ML18230A822

Carolina Power & Light Company - Testimony of Mr. H. M. Harris, Jr., Utilities Engineer - Utilities Division

ML18230A822
Person / Time
Site:	Harris
Issue date:	06/09/1977
From:	Harris H State of SC, Public Service Commission
To:	Office of Nuclear Reactor Regulation
References
18361, 18387
Download: ML18230A822 (16)

Text

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18,361 and 18,387

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q0~'ESTIMONY OF MR.

H. M. HARRIS, JR

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UTILITIES ENGINEER UTXLITXES DIVISION 1

Q.

PLEASE STATE YOUR NMiE AND BUSINESS ADDRESS?

, "NA POLUER AND LIGHT CO.,

INC.

2 A.

H. M. Harris, Jr.,

1321 Lady Street,

Columbia, South 4

Q.

Carolina 29211.

BY WHOM ARE YOU EMPLOYED?

5 A.

I am employed by the South Carolina Public Service Commis-6 sion as a Utilities Engineer XI.

7 Q.

PLEASE BRIEFLY DESCRIBE YOUR EDUCATIONAL AND PROFESSIONAL BACKGROUbD?

9 A.

I graduated from Southern Technical Xnstitute (a division 10 12 13 17 18 19 20 of Georgia Tech) with an Associates Degree in Computer Technology, an Associates Degree in Electrical Engineering and a Bachelor of Engineering Degree, all of which were of High Distinction.

I was employed by Square 0 Company as a Field Engineer.

Xn October of 1974, I went to work with the Public Service Commission as a Utilities Engineer I.

Dur:.ng the past two years, I have attended seminars on electric meters, rate design, peak load pricing and ts.me-of -day m~ tering, forecasting for the utility industry, and served or> the panel for peak load pricing and discontinuance of service at the annual North Carolina.';oter School.

21 Q.

WHAT IS THE PURPOSE OF YOUR TESTIMONY?

22 A.

23 24 My testimony will be broken down into three parts:

First, I will d.iscuss the components and calculation of the Fuel Adjustment Clause which staff recommends in the proceeding.

,1 Staff is of the opinion the present Fuel Adjustment Clause used by CP&L requires certain changes which I will sub-sequently discuss in more detail.'econdly, I will discuss staff's proposed rate structure, and thirdly, I will show staff's forecast of the expected growth of peak load on 6

the CP&L's system.

7 Q.

WHY DOES STAFF FEEL THAT CP&L'S FUEL ADJUSTl1ENT CLAUSE 8

SHOULD BE CHANGED'?

1 9

A.

First, CP&L's present clause does not utilize in its com-10 12 14 ponents the cost of nuclear fuel, the fuel cost of purchased power, or the fuel cost of interchange power.

Secondly, the present clause uses in its calculation the number of kilowatt hours generated rather than the number of KWH sold, excluding intersystem sales.

15 Q.

HOW WOULD THE CHANGES WHICH YOU ARE RECOl&IENDING BE INCOR-16 PORATED IN THE FUEL ADJUSTHENT CLAUSE?

17 A.

Carolina Power

& Light Company's retail Fuel Adjustment 18

Clause, Rider No. 39, Davis Exhibit No.

3, which was filed 19 as an alternate clause for consideration by the Commission, 20 incorporates all the points that we feel are necessary in 21 providing a fair, adequate, and reasonable Fuel Adjustment 22 Clause.

23 Q.

NR.

HARRIS, WOULD YOU BRIEFLY GO OVER THE FORtlULA UTILIZED 24 IN THXS C.LAUSEP 25 A.

The Fuel Adjustment Factor will be calculated by using the 27 total cost of fuel divided by the total kilowatt hour

sales, minus the amount billed in the base rate, times the

4 4

1

'ross Receipt Tax Factor times 100.

2 Q.

HOW MUCH OF THE TOTAL COST OF FUEL DOES THE STAFF RECOMMEND 3

BE BILLED IN THE BASE RATE PER KILOWATT HOUR?

4 A.

Xn my Exhibit No.

1, the actual costs of fuel for the 5

first four months of 1976, and the Company's projected fuel costs for the remaining eight months, were used to calculate the average for the year.

This average is 8.43 10 12 16 mills which the staff rounded to 8.5 mills per kilowatt hour.

Using these actual and projected costs for the year, and using 8.5 mills in the base rate per kilowatt hour, the customer would see a total credit adjustment of

$ 5.72 for six months and a total debit adjustment of

$ 4.57 for six months during this 12-month period.

We recommend that 8.5 mills be used in the base rate fos. the reasons outlined

above, and also, we feel that it would cause less fluctua'-ion from one month to the next in the customer's bill.

17 Q.

MR. HARRIS, WHAT CAUSES THESE MONTH TO MONTH FLUCTUATIONS" 18 WHXCH YOU HAVE MENTIONED AND WHICH YOU SHOW XN YOUR 19 EXHIBIT NO.

1?

20 A.

One reason is that the cost of fossil fuel burned in the 21 22 23 24 25 26 27 28 Company's plants will vary from month to month.

The most significant reason for the fluctuation, however, is due to the nuclear units going off line for approximately six weeks in the Spring, and six weeks in the Fall.

The cost to generate a kilowatt hour with iiuclear fuel is much less than the cost to generate a kilowatt hour with fossil fuel.

When these nuclear units go off line, it considerably increases the total cost of generation per kilowatt hour.

, 1

,Q-MRS HARRIS'OU INDICATED THAT STAFF NANTED TO OFFER FOR 2

THE COMMISSION'S CONSIDERATION AN ALTERNATE SET OF RATES.

3

~

4 A.

PLEASE DESCRIBE THIS RATE STRUCTURE?

First, I want to make clear that we have addressed ourselves to residential rate desicen

~onl., While this rate design will produce the same revenues as CP5L's proposed rates, we are not making any recommendation as to the amount of additional revenue, if any, that should be granted in this 10 proceeding.

These rates could be adjusted in order to generate the proper revenues deemed reasonable by the Commis-12 sion.

Traditionally, rate structures have been designed using the declining block rate based on the designer's 13 14 judgement and experience as to the amount that should be charged in each block, which does.not necessarily reflect the actual cost to serve a customer.

The staff is of the 16

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17 19 opinion that an appropriate rate design should reflect, as closely <<s possible, the costs of: providing electric service to customers.

Additionally, good rate design should be used to conserve energy resources, an/ to promote economic 20 efficiencies.

The staff's propo.'d residential rate schedules

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are designed with pricing changes to reflect a more equitable 23 24 25 26 27 2S and efficient rate design.

The cost of serving electric users may be divided into customer.

demand, and energy costs.

The customer cost com-ponent varies with the number of customers being served.

The demand component varies with the load imposed on the system's facilities by the customer'.

The energy component varies with kilowatt hour consumption.

Customer costs, which include billing costs, meter installation, service drop, and parts of the distribution plant, are costs incurred by the utility regardle'ss of the kilowatt hours sold to the customer.

One of the electric utilities which the Commission regulates has a separate charge in their residential rate schedules to recover customer costs.

The other utilities, including CPGL, attempt to recover these customer costs through minimum bills and in the early blocks of the rate schedules.

10 12 Attempting to recover the customer costs in the early blocks inflates these blocks above the rates necessary to recover energy and demand costs.

Staff believes the fairest means 13 14 of recovering customer costs is through the use of a separate charge.

Therefore, staff's proposed rate schedules 1'5 16.

introduce a basic "facilities charge".

The facilities charge is collected from all customers each month regardless of kilowatt hour consumption.

Customer costs are fixed

costs, and the facilities charge will enable the utility to recover most of these costs outside of the kilowatt hour 20 21 blocks.

Staff believes the facilities charge will elimi,nate

some, but not all, of the intra-class cross-subsidization'2 23 which presently exists in the residential rate schedules.

In addition, the proposed rates include the recommended 24 25 26 fuel charge component which I discussed earlier.

Generally

speaking, the rates are designed to reflect more accurately the cost of providing electric service to all customers.

27 Q.

NHAT IS THE FACILITIES CHARGE FOR EACH RESIDENTIAL CLASSIFICA-28 TION?

'1 A.

As I said before, these costs are incurred by the utility whether the customer uses any kilowatt hours or not.

Utilizing the 1975 "Retail Operations Cost Allocations Study" submitted for this case, and assuming the accuracy of these figures, these fixed costs can be derived.

They are

$ 9.50 for the R-2 rate,

$ 7.87 for the R-3 rate, and

$ 7.41 for the R-4 rate.

8 Q

MR HARRXS I CAN YOU EXPLAIN TO US HOW THESE COSTS ARE 9

10 A.

12 15 16 17 18 19 20 COLLECTED UNDER THE COMPANY'S PROPOSED RATES?

Xn each of their rates,

$ 2.80 is collected as a minimum bill with no kilowatt hours usage.

Xn the R-4 rate,

$ 15,109 would be collected, but the actual cost would be

$ 39,984 of which

$ 24,875 must be collected from other rate payers.

Including the other two residential rate schedules, the total amount to be collected from other rate payers would be almost

$ 62,000.

In order for the Company to fully recover the customer cost, the consumption in Rate R-4 would have to be approximately 160 KNH, in R-3 approximately 170 KNH, and 260 KNH in R-2.

Any customer that, used less than these amounts in each rate would not 21 22 Q.

23 24 A.

25 27 28 pay their share of the cos ts.

HON HAUE YOU ATTEMPTED TO RECOUER THESE FIXED COSTS IN THE STAFF'S PROPOSED HATES?

We are proposing a facilities charge of

$ 4.50 for R-4,

$ 4.50 fox R-3, and

$ 5.00 for R-2 with no KNH included.

This facilities charge represents approximately 604 of the actual cost shown in the Cost of Service Study.

Those three amounts were then rounded in order to make their use in

I'k

2 3

the calculations as simple as possible.

Q.

HAVE YOU MADE A COMPARXSON OF THE RATES FXLED IN THIS DOCKET?

4 A.

Yes, X have.

Xn my Exhibits 2 and 3, I have compared the Company's proposed rates to the approved rates, with and without fuel adjustment, respectively.

In my Exhibits 4 and 5, I have compared staff 's proposed rate 10

-to the Company's approved rate, with and without fuel adjustment, respectively.

In Exhibit 6 and 7, I have compared the Company's proposed alternate rate to the approved rate, with and without fuel adjustment.

In my 12 13 Exhibit 8, I have a comparison of all the rates filed in this Docket with the fuel adjustment.

14 Q.

15 WHAT MAJOR DIFFERENCE ARE THERE IN THE STAFF'S AND THE COMPANY'S PROPOSED RATE SCHEDULES?

16 A.

We consider there to be three major differences in the rate schedules which can be seen-in my Exhibits 9, 10, and 18 19 The first significant difference is the basic 20 facilitiis charge which we stated earlier will assist in;,

recovering some of the fixed cos t of providing service in 22 a fashion which staff feels is fair and equitable.

23 The second difference is the reduction in the number 24 of rate blocks from six, seven or eight blocks to three blocks. It is our opinion that one function of the rate 26 27 28 designer is to utilize a rate schedule that is as easy

'o administer as possible.

We also feel that these three blocks will generate the same revenues as the six, seven or

eight blocks.

Thirdly, we can see no justification for the customers on the all-electric rate (R-2) to receive a discount in the summer months.

Caroli'na Power and Light Company is a

summer peaking.

Company and must build for this peak.

This differential will accomplish attenuation of peak demand, while maximizing the load factor.

9 Q

MR ~

HARRXS i YOU HAVE STATED THAT STAFF HAS PRO JECTED 10 THE EXPECTED GROWTH OF PEAK LOAD ON CPGL'S SYSTEM.

WOULD YOU EXPLAIN YOUR METHODOLOGY AND THE RESULTS?

12 A. I used the "Least Squares" method which relies upon 14 15 16 17 18 19 20 accepted mathematical derivations to produce a ten-year forecast of peak demand.

A graph is used on which is plotted the annual peaks for the time frame utilized, which in the case was ten years.

These points are then used in a calcula-tion using the sum of the "Least Squares" method.

This will minimize the sum of squares of the errors or differences between the plotted points giving you the "best mean values".

A trend line for that period of time can then be plotted.

21 Q.

WHAT XS

'THE RESULT OF YOUR FORECAST?

22 A.

I have developed two different forecasts, looking first at 23 25 26 27 28 the summer load, and secondly at the winter load.

In my Fxhibit 13, I ran a trend line for the years 1960 through 1975 which yielded an average increase of 10.61$.

In my Exhibit 14, X ran a trend line for the years 1968 through

1975, which yielded an average increase of 9.11~.

My final run was based on the years 1971 through 1975 which I feel

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best reflects the economic condition of the present

time, and is shown in my Exhibit 15.

3

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These three trend lines are plotted on my Exhibit 16 that gives the Commission a range for the future.

Staff's forecast is shown in Exhibit 17. If you look at Exhibit 18 we apply staff's projection to CP&L's I

total resources for the next ten,years.

After 1977, it I

would appear that CP&L's reserves drop below 20%.

A negative reserve appears from 1981 through 1985.

This can 10 be compared to CP&L's projections filed in the data request 12 which I show in my Exhibit 12.

CP&L has forecasted that their winter load will equal 14 15 16 18 their summer load through 1985.

I again made three runs

, using the winter peaks to find a trend line.

These can be seen in my Exhibits 19, 20 and 21.

These again are plotted on my Exhibit 22 to show the range of the trend lines.

Staff chose the trend line having an average increase per year of 9.48~ for our forecast.

Ne requested 20 21 customer growth from 1952 through 1975 in the data request.

While the number of residential customers utilizing the "general'r R-4 rate schedule is declining, the number of 22 23 25 26 27 28 wat'er heater customers is still i.ncreasing, but at a lesser rate, and the number of all-electric customers is increasing.

Since the peak for <<ll-electric users is in the winter, we feel the winter load will surpass the summer load in 1977.

Staff's forecast is shown in my Exhibit 23.

Finally, our projection for the winter load is contrasted with CP&L's total resources in my Exhibit 24.

Again,

C in 1977 the reserves drop below 20% and greater V

negative. reserve appears from 1981 through 1985.

3 Q.

MR. HARRIS, DOES THAT CONCLUDE YOUR TESTIMONY?

4 A.

Yes it does, although I would like to submit for the Commission review, my Exhibits 25,and 26 which show-10 12 the base rate comparison and percentage increases for the residential approved rates and the rates presently under bond with and without fuel adjustment, respectively.

Also, for the Commission's information, I have prepared Exhibits 27 and 28 which show residential, commercial and industrial base rate comparisons between major electric utilities the Commission regulates.

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