Ms. Mary J Kunkle Michigan Public Service Commission 6545 Mercantile Way P. O. Box 30221 Lansing, MI 48909 April 22, 2011 RE: MPSC Case N U-16472/U-16489 Dear Ms. Kunkle: The following are attached for paperless electronic filing: on Behalf of the Natural Resources Defense Council E-Service List Sincerely, Christopher M. Bzdok chris@envlaw.com /mlb xc: ALJ Mark E. Cummins Parties to Case N U-16472/U-16489 Rebecca Stanfield, NRDC (rstanfield@nrdc.org)
STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of THE Authority to Increase Its Rates, Amend Its Rate Schedules and Rules Governing the Distribution and Supply of Electric Energy, and for Miscellaneous Accounting Authority. In the matter of the Application of THE approval to defer certain pension and post-employment benefits expense for future amortization and recovery. Case N U-16472 Case N U-16489 on Behalf of the Natural Resources Defense Council Christopher M. Bzdok (P53094) OLSON, BZDOK & HOWARD, P.C. Attorneys for NRDC 420 East Front Street Traverse City, MI 49686 Telephone: (231) 946-0044; Fax: (231) 946-4807 Email: chris@envlaw.com April 22, 2011
U-16472 Page 1 of 3 1 2 3 Q. What is your full name and business address? 4 A. My name is Pamela G. Morgan. My business address is 17 Masaryk, Lake Oswego, 5 Oregon 97035. 6 Q. Did you file direct testimony in this proceeding on behalf of the Natural Resources 7 Defense Council (NRDC)? 8 A. Yes, I did. 9 Q. What is the purpose of your rebuttal testimony? 10 A. My purpose is to recommend a clarification and an adjustment to the operation of 11 the decoupling mechanism proposed by the Staff of the Commission in the testimony of 12 Katie Morgan. 13 Q. Are you sponsoring any exhibits? 14 A. N 15 Q. Did Commission Staff propose a decoupling mechanism for Detroit Edison to take 16 the place of the company's proposal for a lost revenue recovery mechanism? 17 A. Yes. 18 Q. What is your understanding of Staff's proposed mechanism? 19 A. Staff has proposed a simple comparison between rate case revenue and actual 20 revenue, by rate schedule, bifurcated between full service and direct access customers. 21 For full service customers, the revenue subject to reconciliation would equal total rate 22 schedule revenue less customer charge, fuel and purchased power, and other surcharges. 23 For retail open access customers, the revenues reconciled would be the total rate schedule 24 revenue less customer charge revenue and other surcharges. Decoupling would begin 25 with the first month after the end of a general rate case projected test year. For the period
U-16472 Page 2 of 3 1 of the test year, the load forecast used would include expected energy efficiency 2 reductions. The mechanism would terminate upon the implementation of new rates, 3 whether pursuant to self-implementation or a Commission order, resuming again after the 4 test year of that implementation had passed is re-authorized in the case. 5 Staff proposes that the Commission address allocation of any revenue shortfall or 6 excess in the reconciliation and that, further, the amount of revenue differential subject to 7 reconciliation be capped at 1.5% of qualifying revenue in the first year after the test year 8 and 3% in subsequent years after the test year but before a new rate case. Staff bases 9 these parameters on a maximum amount of energy efficiency gains under the Energy 10 Optimization program. 11 Q. Does NRDC support this proposed decoupling mechanism? 12 A. Generally, yes, subject to a clarification and a recommendation. 13 First, we suggest that the Commission make absolutely clear that the decoupling 14 mechanism is not intended to capture the revenue effects of customers moving between 15 full service and retail open access service. 16 As it does now, it should continue to address that volatility, if at all, through a 17 separate mechanism such as the Customer Incentive Mechanism. 18 Second, NRDC recommends that the Commission apply the caps Staff proposes 19 on to a revenue differential that has been weather-adjusted. NRDC does not have a 20 position whether the decoupling mechanism should calculate the differential from actual 21 or weather-adjusted revenues. To determine whether the caps apply, however, weather 22 effects should be removed from the differential. It would not be good policy to restrict a 23 recovery under the mechanism simply because a colder-than-normal summer caused 24 qualifying revenues to fall significantly from the rate case level. Nor would it make sense 25 to restrict a rebate to customers if energy efficiency gains were poor but a warmer-than
U-16472 Page 3 of 3 1 expected summer drove qualifying revenues to much higher than test year expected levels. 2 Q. Do you have any other concerns about Staff's proposed mechanism? 3 A. Yes, the caps would give us some pause if their adoption in this case carried an 4 implication that they would remain appropriate through several rate cases into the future. 5 Over time, it may be that the caps proposed could work to constrain aggressive energy 6 efficiency efforts, particularly non-programmatic energy efficiency. Staff proposes, 7 however, that the Commission revisit the mechanism in each general rate case. If 8 conditions are changing, we expect that NRDC or any other party can suggest changes at 9 that time. 10 Q. Does this complete your testimony? 11 A. Yes.
STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of THE Authority to Increase Its Rates, Amend Its Rate Schedules and Rules Governing the Distribution and Supply of Electric Energy, and for Miscellaneous Accounting Authority. In the matter of the Application of THE approval to defer certain pension and post-employment benefits expense for future amortization and recovery. Case N U-16472 Case N U-16489 ELECTRONIC SERVICE LIST On the date below, an electronic copy of Rebuttal Testimony of Pamela G. Morgan on Behalf of the Natural Resources Defense Council was served on the following: Mark E. Cummins, ALJ Name/Party Counsel for MPSC Staff Anne M. Uitvlugt Robert W. Beach Brian W. Farkas Spencer A. Sattler Counsel for AG Donald E. Erickson Counsel for Detroit Edison Bruce R. Maters Jon P. Christinidis David S. Maquera Michael J. Solo Richard P. Middleton Counsel for Energy Michigan Inc. Eric J. Schneidewind Counsel for The Kroger C Michael L. Kurtz Kurt Boehm Local 223, Utility Workers Union of America John R. Canzano Meagan B. Dolleris E-mail Address cumminsm1@michigan.gov [hard copy sent by regular mail] uitvlugta@michigan.gov beachr1@michigan.gov farkasb@michigan.gov sattlers@michigan.gov ericksond@michigan.gov matersb@dteenergy.com christinidisj@dteenergy.com maquerad@dteenergy.com solom@dteenergy.com middletonr@dteenergy.com mpscfilings@dteenergy.com ejschneidewind@varnumlaw.com mkurtz@bkllawfirm.com kboehm@bkllawfirm.com jcanzano@kmsmc.com mdolleris@kmsmc.com
Counsel for the City of Detroit Robert C. Walter Counsel for ABATE Robert A. W. Strong Leland R. Rosier Counsel for DEAR Raymond O. Sturdy, Jr. Counsel for MCAAA Don L. Keskey Counsel for MI Cable Telecommunications Assoc. David E. S. Marvin Jennifer Utter Heston Counsel for The Detroit Medical Center, Henry Ford Health System and William Beaumont Hospital Michael J. Watza Robert T. Kent Counsel for Wal-Mart Stores East, LP & Sam s East, Inc. Rick D. Chamberlain Tyler D. Tennent Edward C. Dawda waltr@detroitmi.gov rstrong@clarkhill.com lrrosier@clarkhill.com Rsturdy@comcast.net donkeskey@publiclawresourcecenter.com dmarv@fraserlawfirm.com jheston@fraserlawfirm.com mike.watza@kitch.com rob.kent@kitch.com rdc_law@swbell.net ttennent@dmms.com edawda@dmms.com The statements above are true to the best of my knowledge, information and belief. OLSON, BZDOK & HOWARD, P.C. Counsel for NRDC Date: April 22, 2011 By: Michelle L. Boettcher, Legal Assistant 420 E. Front St. Traverse City, MI 49686 Phone: 231/946-0044; Fax: 231/946-4807 Email: michelle@envlaw.com 2