CET Stipulation Testimony - psc.utah.gov

CET Stipulation Testimony - psc.utah.gov BEFORE THE PUBLIC SERVICE COMMISSION OF UTAH IN THE MATTER OF THE JOINT APPLICATION OF QUESTAR GAS COMPANY, THE DIVISION OF DOCKET NO. 05-057-T01 PUBLIC UTILITIES, AND UTAH CLEAN ENERGY FOR THE APPROVAL OF THE CONSERVATION DPU EXHIBIT 1.0ST ENABLING TARIFF ADJUSTMENT OPTION AND ACCOUNTING ORDERS Artie Powell, Ph.D. Testimony in Support of the Stipulation September 22, 2006 1 ARTIE POWELL, PHD 2 TESTIMONY IN SUPPORT OF THE STIPULATION 3 DOCKET NO. 05-57-T01 4 5 Q: Will you please state your name, address and title for the record? 6 A: My name is Artie Powell; my work address is 160 East 300 South, Salt Lake City, 7 Utah, 84114; I am the Energy Section Manager for the Division of Public Utilities. 8 Q: Are you the same Dr. Artie Powell that submitted pre-filed direct and 9 surrebuttal testimony in this docket? 10 A: Yes. 11 Q: Will you start by summarizing the major features of the Stipulation? 12 A: The Stipulation can be summarized in 5 points: 13 1. The parties agree to a 3-year pilot program consisting of: 14 i. The Company filing a comprehensive DSM program for 15 Commission approval within 60 days of the Commission’s 16 approval of the Stipulation, thus capturing some efficiency 17 benefits this heating season. 18 ii. Implementation of the CET tariff as specified in the Joint 19 Application and modified by the Stipulation. 20 iii. A comprehensive 1-year review of the CET tariff and any 21 proposed alternative mechanisms or positions. This review is DOCKET NO. 05-057-T01 ARTIE POWELL STIPULATION TESTIMONY DIVISION OF PUBLIC UTILITIES 22 proposed to be completed in September 2007. 23 2. Upon approval of the Stipulation, the Company, Questar Gas 24 Company, will credit the CET balancing account by $1.1 million. 25 Additional accruals will be recorded as if the CET tariff had been in 26 effect since July 1, 2007. 27 3. Beginning in September (or October) of 2006, the Company will 28 make semiannual filings requesting amortization of the CET 29 balancing account balance. These filings will be timed to 30 approximately correspond with the traditional semiannual pass-31 through filings. The first request for amortization will be for the 32 $1.1 million credit, which will lower DNG rates by the same amount. 33 Amortization of other accruals will be sought in future requests. 34 4. Through August 2007, the Company may not amortize CET accruals 35 amounting on a net basis to more than 0.5% of total Utah 36 jurisdictional GS revenues based on the most recent 12-month period 37 at the time of the amortization. Also, through August 2007, the 38 Company may not accrue a net amount to the CET balancing 39 account for amortization that totals more than 1.0% of the total Utah 40 jurisdictional GS revenues based on the most recent 12-month period. 41 5. The Company will transfer $1.3 million of unspent research and 42 development monies to the DSM cost balancing account. - 2 - DOCKET NO. 05-057-T01 ARTIE POWELL STIPULATION TESTIMONY DIVISION OF PUBLIC UTILITIES 43 Q: Do you believe that the Stipulation is in the public interest? 44 A: Yes. The Division’s witnesses, Dr. Compton and I, filed extensive testimony in 45 support of the Joint Application. We concluded that the Joint Application was in 46 the public interest. There is nothing in the Stipulation that is inconsistent with the 47 Joint Application and, therefore, I conclude that the Stipulation is in the public 48 interest. 49 Q: There are several aspects of the Stipulation that were not part of the original 50 Joint Application. For example, as you indicated earlier, the Stipulation 51 restricts the amortization and accrual amounts through August 2007. Why 52 are these differences not inconsistent with the original Joint Application? 53 A: In paragraph 18, the Joint Application reads, “At any time during the Pilot 54 Program, any party can recommend to the Commission that the Pilot Program be 55 modified or discontinued.” The differences presented in the Stipulation are 56 consistent with the pilot program’s intention that it could be changed upon 57 approval of the Commission at anytime during the three year program. 58 Furthermore, the differences contained in the Stipulation, I believe, improve the 59 pilot program, which again was the intent of allowing changes in the first place. 60 For example, the limits on accruals and amortization mitigate what some parties 61 perceive as risks being shifted from the Company to rate payers. As I pointed out 62 in rebuttal testimony, some reports indicate that instead of the risks being shifted, 63 they are eliminated. Nevertheless, the limitations set forth in the Stipulation do - 3 - DOCKET NO. 05-057-T01 ARTIE POWELL STIPULATION TESTIMONY DIVISION OF PUBLIC UTILITIES 64 limit any potential change in distribution non-gas rates over the first year and, 65 therefore, can be said to benefit customers. 66 Another example is the Company’s obligation under the Stipulation to file within 67 60 days of the Commission’s approval of the Stipulation a comprehensive DSM 68 program. While it was anticipated that the Company would do so, the Joint 69 Application was not clear on the timing between the implementation of the CET 70 tariff and the commencement of any DSM program. The Stipulation makes this 71 link between the two explicit. It is hoped that DSM benefits can be captured for 72 this heating season. In addition to committing to filing a DSM program for 73 approval, the Company has agreed under the Stipulation to reduce rates by $1.1 74 million through a credit accrual to the CET balancing account, but will not seek 75 recovery of any additional accruals to the CET balancing account until the spring 76 of 2007. If the Company is derelict in its obligations to DSM under the 77 Stipulation, the Division, or any other party, can recommend at the spring filing 78 that the Company not be allowed to recovery or amortize the additional accruals 79 to the CET account. 80 Again, I believe the changes provided for in the Stipulation are consistent with the 81 original intent of the Joint Application and actually improve the pilot program. 82 Q: Isn’t the CET tariff a radical departure from traditional regulatory practices 83 and, thus, can not be construed as being in the public interest? 84 A: Not at all. As I pointed out in surrebuttal testimony, and as the Committee’s - 4 - DOCKET NO. 05-057-T01 ARTIE POWELL STIPULATION TESTIMONY DIVISION OF PUBLIC UTILITIES 85 witness Dr. Dismukes points out in rebuttal testimony, the CET is similar in its 86 operation as a high fixed customer charge. Customer charges are nothing new 87 and, therefore, the CET is not a radical departure. Thus, we can conclude that the 88 Stipulation is in the public interest. 89 Q. While several parties raise objections to the Joint Application, no party 90 provided a concrete alternative for the Commission to consider. Is that 91 correct? 92 A: Yes, that is correct. 93 Q: How does the Stipulation then address the concerns raised by other parties 94 that other mechanisms, such as partial decoupling, achieve the same results 95 that are intended by the CET tariff? 96 A: While I believe the testimony of the Joint Applicants successfully refutes the 97 concerns and claims, both against the CET tariff and of alternative mechanisms, 98 of other parties, the Stipulation allows interveners more time to fully develop 99 alternatives to the proposed CET tariff if they so chose. 100 As you are aware, despite several hundred pages of testimony, no intervener 101 proposed an alternative to the CET tariff proposed in the Joint Application. The 102 Committee’s witness, Dr. Dismukes, proposed in rebuttal testimony five 103 modifications to the CET tariff and pilot program. Presumably, if these 104 modifications were adopted by the Commission, the program and tariff as defined 105 in the application would be acceptable to the Committee. With the exception of - 5 - DOCKET NO. 05-057-T01 ARTIE POWELL STIPULATION TESTIMONY DIVISION OF PUBLIC UTILITIES 1106 one proposed modification, and slight alterations in a couple of others, the 107 Division found that these modifications were either part of the Joint Application 108 or were consistent with the intent and therefore acceptable modifications. The 109 Stipulation memorializes these modifications. 110 For example, Dr. Dismukes recommended an explicit connection between the 111 implementation of the CET tariff and DSM programs. As I previously explained, 112 the Stipulation accomplishes this by implementing the CET tariff and obligating the Company to file with the Commission a comprehensive DSM program within 113 114 60 days of the Commission’s approval of the Stipulation. 115 Q: In surrebuttal testimony, didn’t Dr. Dismukes offer several alternatives to 116 the CET tariff? 117 A: Yes, however, none of these alternatives were fully developed or explained to an 118 extent that they could be evaluated side-by-side with the CET tariff. Although the 119 Division’s surrebuttal testimony pointed out the inherent flaws and potential 120 statistical pitfalls of these alternatives, this critique was necessarily made in 121 general terms. The Stipulation can potential correct this by allowing parties time 122 to fully develop one or more alternatives that can be evaluated side-by-side with 123 the CET tariff. 124 Q: How long does the Stipulation allow for the development of these alternatives? 1 The Division argued in surrebuttal testimony that adjustments to the Company’s ROE were not warranted or justified on the basis of the evidence available at the time of filing. - 6 - DOCKET NO. 05-057-T01 ARTIE POWELL STIPULATION TESTIMONY DIVISION OF PUBLIC UTILITIES 125 A: Under the terms of the Stipulation, parties have until June 1, 2007 to file written 126 testimony or a position statement. This time should be more than adequate given 127 the three years that the issues in this case have been under investigation by the 128 Division, and other regulatory bodies and interested parties. 129 Q: The Stipulation specifies or recommends that a comprehensive review be 130 undertaken at the end of the first year or about September 2007. Is it the 131 intent that this review would provide the basis for both an evaluation of the 132 CET tariff or any alternatives and the efficacy of the Company’s DSM 133 Program? 134 A: No. The intent is that the first year review would be an opportunity to evaluate 135 side-by-side the CET tariff with any alternatives that parties have proposed in the 136 June 1, 2007 filing. One year, in my opinion, is not an adequate amount of time 137 to determine efficacy of any DSM program. Most likely, it will take several years 138 for any DSM program to ramp up to its full potential. While the Division will 139 closely monitor the Company’s DSM program, one reason for a three year pilot 140 program is to allow sufficient time for the DSM program to develop and mature to 141 a point that meaningful evaluations and recommendations can be presented to the 142 Commission. 143 Q: Does that conclude your testimony? 144 A: Yes. - 7 -