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Home My WebLink AboutPUD2023-000086_175_Statement_of_Position_1724091762247-2024.08.19_-_AARP_Statement_of_Position.pdfAARP Statement of Position Cause No. PUD 2023-00086 1 August 19, 2024 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA THE APPLICATION OF PUBLIC SERVICE COMPANY OF OKLAHOMA, AN OKLAHOMA CORPORATION, FOR AN ADJUSTMENT IN ITS RATES AND CHARGES AND THE ELECTRIC SERVICE RULES, REGULATIONS AND CONDITIONS FOR SERVICE FOR ELECTRIC SERVICE IN THE STATE OF OKLAHOMA AND TO APPROVE VARIOUS COST RECOVERY MECHANISMS ) ) ) ) ) ) ) ) ) CAUSE NO. PUD 2023-000086 AARP’S STATEMENT OF POSITION COMES NOW AARP, by and through its undersigned counsel, and hereby provides its Statement of Position describing certain positions that AARP is taking in this proceeding. AARP reserves the right to address any other issues raised by other parties in this docket. Along with this Statement of Position, AARP filed Responsive Testimony of Patrick Sullivan on August 12, 2024, on certain cost of service and rate design issues. AARP is the nation’s largest nonprofit, nonpartisan organization dedicated to empowering people 50 and older to choose how they live as they age. With a nationwide presence, AARP strengthens communities and advocates for what matters most to families: health security, financial stability, and personal fulfillment. AARP has approximately 400,000 members residing in Oklahoma representing all segments of the socio-economic scale. A substantial percentage of AARP’s members live on fixed or limited incomes and depend on reliable low-cost electric service for economic security, health, and personal welfare. In addition to the pre-filed testimony of Mr. Patrick Sullivan on certain cost of service and rate design matters, AARP supports PSO’s proposals for allocating transmission costs and wind production related costs within its Cost-of-Service Study. AARP further supports the Commission CASE PUD 2023-000086 ENTRY NO. 175 FILED IN OCC COURT CLERK'S OFFICE ON 08/19/2024 - PAGE 1 OF 7 AARP Statement of Position Cause No. PUD 2023-00086 2 August 19, 2024 ordering PSO to file a Cost-of-Service study in its next general rate case using the Probability of Dispatch method to allocate production costs. I. Return on Equity. PSO requests to increase its return on equity (ROE) from 9.30% to a staggering 10.8%, resulting in more costs to customers. Recommendations in this case from PUD and OIEC are that 9.30% and 9.00%, respectively, represent a fair and reasonable return. The Attorney General (“AG”) proposes an ROE of 9.50%. No expert in this matter comes close to calculating an ROE of 10.8%, as requested by the Company. AARP supports the appropriate ROE will be found in the range of 9.00% to 9.30%. II. Capital Structure. PSO’s current capital structure has 52.00% as equity and 48.00% as debt. PSO is requesting to utilize 51.12% of its capital structure as equity and 48.88% as debt, which will create additional costs to customers. Recommended equity layers in this case range from PUD, 51.12%, and OIEC, 43.50%, while the AG proposes an equity layer of 50%. AARP supports the use of a 50/50 equity/debt capital structure for purposes of calculating PSO’s rate of return as most reasonable based on the expert opinions provided in this case. III. Rate Base Adjustments Despite not providing sufficient evidence that certain projects were cost-effective, PSO nevertheless seeks to recover from its rate payers approximately $62 million of capital projects by including such projects into rate base in this case. PUD witness Mr. Stephens references that the United States Department of Energy recommends cost-effectiveness tests as defined by U.S. DOE, and augmented by the California PUC, as a reasonable and logical assurance for the Commission and customers that capital expenditures provide sufficient value for customers when compared to CASE PUD 2023-000086 ENTRY NO. 175 FILED IN OCC COURT CLERK'S OFFICE ON 08/19/2024 - PAGE 2 OF 7 AARP Statement of Position Cause No. PUD 2023-00086 3 August 19, 2024 their costs. AARP agrees with the findings of PUD and recommends the Commission disallow the projects listed on pages 39 and 40 of PUD witness Mr. Stephens’ responsive testimony because PSO’s customers are not securing benefits from these capital expenditures. IV. Tracker Review and Denial of New Vegetation Management Deferral Accounting Treatment. As the Commission is aware, AARP generally opposes the use of riders and recovery of costs outside of rates. The Commission’s criteria in finding potential need for rider recovery is that riders should only be considered if they are used for costs that are (1) outside of the utility's control, (2) substantial, and (3) unpredictable or volatile. Riders also result in additional undesirable consequences such as removing utility incentives to control costs and improperly shifting utility business risks away from the company (who can identify and address such risks) and onto ratepayers. Thus, riders should only be approved by regulators in rare circumstances to address substantial, volatile, and uncontrollable costs that, if not addressed outside of a base rate case, could harm a utility’s financial health. Because of the continued expansive use of riders, AARP requests the Commission fully review all riders currently in place. With the foregoing in mind, AARP supports OIEC, the AG, and PUD’s recommendations that the Commission deny PSO’s request for a Vegetation Management deferral accounting treatment in this case. AARP additionally requests the Commission consider OIEC’s recommendations to terminate PSO’s Grid Enhancement and Reliability Rider (“GEAR”) on the effect ive date of new rates in this case. AARP supports OIEC’s alternative recommendation that if the GEAR remains in the public interest, that the Commission order an annual cap on the costs able to be recovered at $5 million per annum, exclude recovery of O&M costs via GEAR, and set a specific termination date. CASE PUD 2023-000086 ENTRY NO. 175 FILED IN OCC COURT CLERK'S OFFICE ON 08/19/2024 - PAGE 3 OF 7 AARP Statement of Position Cause No. PUD 2023-00086 4 August 19, 2024 V. The Generation Cost Recovery Rider (“GCR”). In this case, PSO has proposed the GCR to recover the return on, and of, capital investments and O&M expenses associated with SPP requirements for accrediting conventional generation capacity and the delayed retirements of Southwestern Units 1 and 2, and Weleetaka Units 4 and 5. PUD recommends the Commission deny the requested GCR for three reasons: First, the costs proposed for recovery via the GCR, are not recurring, volatile, or unpredictable as reflected in PSO’s own exhibits in this case. Second, many of the project costs proposed for recovery via the GCR are for projects which have not been completed, placed in service, used and useful or benefiting PSO’s customers. Finally, the Performance Based Accreditation (“PBA”) proposed by the Southwest Power Pool (“SPP”) has yet to be approved by the Federal Energy Regulatory Commission. Similarly, OIEC recommends the Commission deny PSO’s request to implement the GCR and the associated PBA regulatory asset accounting treatment. OIEC noted that $107.6 million of costs would be recoverable through the GCR over the next five years which could result in additional upward pressure on customers’ bills over that time period. AARP agrees with the recommendation of PUD - the Commission should deny PSO’s request to implement the GCR. Additionally, AARP supports OIEC, PUD, and the AG’s recommendation to deny PSO’s requested PBA regulatory asset accounting treatment. VI. Incentive Compensation. PSO again seeks 100% recovery of its short-term incentive compensation expenses from ratepayers. Similar to many other jurisdictions, the Commission treats the portions of short-term incentive compensation related to financial performance of the company (normally in the form of increased earnings) as a below-the-line expense that is not included in formulating rates. Instead, such expenses are recovered from shareholders through the benefit of increased share CASE PUD 2023-000086 ENTRY NO. 175 FILED IN OCC COURT CLERK'S OFFICE ON 08/19/2024 - PAGE 4 OF 7 AARP Statement of Position Cause No. PUD 2023-00086 5 August 19, 2024 price/earnings required to payout the incentives. To reflect this ratemaking treatment, this Commission historically allows recovery of 50% of short-term incentives and, as there is no other change in circumstance other than the request for recovery from ratepayers, s tandard regulatory treatment should continue. Finally, PSO requests to recover expenses associated with its Supplemental Executive Retirement Plan (“SERP”). SERP is an added form of incentive, or discretionary, compensation plan for employees of PSO earning at the higher end of the wage ranges. Incentive compensation is discretionary (may or may not be paid out in any given year); a portion is tied to financial performance which directly benefits shareholders (not ratepayers) through increased share prices; the company is not prevented nor is it disadvantaged by this standard below-the-line treatment, as other utilities receive similar regulatory treatment. Although AARP submits that rate payers should not bear any burden associated with incentive compensation, AARP supports the standard regulatory treatment that excludes discretionary incentives related to shareholder earnings, which are also supported in the testimonies of the AG, OIEC and PUD. Specifically, such treatment disallows recovery of 50% of pro-forma short-term incentive compensation, 100% of pro-forma long-term incentive compensation, and 100% of SERP related contribution expenses. VII. SPP Transmission Cost Tariff (“SPPTC”) Modifications and SPP Fees and Expenses. PSO requests to expand the costs and expenses to be collected in the SPPTC to all SPP fees and expenses in SPP Schedules 1A, 9, 11, and 12. PUD recommends that the Commission not approve any changes to the SPP fees and expenses collected via the SPPTC and that the amount of fees and expenses collected via the SPPTC should be consistent with those approved in Case CASE PUD 2023-000086 ENTRY NO. 175 FILED IN OCC COURT CLERK'S OFFICE ON 08/19/2024 - PAGE 5 OF 7 AARP Statement of Position Cause No. PUD 2023-00086 6 August 19, 2024 No. PUD 2022-0093, Final Order 738226. Similarly, OIEC recommends the SPPTC remain unchanged from the approval in Case No. 2022-0093. OIEC recommends PSO’s requested affiliate transmission charges, specifically allowed Schedule 9 affiliate charges, should be adjusted to reflect only the actual SPP Schedule 9 affiliate charges billed to PSO for transmission service for the twelve-month period ending February 29, 2024, including the six-month update. OIEC’s recommendation reduces PSO’s requested SPP affiliate Schedule 9 transmission charges by approximately $41 million. AARP supports keeping PSO’s SPPTC as it was approved in Case No. 2022-0093 by denying PSO’s request to expand those charges collected via the SPPTC. AARP recommends the Commission utilize OIEC’s proposed adjustments to reduce PSO’s affiliate Schedule 9 transmission charges by approximately $41 million based on actual, updated expense amounts. VIII. Additional Revenue Requirement Disallowances. AARP supports the AG and OIEC’s positions recommending revenue requirement disallowances of the following: • Dues and Memberships totaling $772,721; • Directors and Officers Liability Insurance totaling $121,640; • Investor Relations Expenses totaling $48,658. AARP reserves the right to address issues raised by other parties in this matter. Respectfully submitted, ________________________________ Adam J. Singer, OBA No. 33272 Derryberry & Naifeh, LLP 4800 North Lincoln Boulevard Oklahoma City, OK 73105 (405) 528-6569 asinger@derryberrylaw.com Attorney for AARP CASE PUD 2023-000086 ENTRY NO. 175 FILED IN OCC COURT CLERK'S OFFICE ON 08/19/2024 - PAGE 6 OF 7 AARP Statement of Position Cause No. PUD 2023-00086 7 August 19, 2024 CERTIFICATE OF SERVICE I hereby certify that on the 19th day of August, 2024 a true and correct copy of the above and foregoing was electronically served via the Electronic Case Filing System to those on the Official Electronic Case Filing Service List, to include the following persons: _____________________________ Adam J. Singer Mark Argenbright Director, Public Utility Division OKLAHOMA CORP. COMM’N Jim Thorpe Building 2101 N. Lincoln. Blvd. Oklahoma City, OK 73105 pudenergy@occ.ok.gov Natasha Scott Michael Velez Mike S. Ryan Justin Cullen E.J. Thomas OKLAHOMA CORP. COMM’N Jim Thorpe Building 2101 N. Lincoln. Blvd. Oklahoma City, OK 73105 natasha.scott@occ.ok.gov michael.velez@occ.ok.gov michael.ryan@occ.ok.gov justin.cullen@occ.ok.gov ej.thomas@occ.ok.gov Oklahoma Corporation Commission A. Chase Snodgrass Thomas Grossnicklaus K. Christine Chevis Ashley N. Youngblood 313 NE 21st Street Oklahoma City, OK 73105 Chase.Snodgrass@oag.ok.gov Thomas.grossnicklaus@oag.ok.gov Christine.Chevis@oag.ok.gov Ashley.youngblood@oag.ok.gov Utility.regulation@oag.ok.gov Oklahoma Attorney General’s Office Kenneth Tillotson Thompson Tillotson, PLLC PO Box 54632 Oklahoma City, OK 73154 kenneth@ttfirm.com Public Service Company of Oklahoma Jack Fite 9520 N. May Ave., Suite 211 Oklahoma City, OK 73120 jfite@wcgflaw.com Public Service Company of Oklahoma Lauren Willingham 9434 Cedar Lake Ave. Oklahoma City, OK 73114 lwillingham@aep.com American Electric Power Thomas Schroedter Hall, Estill, Hardwick, Gable, Golden & Nelson, PC 521 East 2nd Street, Suite 1200 Tulsa, OK 74120 tschroedter@hallestill.com kwilliams@hallestill.com Oklahoma Industrial Energy Consumers J. David Jacobson JACOBSON & LAASCH 212 East Second Street Edmond, OK 73034 jdj8788@aol.com Petroleum Alliance Rick D. Chamberlain P.O. Box 21866 Oklahoma City, OK 73156 Rick@chamberlainlawoffices.com Attorney for Walmart, Inc. Kayla D. Dupler OFFICE OF THE STAFF JUDGE ADVOCATE Building 463 (Room 201) Ft. Sill, OK 73503 kayla.d.dupler.civ@army.mil CASE PUD 2023-000086 ENTRY NO. 175 FILED IN OCC COURT CLERK'S OFFICE ON 08/19/2024 - PAGE 7 OF 7