with the Pennsylvania Public Utility Commission (the "Commission"). 1. Q. Please describe your educational background. 1 A. I have a Bachelor of Science Degree in Engineering from Widener University. In addition, I have a Master s Degree in Business Administration from Saint Joseph's University.. Q. Please describe your professional experience. 1 0 1 A. I was hired in 1 by PECO as a System Engineer in the Plant Operations group supporting the Limerick Nuclear Generating Station. From 1 to 11, I held several positions of increasing responsibility supporting plant operations, management, and quality assurance. In 1, I transferred into the position of Rate
Engineer in the Rates and Regulatory Affairs Group. In 1, I was appointed to the position of Project Manager, Customer Choice Implementation, and was responsible for many regulatory activities related to the phase-in of electric and gas retail choice for all of PECO's two million electric and gas distribution customers. In 000, I transferred to the Company's Customer and Marketing Services Department and served as e-commerce Manager and then as Project Manager, overseeing various Business/Information Technology system implementations. In 00, I returned to the Regulatory and External Affairs Department, where I served as Principal Rate Administrator. In 00, I was promoted to my current position Manager of Retail Rates.. Q. What is the purpose of your testimony? 1 1 A. My testimony will address proposed changes to the Company s Electric Service Tariff. These changes include changes to: (1) certain existing tariff rules and regulations; () rate schedules; () riders; () surcharge mechanisms; and () miscellaneous items such as typographical errors. 1. Q. Mr. Schlesinger, have you submitted testimony previously before the Commission? 1 0 1 A. Yes. I submitted testimony in support of both PECO's Phase I and Phase II Energy Efficiency and Conservation ( EE&C ) Plans. In addition, I submitted testimony in support of the Company's Market Rate Transition Energy Efficiency Package and its Residential Real-Time Pricing Program.
II. PROPOSED CHANGES TO EXISTING TARIFF RULES AND REGULATIONS. Q. Is PECO proposing any changes to the Company s existing definitions of terms and tariff rules and regulations? A. Yes. The Company is proposing revisions to the following: (1) the definition of service ; () Rule.1- Company s Service Lines; () Rule. Service Supply Alterations; () Rule. Customer s Service Extensions; () Rule. Relocation of Company Facilities Requested by Non-Residential Property Owners; () Rule 1.1 Limitation of Liability; and () Rule. Meter Reading Intervals. The proposed changes are intended to promote more effective administration of tariff practices and processes. These changes are identified in PECO Exhibit SAN, which accompanies PECO Statement No., the direct testimony of Scott A. Neumann. 1. Q. What change is PECO proposing to the definition of service? 1 1 1 0 1 A. PECO s definition of service lists the types of services that are available on PECO s system. PECO is proposing to reduce the capacity size of transformers located outside of a building for three-phase /0 volt service from a maximum of 0 kva to a maximum of 00 kva. PECO does not stock three-phase /0 volt transformers sized for 0 kva service and has not had any requests for service at that level and no customers are taking service at that level. PECO has customers receiving three-phase service through 00 kva /0 volt transformers, which is the reason PECO is proposing to reduce the available transformer size rather than eliminating this entire category of service. Rate GS customers that desire service through transformers with capacity greater than 00 kva can obtain service in other
voltage classes, such as /0 volts or /0 volts. PECO continues to stock transformers that can provide that level of service and will continue to make that level of service available. The proposed change will have no customer or revenue impact.. Q. What changes is PECO proposing to Rule.1 and. and the definition of point of delivery? 1 1 1 A. Rule.1 and Rule. describe, respectively, PECO s service-supply lines and the customer s service extension, and sets forth the delineation between the facilities that PECO owns and operates and the facilities that the customer owns and operates. The recent Pennsylvania Supreme Court case of Alderwoods v Duquesne, 1 WAP 01 (slip op. December, 0), states that under Pennsylvania law, maintenance and inspection responsibilities generally are divided at the service point, such that an electric service provider does not have a free-standing duty to inspect customerowned electrical equipment and services on the premises side. PECO is adding language to Rule.1 and Rule., and an associated change to the definition of point of delivery, to emphasize that the point of delivery as defined in PECO s tariff is the service point that distinguishes the respective responsibility of the Company and its customers. Because this is a restatement of existing law and practice, PECO does not expect any revenue impact from this change. 1. Q. What is PECO s proposed change to Rule.? 0 1 A. Rule. states that customers will be charged if they request an alteration to PECO s service supply lines. PECO wishes to clarify that two uncommon situations constitute an alteration to its service supply lines. The first is the installation of
1 insulating protective equipment such as rubber line hoses, blankets, and hoods also known as hard cover to allow work to be done in close proximity to PECO s energized facilities. PECO manages a limited inventory of hard cover for its system and sometimes finds that developers and contractors do not call PECO to inform it when they have completed the work that required hard cover. As a result, the hard cover remains in place after it is no longer needed, making it unavailable for use at other locations. To remedy that problem, PECO proposes to require a deposit before hard cover is installed. The deposit will be returned after the customer notifies PECO that its work has been completed and the hard cover removed. PECO anticipates that its proposed change will encourage customers to continue to call for hard cover while, at the same time, providing an incentive for them to notify PECO when their work is complete. 1 1 1 The second situation is the installation of tell-tales, which are visual markers hung on or below lines to indicate the necessary safe clearance to operate cranes, trucks, and other equipment in the vicinity of line. PECO believes that the costs to alter its system in this way are best treated as a cost of the customer s construction project, rather than socializing those costs to PECO s entire customer base through its rates. PECO, therefore, proposes to charge commercial developers and contractors for the installation of tell tales as an alteration to PECO s system. 0. Q. What change to Rule. does PECO propose? 1 A. When commercial developers plan projects, they usually must go through local zoning and planning approval. Often, municipalities will require the developer to
make changes to local roadways, such as road widening or installation of deceleration lanes that require PECO to move its facilities to a new location. PECO considers the cost of that facility relocation to be a cost of the developer s project that is properly recovered from the developer. The alternative is to have the facility relocation funded by PECO capital in the short run and then later have that capital expenditure included in PECO s base rates and paid for by its other customers. PECO s current tariff recognizes that such costs are properly treated as developer project costs. 1 1 The current tariff language, however, allows the possibility that a developer, rather than making the facility location request to PECO, will request a municipal entity to make the relocation request on its behalf, on the theory that having the request come from the municipality makes the relocation costs the responsibility of PECO and its customers. The purpose of the proposed change is to make it clear that these facility relocation costs remain the responsibility of the developer regardless of which entity requests the relocation. 1. Q. What are the revenue implications of this change? 1 1 0 A. Such requests occur only rarely, and PECO is not aware of any such projects that are included in the 01-01 data that support its rate request. However, the issue comes up from time-to-time, and PECO, therefore, proposes to make the proposed change to clarify that these developer project costs cannot be shifted by having a third party make the relocation request on behalf of the developer.
1. Q. What change does PECO propose to Rule 1.1? A. Rule 1.1 addresses PECO s limitation of liability. The Rule limits PECO s liability to $00 for certain outages, power surges, and similar events. PECO has had the $00 limit for many years. It was originally intended to reimburse customers for the amount that would not be covered by the typical deductible on homeowners or renters insurance. 1 1 1 Customer feedback that PECO has received indicates that the $00 limit is no longer adequate to address a typical outage or surge claim. The typical customer now has more electronic devices that can be damaged by surges. In addition, more customers self-insure above the $00 level, either through higher deductibles or by voluntarily not making claims against their homeowners policy for relatively smaller amounts. PECO, therefore, proposes to increase the amount that it will pay in these situations to up to a maximum of $1,000. This proposed change is projected to increase PECO s injuries and damages expense by approximately $00,000 per year, which is reflected as a pro forma adjustment to injuries and damages expense in PECO Exhibit No. SY- 1, Schedule D-, which accompanies PECO Statement No., the direct testimony of Shuo Yin.. Q. What are the proposed changes to Rule.? 1 0 1 A. Rule. addresses meter reading intervals. Rule. currently states that: Only those bills which cover a period of service of less than days or more than days will be prorated. The Commission s definition of billing month, found at Pa. Code.1, is a period of to days. I can find no historic basis for the difference
in billing periods, and PECO is therefore revising its tariff to conform to the Commission s definition of billing month. This change will not have any revenue impact. III. SECTION SURCHARGE MECHANISMS. Q. Please explain what a Section surcharge mechanism is. A. Section of the Public Utility Code, Pa. C.S., authorizes utilities to establish automatic adjustment clauses that allow them to recover, outside of base rate proceeding, specific, designated categories of costs. Cost recovery is subject to annual review and reconciliation, such that over or under-recoveries of actual costs are refunded or recouped, as applicable. The operation of such clauses is also subject to annual public hearings and periodic audits by the Commission. 1 1 1. Q. What changes to PECO s Section surcharge mechanisms are being proposed? 1 1 0 1 A. The Company is proposing to: (1) clarify the application of Gross Receipts Tax ( GRT ) to certain existing Section mechanisms; () include the revenue requirement currently recovered under PECO s Smart Meter Cost Recovery Surcharge ( SMCRS ) in its base rate revenue requirement and reduce its SMCRS accordingly; () delete from its tariff the expired Phase I Energy Efficiency and Conservation Program Cost surcharge ( EEPC-I ); () modify the Consumer Education Charge ( CEC ); and () revise the L Factor of the Universal Service Fund Charge ( USFC ).
. Q. Please explain the issue regarding the application of the GRT. A. PECO s CEC and SMCRS do not clearly reflect the fact that GRT applies to the revenues collected under those surcharges.. Q. How does PECO propose to address this issue? A. PECO proposes to add a definition of the GRT (called a T factor) to both the CEC and SMCRS and update the formulas for both surcharges accordingly. The proposed changes to the definitions and formulas are consistent with the language in other Section surcharge mechanisms set forth in PECO s Electric Service Tariff. 1. Q. Why is PECO proposing to roll the smart meter surcharge into base rates? 1 1 1 1 0 1 A. In accordance with Act 1 of 00 ( Act 1 ), Electric Distribution Companies ( EDCs ) are entitled to full and current recovery of costs associated with implementing a smart meter system. Act 1 allows an EDC to recover its net costs either: (1) on a current basis through a Section reconcilable surcharge; or () in base rates, with authority to defer costs incurred between base rate cases. EDCs were given the option to choose either method. In its Petition for Approval of a Smart Meter Technology Procurement and Installation Plan at Docket No. M-00-1, PECO proposed, and received approval, to recover its smart meter costs through a Section surcharge, namely, its SMCRS. In addition, PECO explained in its Petition that, when its smart meter system is fully deployed, it would be appropriate to roll the smart meter program costs into its base rates. The SMCRS has been in place since January 1, 0, and, as of January 1, 01, smart meter
deployment will have been substantially completed. For these reasons, PECO is proposing to roll $. million of smart meter costs into it base rate revenue requirement in this case. The allocation of the roll-in among customer classes is based on the number of customers in each rate class, which is the same allocation method that is used for purposes of the SMCRS, and is allocated as follows: $0. million for residential (Rates R and RH), $.01 million for small commercial and industrial (Rate GS), and $0.0 million for large commercial and industrial (Rates HT, PD, and EP). PECO Exhibit RAS-1 shows the allocation of the smart meter costs by rate class. In addition, the roll-in, by rate, is identified in PECO Exhibit RAS-. Accordingly, if the Company s proposal is approved, the SMCRS would be reduced to reflect the roll-in of smart meter costs to base rates. 1 0. Q. Will the SMCRS surcharge be eliminated as a result of the roll-in? 1 1 A. Yes, but not as part of this case. Although the on-going smart meter costs are being rolled into base rates upon the effective date of those rates, any over/under collection balance that may exist at that time will be refunded or recouped, as applicable, through the SMCRS. Consequently, the SMCRS must remain in place as the vehicle for that true-up. Once the over/under balance has been recouped or refunded, as applicable, PECO will propose to eliminate the SMCRS in a future filing. 1 1. Q. Describe the proposed changes to the EEPC Phase I surcharge. 0 A. The Phase I EEPC Program ended on May 1, 01, and PECO set the surcharge for
each customer rate class to zero in early to mid-0 depending on the rate class. 1 Because Phase I has now been completed, the Phase I EEPC surcharge can be eliminated, and PECO is, therefore, proposing to delete the Phase I EEPC tariff page.. Q. Describe the proposed change to the CEC. A. PECO is proposing to expand the CEC to recover all costs associated with Commission-approved initiatives implemented pursuant to the PUC s Retail Markets Investigation ( RMI ). The Commission approved the recovery of PECO s RMI costs associated with the implementation of the Joint EDC-EGS Bill in its Final Order entered May, 0, at Docket No. M-0-01. PECO submitted a compliance filing to recover those costs on January 0, 0, and received final approval on March, 0. 1 1. Q. Do any other EDCs currently have such a mechanism for recovery of RMI costs? 1 1 0 A. Yes. PPL Electric Utilities ( PPL ) received approval to recover these costs as part of its Competitive Enhancement Rider ( CER ) in the Commission s Final Order entered on December, 01 in PPL s base rate proceeding at Docket No. R-01-0. In that case, the Commission stated that the costs proposed to be recovered through the CER qualify for recovery under an automatic adjustment clause and that the CER provides a more flexible methodology for the Company to recover these Commission mandated expenses, and the CER is consistent with the 1 In accordance with, Docket No. M-01-, PECO is rolling the remaining Phase I EE&C program balances into the Phase II EEPC.
Commission approved recovery mechanism we have adopted in other EDC proceedings. See PPL Final Order at. Thus, PECO s proposal aligns its CEC with the cost recovery mechanisms approved by the Commission in other proceedings.. Q. What change does PECO propose to the L Factor of the USFC? A. The current L Factor of the USFC contains references to previous settlement commitments that expired at the end of 01. PECO is removing those references but leaving the L Factor in place with a zero value. IV. RATE CHANGES. Q. What changes to rate-related terms and conditions is PECO proposing? 1 1 A. PECO proposes two changes to the terms and conditions affecting its rates. The first change will clarify that lighting customers are responsible for choosing the type and amount of illumination provided by any lighting facility. The second change will modify the language on conjunctive billing in Rates HT (High Tension) and EP (Electric Propulsion) so that it is consistent across both rate schedules. 1. Q. Please explain the lighting issue. 1 0 1 A. To ensure that lighting facilities are safely connected to its distribution system, PECO imposes certain construction and electrical constraints on customer lighting facilities, including private outdoor lighting and customer-owned streetlights. However, none of these requirements contemplate that PECO will conduct any analysis of how much light the customer should use to safely illuminate an area or where the lights should 1
be located in order to provide proper illumination or serve their intended purpose (e.g., traffic lighting studies), because it is not PECO s responsibility to do so. The requirements set forth in PECO s tariff pertain only to the manner in which lighting facilities are to be safely connected to PECO s system. PECO proposes to add language to its lighting rate schedules to make clear that it is the customer s sole responsibility to determine the amount and location of illumination to serve its needs.. Q. Please explain what conjunctive billing is and when it is used. 1 1 1 A. Conjunctive billing is employed when PECO provides a second delivery point to customers served under Rate High HT and Rate EP because the load that would be served through a single delivery point is greater than the capacity of the standard supply circuit(s). In those situations, PECO provides the second service only if it is less costly for the Company to do so than upgrading the service to the first delivery point. The advantage for customers who qualify for this provision is that PECO treats the two delivery points as a single delivery point (i.e., conjunctively) for metering and billing purposes, resulting in reduced billings as compared to issuing two separate bills.. Q. What changes are being proposed to the conjunctive billing language? 1 0 1 A. Rates HT and EP both contain conjunctive billing language. However, the language is slightly different in each. PECO is proposing to use the Rate EP language, with minor revisions, for both Rates HT and EP, for consistency and clarity. 1
V. RIDER CHANGES. Q. What rider changes is PECO proposing? A. PECO is proposing to: (1) revise the Economic Development Rider ( EDR ); () revise the Residential and Commercial and Industrial Direct Load Control ( DLC ) Rider; and () eliminate several expired riders. 0. Q. Describe the proposed revisions to the EDR. 1 A. PECO consolidated all of its tariffed economic development tools in the EDR in 0 as part of its last electric distribution base rate case. Based on the experience gained from four years of applying the previously revised EDR, PECO is now proposing to simplify, clarify and refocus that rider. In addition, revisions to the rate reduction provision of the EDR are needed to reflect the effect of the changes to the Commercial and Industrial distribution rate structure proposed in this proceeding. 1 1. Q. Please provide the details of the proposed EDR changes. 1 1 0 1 A. First, eligibility for the EDR is being clarified for both new and existing customers. New customers would have to apply for service under the EDR before their electric service is energized. Existing customers would have to apply for service under the EDR before the anticipated load growth that qualifies them for the EDR occurs. The purpose of these changes is ensure that rate reductions are not provided in free rider situations where a customer would have added or expanded its load even without the economic development inducements furnished by the EDR. In this way, the EDR will be used only in those situations where the new or expanded load would not have
materialized absent the economic incentives that the EDR provides. 1 The second change pertains to existing non-manufacturing customers. Currently, to be eligible for the rider, an existing non-manufacturing customer has to demonstrate increased load and must retrofit its building to meet Leadership in Energy and Environmental Design ( LEED ) green building standards for existing buildings. While such environmental goals are laudable, PECO does not believe that the EDR should be restricted by that additional qualification where load retention is the primary goal. Accordingly, PECO is proposing to expand the scope of EDR so that it will be available to non-manufacturing customers that otherwise qualify for the EDR even if they do not retro-fit their buildings to LEED standards, as long as such customers have a viable economic alternative to retaining their load in the PECO service territory. 1 1 Pursuant to the third proposed change, the rate reduction available under the EDR would be made consistent, at a maximum of %, for both the Employment & Load Growth section and the Competitive Alternative section. The Company has not offered a competitive alternative discount larger than % under the existing EDR, and does not intend to do so in the future. 1 0 1 Finally, because PECO is eliminating kwh charges for industrial and commercial customers, the rate reduction language and associated table are being revised to reflect the fact that, under PECO s proposed rates, the credit applies to all kw of demand billed under the Variable Distribution Charge.
. Q. Describe the changes PECO is proposing to its Residential and Commercial/Industrial DLC Riders. A. These riders were proposed as part of PECO s Act 1 Phase II Energy Efficiency & Conservation ( EE&C ) Plan that had been filed at Docket No. M-01-. In that proceeding, the Commission approved the DLC riders for a one-year term that would have expired on May 1, 0. PECO filed for Commission approval to voluntarily extend the expiration date of the DLC riders through May 1, 01. That request was approved by the Commission s Order entered on May, 0 at the same docket. PECO is revising the date in the Term of Contract sections of both DLC riders to coincide with the approved May 1, 01 expiration date. 1. Q. Please identify the riders PECO proposes to eliminate from its tariff and explain why PECO is doing so. 1 A. PECO is proposing to eliminate four riders: (1) the Interruptible Rider Mandatory ( IR-M ); () the Interruptible Rider Voluntary & System Reliability ( IR-V ); () the Voluntary Market Rate Phase-In Rider; () and the Wind Energy Service Rider. 1 1 0 The IR-M was offered to implement the Pennsylvania New Jersey Maryland Interconnection, LLC ( PJM ) demand response program, which ended on May 1, 01. PECO previously noted the program s expiration date on the tariff page setting forth the IR-M tariff, and stopped offering service under the rider at that time. It is now appropriate to eliminate the IR-M from its tariff entirely. 1
The IR-V pertained to a voluntary program offered by PECO that was established at the same time as the IR-M. PECO has stopped offering this program and, therefore, is eliminating it from its tariff. The Voluntary Market Rate Phase-In Rider was approved by the Commission s Order entered March 1, 00 at Docket No. P-00-01, as part of PECO s Market Rate Transition Phase-In Program. That program was put in place to help mitigate the potential impact of the expiration of generation rate caps as of December 1, 0. The Market Rate Transition Phase-In Program expired as of December 1, 01, and the Market Rate Phase-In Rider should, accordingly, be removed from PECO s tariff. 1 1 1 On October 1, 01, as part of the Final Order in the proceeding upon PECO s Petition for Approval of its Default Service Program II, at Docket No. P-01-, the Commission approved the elimination of PECO s Wind Energy Service Rider. Accordingly, PECO ceased offering service under the rider as of January 1, 01. Therefore, there is no reason to keep that rider in PECO s tariff, and PECO is proposing to eliminate it. VI. MISCELLANEOUS. Q. What other issues do you need to address? 1 A. There are various typographical errors and formatting issues that should be addressed. 0. Q. What are the typographical errors? 1 A. In Rule. there is an incorrect reference to the National Electric Safety Code.
The correct name of that document is the National Electrical Safety Code, and PECO proposes to change Rule. to so state. In the Night Service Riders (Rates GS, PD, HT), there are obsolete references to blocking of energy rates and CTC that need to be removed. The first term is no longer applicable because PECO s variable distribution rates ceased to have a blocked pricing structure as of the end of 01, while the imposition of the Competitive Transition Charge ( CTC ) ended at the end of 0. In Rule., in the SMCRS, and in Rate RH there are references to Rate OP ( Off Peak Service ) that need to be eliminated. Rate OP is no longer offered by the Company; it was eliminated with the Commission s approval in the Company s previous electric distribution base rate case.. Q. Please describe the formatting issues. 1 1 A. Throughout PECO s current electric service tariff there are inconsistencies in formatting, including, but not limited to, spacing, bolding, margin alignment, font sizes, and blank pages, which have been corrected in PECO s proposed electric service tariff. 1 VII. CONCLUSION. Q. Does this conclude your direct testimony? A. Yes, it does.