PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON

Transcription

1 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON At a session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in the City of Charleston on the 12th day of July GENEFUL ORDER NO In the Matter of the Effects on Utilities of the 2017 Tax Cuts and Jobs Act. COMMISSION ORDER The Commission grants intervenor status to the Consumer Advocate Division (CAD), the West Virginia Energy Users Group (WEUG), the Kanawha County Commission (KCC) and the City of Charleston (City), grants motions for Appalachian Power Company (APCo), Wheeling Power Company (WPCo) and Hope Gas, Inc., dba Dominion Energy West Virginia (Hope) witnesses to testify on July 24, 2018, denies motion for Peoples Gas WV, LLC (Peoples) witness to testifl on July 26, 201 8, and addresses inotions and recominendations to be excused from the hearing. BACKGROUND On January 3, 2018, the Commission initiated this proceeding to investigate the effects of the 2017 Tax Cuts and Jobs Act (2017 Federal Tax Act) on the revenue requirements of certain utilities. As a part of that Order, the Commission mandated the utilities to track the tax savings resulting from the 2017 Federal Tax Act on a monthly basis beginning with the effective date of January 1, The Order also required the utilities, on or before May 30, 2018, to pre-file testimony explaining the impact the 2017 Federal Tax Act has on their federal income tax expense, as described in that Order. On January 26, 2018, the Commission entered an order requiring the utilities, effective January 1, 20 18, to establish a regulatory liability on their accounting records to track any impacts of the 2017 Federal Tax Act, including current and deferred tax impacts. In that Order, the Commission stated that regulatory liability recognition on the financial statements of the utilities of any cost of service savings would serve to protect the interests of ratepayers until any federal tax benefits can appropriately be reflected in rates. Commission Order dated January 26,2017 at 2. On January 31, 2018, the WVEUG filed a Notice to Participate in this matter stating its interest in protecting its members.

2 On March 8, 20 18, the Commission entered an order requiring any parties having an interest in this matter to file responses to the utilities testimony on or before July 2, , and giving the utilities the opportunity to file replies on or before July 13, On May 30, 2018, several electric, gas, water and sewer utilities, including APCo, WPCo, Monongahela Power Company (Mon Power), Potomac Edison Company (PECo), Mountaineer Gas Company (MGC), Hope, Peoples Gas WV, LLC Peoples, Bluefield Gas Company (Bluefield), West Virginia American Water company (WVAWC), Beckley Water Company (Beckley) and Shenandoah Junction Public Sewer, Inc (Shenandoah), filed direct testimony. Solid waste facilities and carriers, including Waste Management of West Virginia, Inc.(WMWV), Disposal Service, Inc.(DSI), LCS Services, Inc.(LCS), Meadowfill Landfill, Inc.(Meadowfill), Northwestern Landfill, Inc.(Northwestern), and S&S Grading, Inc. a.k.a. S&S Landfill, Inc.( S&S) (collectively WMWV Entities), Allied Waste Services of North America, LLC d/b/a Republic Services of West Virginia, American Disposal Services of West Virginia, Inc. d/b/a Republic Services of West Virginia, d/b/a Allied Waste Services of America, LLC, d/b/a Republic Services of West Virginia, American Disposal Services of West Virginia, Inc., d/b/a Short Creek Landfill, and Allied Waste Services of North America, LLC, d/b/a Mountaineer Transfer Station, also filed testimony. On June 18, 2018, the KCC and the City filed a Notice of Intent to Participate (Notice) stating that they intend to file testimony and requesting to participate in this proceeding as interested parties. Notice, pp On June 22, 2018, the Commission entered an Order scheduling a hearing to commence on July 24, 20 18, and continuing on July 25 and July 26 if necessary. On June 26, 2018, Tygarts Valley Sanitation, Inc. (Tygarts Valley) and N & N Disposal, Inc. (N&N), filed Motions to be Excused From Hearing (Tygarts Valley Motion and N&N Motion) stating that federal income tax is a de minimis portion of their operating expenses and any savings as a result of the 2017 Federal Tax Act will be de minimis. Tygarts Valley Motion, at 1, N&N Motion, at 1. On June 28, 2018 APCo and WCo filed a Motion Respecting Witness Scheduling (APCo Motion) stating that one of their witnesses, Alex E. Vaughn, is available only on July 24, 20 18, and requesting that he be permitted to testify on July 24 and be released from the hearing at the conclusion of the hearing that day. APCo Motion at 1. On June 29, 2018, Hope Gas, Inc., dba Dominion Energy West Virginia (Hope) filed a Motion for Witnesses of Hope to Appear and Testify on July 24, 2018, and 2

3 Request for Expedited Action (Hope Motion). Hope requested that both of its witnesses appear and testify on July 24, As justification for this request, Hope stated that its witness, James Gabbert, is unable to appear on July 25 or 26 because of a long-planned vacation. Hope Motion at 2. On June 29, 2018, Shenandoah filed a Motion to be Excused From Hearing (Shenandoah Motion) stating that the Company's federal income tax expense is a deminimis portion of its total operating expenses and any savings incurred by the Company from the 2017 Federal Tax Act will also be de minimis. Shenandoah has historically experienced negative net income. Shenandoah Motion at 2-3. On July 2, 2018, the (CAD), the WVEUG, Lusk Disposal Service (Lusk)', the KCC and the City filed testimony. The Commission Staff filed an Initial and Final Joint Memorandum. (Joint Memorandum). On July 3, 2018, the Newell Company (Newell) filed a Motion to be Excused From Hearing (Newell Motion) stating that it is not currently paying federal income taxes and the rates approved by the Cornmission in its last rate case did not include federal income tax expense. Further, Newell informed the Commission that it does not have any excess deferred income taxes. Newell Motion at 1-2. On July 3, 20 18, the WMWV Entities filed a Motion to Excuse Witness, Mark A. Lockett from Hearing (WMWV Motion). The WMWV Entities state that the direct testimony of Mr. Lockett is limited to explaining the legal status of WMWV, its relationship to the WMWV Entities, and explaining that WMWV files a consolidated Federal Income Tax return each year on behalf of all corporate entities within the WMWV family of companies, including the WMWV Entities. Market Area Controller, Michael J. Magee, will be present at the hearing to testify as a witness on behalf of the WMWV Entities. On July 11, 2018, Peoples filed a Motion to Appear Before Commission on July 26, 2018 Hearing (Peoples Motion), stating that its witness Andrew P. Wachter cannot appear on July 24 because his presence is required in a long-scheduled corporate meeting in Pittsburgh, Pennsylvania. DISCUSSION In their Notice, the KCC and the City state their interest in this matter as political subdivisions of the State of West Virginia and request that they participate as interested parties. Notice, pp The Commission will treat the Notice as a motion to intervene pursuant to Rule 12.6 of the Commission Rules of Practice and Procedure and will grant 1 Lusk requested an extension of time to file testimony because its tax returns were under extension. 3

4 the KCC and the City intervenor status in this proceeding. Similarly, the CAD and the WVEUG have an interest in this case and will be granted intervenor status in this proceeding No objection has been made to the APCo and Hope Motions requesting that their witnesses Vaughn and Gabbert testify on July 24. The APCo and WPCo Motions will be granted with respect to Mr. Vaughn and Mr. Gabbert. APCo witness Mr.Vaughn will be permitted to testify first, followed by Hope witness Mr. Gabbert. Because there was no reason to schedule Hope witness Farmer to be scheduled early, the Cornmission has scheduled witness Farmer as indicated in the order of witnesses below. Tygarts Valley, N&N, Shenandoah and Newell have stated that they are either not paying federal income tax or that federal income tax is a de minimis portion of their operating expenses and that any savings resulting from the 2017 Tax Act will be de minimis. Tygarts Valley Motion, at 1; N&N Motion, at 1; Shenandoah Motion2 at 2-3; and Newell Motion at 1-2. Because of the relatively minor impact that these utilities assert the 2017 Tax Act will have on their revenues, the Cornmission will not require that they participate in the hearing, subject to the same conditions for admitting their pre-filed testimony into the record discussed below. WMWV Entities witness, Mr. Lockett, has provided pre-filed testimony that is limited to discussion of the organizational structure of the WMWV Entities and that WMWV prepares and submits a consolidated federal tax return for all corporate entities in the Waste Management family of companies. WMWV Entities witness, Mr. Magee, has provided pre-filed testimony addressing the impact of the 2017 Federal Tax Act. WMWV Entities Motion at 1-2. WMWV Entities filed a Motion to Excuse Witness, Mark A. Lockett, from Hearing (WMWV Motion). The Commission will grant WMWV Entities Motion, subject to the same conditions for admitting prefiled testimony into the record discussed below. The Commission cannot determine how many days the hearing will last and, therefore, cannot grant Peoples Motion. The Commission will schedule Mr. Wachter last in the order of witnesses set forth below. Pre-filed testimony is not typically admitted into the evidentiary record of a proceeding if a witness is not present to sponsor and stand for cross-examination on the pre-filed testimony. This is not a typical case, however. Some parties have specifically Contrary to the assertions made by Shenandoah in its Motion, the Commission did not excuse the Jochum Motor Carrier certificate holders (Jochum) from this proceeding in its Order of May 15, The Commission excused Jochum from making further filings in this proceeding unless required by further order of the Commission. Commission Order dated May 15,

5 requested that their witnesses who submitted pre-filed testimony be excused from appearing at the hearing. In addition, Staff has made a recommendation regarding a large number of smaller utilities. Specifically, Staff recommended that the utilities that have informed the Commission that federal income tax expense either played no role in setting their rates or has a de minimis effect on rates, be excused from making further filings in this proceeding unless required by further order of the Commission. Staff provided an Exhibit A attached to the Joint Memorandum listing those utilities recommended to be excused. Staff asserted that those utilities should be advised that regulatory accounting still applies where accumulated deferred income taxes (ADITS) have been recorded at 35% (or their previously recognized statutory rate) and are now at the 21% rate. No entries should be made to eliminate the Excess ADIT (or EADIT) until Staff has the chance to review each situation in a future rate case. This future rate case review includes the appropriateness of feeding back any of the difference or savings in the current tax expense occurring between January 1, 2018, and the date rates can be changed. This is the deferral accounting requirement that applies to all utilities in this case. Joint Memorandum at 2. The Commission tentatively agrees, subject to the opportunity for objection by other parties, with Staff regarding Staff's recommendation to excuse the utilities listed on Exhibit A of this Order (collectively, along with Tygarts Valley, N&N, Shenandoah and Newell, referred to as the Smaller Utilities). The Smaller Utilities will be excused from making further filings and appearing at the hearing in this matter unless and until the Commission orders otherwise in a future order.3 These utilities are advised that regulatory accounting as required by the Commission Order of January 26, 2018 will continue to apply until their rates are reviewed in a rate case or additional proceedings in this matter. As a departure from our typical treatment of pre-filed direct testimony, as described above, the pre-filed testimony and documents filed by the Smaller Utilities informing the Commission of the impact of the Federal Tax Act will be entered into the record in this proceeding without a sponsoring witness, unless there is an objection to this procedure filed by any other Party. That objection must provide good cause why such pre-filed testimony or other documents already filed should not be a part of the record. Any objection should be filed by close of business on July 17, Absent that objection the Commission will enter the pre-filed testimony and letters as informational filings to establish an official record of the information provided. The Smaller Utilities that filed pre-filed testimony or other statements of the impact of the Tax Act are advised that, while they are excused from making further filings and appearing at the hearing, they are subject to any future orders of the 3 This excusal is allowed, but not mandatory. Any of the included utilities may appear at the hearing and present their witnesses if they desire. 5

6 Commission in this matter that may affect their tax calculations, rates, and any requirement to provide credits for any accumulated regulatory liability. Because of the large number of parties and witnesses, the Commission establishes an the following order of witnesses based on the testimony filed in this matter and the motions granted herein: APC o witness Vaughn Hope witness Gabbert In consideration of their other administrative duties as officers of a political subdivision of the State, Charleston witness Mayor Jones and County Commission witness Commissioner Carper will be given some flexibility regarding their appearances. Either may follow witnesses Vaughn and Gabbert if they wish. If that is not convenient, we will schedule them at 1:00 p.m., on July 25 or at such other time on July 25 that they request, consistent with uninterrupted testimony of another witness. Mayor Jones and Commissioner Carper should inform the Commission as soon as possible whether they prefer to follow Mr. Gabbert on July 24, or to appear at 1:00 p.m. (or other approximate time), on July 25. APCo witness Scalzo Hope witness Farmer MonPower witness Valdes MGC witness Klemm Bluefield witness Jessie WVAWC witness Nevirauskas 10. WVAWC witness Wilde 1 1. Beckley witness Ramsden 12. Allied Waste witness McWilliams 13. Allied Waste witness Wheaton 14. WMWV Entities witness Magee 15. Smaller Utility witnesses wishing to forego being excused from the hearing discussed above, or who are ordered to appear if valid objections to their excusal are filed 16. WVEUG witness Baron 17. CAD witness Smith 18. Staff witness Pauley 19. Peoples witness Wachter The Commission advises the parties that because of the limited space and the number of parties in this case, chairs at counsel s table in the Commission s hearing room will be reserved for counsel only and will be pre-assigned by the Commission. The first two rows of seats in the gallery will be reserved for witnesses but will not be pre- 6

7 assigned. progresses. Adjustments to the pre-assigned seating may be made as the hearing FINDINGS OF FACT 1. The KCC and the City are political subdivisions of the State of West Virginia, are utility ratepayers and request that they participate as interested parties. Notice, pp The WVEUG filed a Notice to Participate in order to protect the interests of its members. WVEUG Notice to Participate filed January 3 1, The CAD has filed testimony and has been participating in this proceeding. 4. No objection has been made to the APCo and Hope Motions requesting that their witnesses Mr. Vaughn and Mr. Gabbert testify on July 24, Tygarts Valley, N&N, Shenandoah and Newell have stated that they are either not paying federal income tax or that federal income tax is a de minimis portion of their operating expenses and that any savings resulting from the 2017 Tax Act will be de minimis. Tygarts Valley Motion, at 1, N&N Motion, at 1, Shenandoah Motion at 2-3, Newell Motion at WMWV Entities, witness Mr. Lockett, provided pre-filed testimony that is limited to discussion of the organizational structure of the WMWV Entities and that WMWV prepares and submits a consolidated federal tax return. WMWV Entities Motion at Staff recommended that utilities identified on Exhibit A attached to Staffs Joint Memorandum be excused froin this proceeding. CONCLUSIONS OF LAW 1. The KCC and the City should be granted intervenor status in this proceeding. 2. The CAD and WVEUG have an interest in this matter and should be granted intervenor status in this proceeding. 3. The APCo Motion Respecting Witness Scheduling and the Hope Motion for Mr. Gabbert to Appear and Testify on July 24,2018 should be granted. - 7

8 4. The Tygarts Valley, N&N, Shenandoah and Newell Motions to be Excused From Hearing should be granted, subject to reconsideration upon objection by other parties. 5. The WMWV Motion to Excuse Witness, Mark A. Lockett, from Hearing should be granted. 6. The Smaller Utilities, including Tygarts Valley, N&N, Shenandoah and Newell and other utilities identified on Exhibit A of this Order, should be excused from making further filings and appearing at the hearing in this matter unless and until the Commission orders otherwise in a future order. 7. Peoples Motion to Appear Before Commission for Hearing on July 26, should be denied. 8. The pre-filed testimony and other documentation filed by the Smaller Utilities should be entered into the record even if they are not sponsored by a witness unless good cause objections to this procedure for one or more of those utilities are filed by other parties and the Commission rules favorably on those objections. 9. The Smaller Utilities that filed pre-filed testimony or other statements of the impact of the 2017 Tax Act and which are excused from participation in the hearing continue to be subject to the deferral requirements previously established in this Proceeding until further order of the Commission to the contrary, and are subject to any future orders of the Commission in this matter that may affect their tax calculations and rates. ORDER IT IS THEREFORE ORDERED that the Kanawha County Commission and the City of Charleston are granted intervenor status in this proceeding. IT IS FURTHER ORDERED that the Consumer Advocate Division and the West Virginia Energy Users Group are granted intervenor status in this proceeding. IT IS FURTHER ORDERED that the Motion Respecting Witness Scheduling of Appalachian Power Company and Wheeling Power Company is granted. IT IS FURTHER ORDERED that the Motion for Witnesses of Hope to Appear and Testify on July 24, 2018, of Hope Gas Inc., dba Dominion Energy West Virginia is granted with regard to Mr. Gabbert. 8

9 IT IS FURTHER ORDERED that the Motions to be Excused From Hearing of Tygarts Valley Sanitation, N&N Disposal, Inc., Shenandoah Junction Public Sewer, Inc., and the Newel1 Company are granted, subject to the conditions discussed herein. IT IS FURTHER ORDERED that the Motion of Waste Management of West Virginia, Inc. (WMWV), Disposal Service, Inc. (DSI), LCS Services, Inc. (LCS), Meadowfill Landfill, Inc. (Meadowfill), Northwestern Landfill, Inc. (Northwestern), and S&S Grading, Inc. a.k.a. S&S Landfill, Inc. is granted. IT IS FURTHER ORDERED that the Motion of Peoples Gas of West Virginia, LLC to Appear Before Commission for Hearing on July 26, is denied. IT IS FURTHER ORDERED that other Smaller Utilities identified on Exhibit A of this Order should be excused from making further filings and appearing at the hearing in this matter unless they prefer to participate or unless and until the Commission orders otherwise in a hture order. IT IS FURTHER ORDERED that the parties be prepared to proceed in the order indicated herein. IT IS FURTHER ORDERED that the Executive Secretary of the Commission serve a copy of this Order by electronic service on all parties and on all the utilities listed on Attachment A of the January 3, 2018 and January 26, 2018 Orders who have filed an e-service agreement, and by United States First Class Mail on all who have not filed an e-service agreement, and on Commission Staff by hand delivery. A True Copy, Teste, Ingrid Ferrell Executive Secretary G cg RMA/ 9

10 EXHIBIT A ELECTRIC UTILITIES Black Diamond Power Company West Virginia Power (not in business) GAS UTILITIES A.V. Company, Inc. Bazzle Gas Company, Inc. Blacksville Oil & Gas Company, Inc. Canaan Valley Gas Company Consumers Gas Utility Company Lumberport-Shinnston Gas Company, Inc. Megan Oil & Gas Company, Inc. Southern Public Service Company Standard Gas Company Tawney Gas Services, Inc. (not in business) Union Oil & Gas Inc SEWER UTILITIES C & J Utilities, LLC Cave Road Utilities, LLC Green Acres Utilities Hidden Valley Treatment, Inc. Highland Farm, LLC HPSD, LLC Lakewood Utilities, Inc. Linmont Sanitation System, Inc. Ogden Sewer Company P & P Enterprises Utilties, LLC SCL, PSD, LLC Sewage Systems, Inc. Shenandoah Junction Public Sewer, Inc. Springer Run Park, L.L.C. The Newell Company The Village at Rock Ridge, Inc. Timberline Four Seasons Utilities, Inc. Vitech Enterprises, lnc. West Virginia Resorts, LLC Williamsburg Sewer System, Inc. WATER UTILITIES Cave Road Utilties, LLC Fox Glen Utilities, Inc. Hampton Roads Water System Jefferson Utilities, Inc. Lakewood Utilities, Inc, Mountain View Water System LLC P & P Enterprises Utilities, LLC Springer Run Park, L.L.C. Sunny View Acres Water Project The Newell Company Timberline Four Seasons Utilities, Inc. Valley Water and Sewer Services, Inc. West Logan Water Company West Virginia Resorts LLC

11 EXHIBIT A SOLID WASTE CARRIERS A&W Sanitation, Inc. Alan Lee Taylor DBA Taylors Trash Removal Allegheny Disposal, ILC AVW of West Virginia Inc. dba Apple Valley Waste Barrackville Garbage Service LLC Bebe Enterprize Inc. Beckley Garbage Disposal Boso Equipment Inc. Carl Dewey Cavender et al. DBA West Side Garbage Dave's Sanitation Service, Inc. E & L Inc. Empire Waste Systems. Inc Enterprise Sanitation, Inc Envirco, Inc. Greenbrier Valley Solid Waste Harold A. Talor Jr DBA Wood County Waste Harold A. Taylor or Alice M. Taylor and Harold A. Taylor Jr DBA Harold's Refuse Removal Haul Away Trash LLC Hezakigh LLC DBA Main Sanitation Hizer Trucking, Inc. Hott Disposal Services, Inc. JEO Enterprises Inc. Jim L. Shisler, DI3A D&J Sanitation Jochum Motor Carrier John A. Gray, DBA Loup Creek Trash Company John D. & Carroll F. Jones, DIM Farmington Garbage Knobley Mountain Hauling. Inc Leonard R. Stewart, DBA Stewarts Sanitation Lowell M. Clark, DBA Petroleum Sanitation Mannington Refuse, LLC Mark A. Efaw & Deronda G. Efaw, DBA Rachel Garbage Disposal Martin Sanitation, Inc Martyn Service, Inc Morgan Sanitation, Inc. Mullens Garbage Company N&N Disposal, Inc. NC Sanitation, Inc. Neil Chisler dba CR&S Chrissys Recycling and Solid Waste Nicholas Sanitation, Inc. North Fork Disposal Service, LLC Oak Hill Garbage Disposal, Inc. Panhandle Pumping, Inc Phyllis C McCall dba Western Greenbrier Disposal Service Preston Sanitation, Inc Quality Sanitation, Inc. R & L Trash Service, LLC RGL Inc dba Mountain State Waste Robert Peer Rural Garbage and Refuse inc. S&K Sanitation, Inc Smallwood Sanitation Co, lnc.

12 EXHIBIT A Solid Waste Services of West Virginia, Inc Southern Sanitation, Inc Stewart's Sanitation Sunrise Sanitation Services Taylor's Disposal Inc. Thomas Solid Waste Collection, LLC Tygarts Valley Sanitation, Inc. Union Disposal Services, LLC Waste Transporters, Inc. Wood County Waste, Inc SOLID WASTE FACILITIES Allied Waste Sycamore Landfill, LLC Brooke County Sanitary Landfill Chistopher Mallet, dba American Recycle Entsorga West Virginia LLC Gary J. Duffield &a David Kelley H.A.M. Sanitary Landfill, LLC Lackawanna Transport Company dba Wetzel County Landfill Tygarts Valley Transfer, Inc, Valero Terrestrial Corporation dba Brooke County Composting Facility WV Tire Disposal