Intervenor Review of Electricity Distributor
Rate Applications
July 9, 2012Jay Shepherd
for School Energy Coalition
School Energy Coalition
• Who We Are• Coalition of seven school board/management
organizations• 5000 schools with 2 million students• Spend $550 million per year on energy
• Intervention Principles• Always look for the win-win solution• “Walk softly but carry a big stick”• Think long term
Role of Intervenors
• Voice of the customers• Assist the Board• Attitude of the client
organizations
But Who Are They?
• Organizations:– Five active ratepayer groups in LDC
applications– Other ratepayer, environmental and
industry groups in other matters
• People:– Experienced consultants specializing
in energy
Steps in the Review• Revenue Requirement
– OM&A issues (pattern, FTEs, affiliates)– Rate Base issues (opening, capex, dep’n)– Cost of Capital issues (debt rate, taxes)
• Revenue Forecast (load, customers)
• Deficiency/Sufficiency• Who Pays
– Cost Allocation (RTC, anomalies)– Rate design (fixed charges)
Sources of Information
• Financial Statements• Rating agency reports• Website, Newspaper stories, etc.• Yearbook data• Asset Condition Assessment and AMP• Strategic/Business Plan• Tax returns or tax calculations• Previous applications, results, rates
Comparative Data• Valuable diagnostic tools
– Identify potential problem areas– Test against evidence for consistency
• Comparative Rates the most important– Captures all aspects of costs, but rough
• Rate Base and Capital Spending– PP&E per customer (level and trend)– Capex/depreciation ratio each year– Average depreciation rate
Comparative Data• OM&A Metrics
– OM&A per customer– FTE per customer– Spending ratios (e.g. maint. vs. G&A)– Individual line item trends
• Other Metrics– Components of revenue (e.g. by class)– Debt/equity ratio (leveraging)– Actual returns
Examples
(see handouts)
Interrogatories• What are we looking for?
– Documents referred to (or omitted)– Explanations
• Missing data, steps, or confusion• Comparative data
• Clear answers simplify the TC (call)• Challenges facing this LDC
– Show investigation and analysis– Thoughtful plan to deal with them
Technical Conference
• Usually first contact with intervenors• Not cross-examination, but tougher
than IRs • Model TC is a dialogue• Point is to save the Board panel from
wasting their time
ADR –The Process
• What is actually going on?– Negotiation between utility and ratepayers– Most COS applications can be settled– Opportunity vs. challenge
• Steps– Exchange of information/dialogue– Intervenor caucus– Offers back and forth– Reaching agreement– Documenting the agreement
ADR – Negotiations
• Offers– Issue by issue – revenue requirement usually first– Deficiency based packages (looking for savings)
• Settlement of other issues– Cost allocation and rate design– Deferral and variance accounts– Severability
• Intervenor point of view– Result by agreement vs. result by decision– ADR positions vs. Hearing/Argument positions– Comparative data increasingly influential
Oral Hearings• General comments
– Short time frame– Board members busy but very experienced– Creates an impression but also a record
• Cross-examination– Bias in favour of the cross-examiner– Utility counsel has limited freedom to protect you– Good questioners are well prepared– Don’t “play the game” - use your natural advantage– Credibility not easily lost, but also not easily regained– Pay close attention to questions from Board members
Intervenor Review of Electricity Distributor
Rate Applications
July 9, 2012Jay Shepherd
for School Energy Coalition