Transcript Drafting Rate Case Orders - National Association of

Drafting Rate Case Orders
Energy Regulatory Partnership Program
Abuja, Nigeria
July 14-18, 2008
Presented by Robert W. Kehres
The participants
• Regulated Energy Division – a party in the
case and the technical advisor to the
Commission.
• Regulatory Affairs Division – the legal
advisor to the Commission.
• The Commissioners – the ultimate
decisionmakers.
The Starting Point -- PFD
• Normally, RAD does not become involved
until the ALJ issues the Proposal for
Decision (PFD).
• The PFD is electronically sent to Director
of RAD when it is issued.
• I review it and assign it to an attorney to
act as the lead attorney.
Exceptions
• When the ALJ issues the PFD, the parties are
notified of the date y which their objections
(exceptions) must be filed. This is normally 3-4
weeks for a rate case.
• During this time, the RAD attorneys will be
reviewing the PFD, attempting to determine the
contested issues, and drafting the preliminary
portion of the final order, which describes the
procedural history of the case.
Identification of issues
• When the exceptions are filed (there are always
exceptions in a contested rate case) the RAD
attorneys review them and identify all contested
issues.
• The attorneys start drafting the arguments of the
parties.
• Ideally, the attorneys and the Commissioners
begin meeting to discuss the issues and the
position of the Commission.
Replies to exceptions
• Ordinarily, the parties have 1-2 weeks
after the exceptions before the replies to
exceptions are due.
• RAD attorneys use the 1-2 week period to
review the testimony and exhibits cited in
the arguments section of the draft order.
• Upon the filing of the replies to exceptions,
the case is formally submitted to the
Commission.
Deliberations Phase
• Commissioners provide general guidance.
• RAD attorneys address specific questions.
• RED staff ceases acting as a party and
switches to role as technical advisors to
RAD attorneys and the Commissioners.
– Responsible for calculating all changes in
revenue deficiency/sufficiency based on
proposals drafted by the RAD attorneys or
proposed by a Commissioner.
Order Circulation Phase
• Once all of the major factors are resolved,
RAD prepares a draft order that is
circulated to all Commissioners and the
RED staff.
• Commissioners review the draft order and
make comments in writing.
• RED staff checks the accuracy of the
calculations.
• RED staff prepares exhibits (tariff sheets).
Nearing the end
• Once the exact size of the revenue deficiency/sufficiency
is determined, the Commission must determine how the
change in rates is to be apportioned amongst the rate
classes.
• Tariff sheets are finalized.
• Copies of the final order are shared with Commission’s
in-house press relations and legislative staffers.
• A press release is prepared.
• A Commission meeting is scheduled.
• An agenda for the Commission meeting is posted at
least 18 hours before the Commission meeting.
The End
• In a meeting open to the public, the
Commissioners vote by roll call vote to support
or oppose the order, which must be in writing.
• At least two of the three Commissioners must
agree for the order to be issued.
• All of the Commissioners may issue a concurring
or dissenting order.
• A press release is issued.
• The revised rates take effect the day after the
order is issued, due to notice issues.
Rehearings
• Any party may seek reheaqring before the
Commission.
• Grounds for rehearings:
– Legal error
– Factual error
– Unintended consequence
– Newly discovered evidence
– Clarification needed
Appeals
• After the final Commission order and rehearings,
if any, any aggrieved person may file an appeal
with the Michigan Court of Appeals.
• Unless stayed, the order remains in effect during
the appeal.
• If an aggrieved person is still aggrieved after the
Court of Appeals decision, an appeal may be
taken to the Michigan Supreme Court.
Order in which the issues are
discussed in a rate case
• Procedural history of the case.
• Test year – [2008]
• Rate base – [$5,013,880,000]
– Net utility plant [$4,848,102,000]
– DOE liability [$117,678,000]
– Working capital [$48,100,000]
– Ludington land sales proceeds [moot]
Issues, continued:
• Overall rate of return
– Capital structure
– Cost rates
•
•
•
•
•
•
Common equity [10.7%]
Long-term debt [5.62%]
Short-term debt [5.68%] & preferred stock [4.46%]
Deferred income tax credit [0.00%]
Deferred investment tax credit [0.00%]
Deferred federal income tax [0.00%]
Issues, continued
• Adjusted Net Operating Income [$376,926,000]
– Jurisdictional revenues [$3,047,948,000]
– Fuel & purchased and net interchanged power
[$1,488,745,000]
– Discount fees on accounts receivables
– Employee Incentive Compensation Plan
– Dues and Lobbying expenses
– Billing system cost subsidy
– Tree trimming costs and tracker
– Pension costs and OPEB tracker
– Incremental environmental compliance costs
– Pro-forma tax adjustment
Calculation of Base Rate
Sufficiency
•
•
•
•
•
•
•
Rate Base
Rate of Return
Income Required
Adjusted NOI
Income excess
Revenue multiplier
Revenue excess
$5,013,880,000
6.93%
$347,462,000
$379,926,000
$29,464,000
1.5683
$46,208,400
Issues, continued
• Other Revenue Issues
– Zeeland plant revenue issues
• Interim relief order granted $69.5 million to be collect via a
surcharge, not through base rates
• Final order approved an additional $4.177 million
• Palisades transaction costs
• Palisades refund to Rate E-1 customers
• Energy Efficiency Proposal
• Electric Choice Incentive Mechanism
• Low-income energy efficiency fund
• Nuclear legacy costs
• REVENUE DEFICIENCY -- $27,468,000
The End