BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION

Transcription

1 BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION IN THE MATTER OF THE APPLICATION ) OF SOUTHWESTERN ELECTRIC POWER ) COMPANY FOR APPROVAL OF PROPOSED ) REVISIONS TO THE ENERGY COST ) RECOVERY RIDER TO RECOVER ) ENVIRONMENTAL CHEMICALS ) OF ON BEHALF OF SOUTHWESTERN ELECTRIC POWER COMPANY FEBRUARY 19, 2014

2 TESTIMONY INDEX SUBJECT PAGE I. INTRODUCTION...3 II. PURPOSE OF TESTIMONY...4 III. PROPOSED REVISIONS TO RIDER ECR...5 IV. CONCLUSION...7 EXHIBITS EXHIBIT TJK-1 EXHIBIT TJK-2 Proposed Revision to Rider ECR Forecasted Impact to Rider ECR Page 2 of 8

3 I. INTRODUCTION Q. PLEASE STATE YOUR NAME, POSITION, AND BUSINESS ADDRESS. A. My name is Teresa J. Kraske, and I am employed as a Regulatory Accounting Consultant for American Electric Power Service Corporation (AEPSC), a subsidiary of American Electric Power Company, Inc. (AEP). My business address is 212 East Sixth Street, Tulsa, Oklahoma Q. WHAT ARE YOUR PRINCIPAL AREAS OF RESPONSIBILITY? A. I am responsible for the preparation and coordination of accounting-related schedules and other accounting information for regulatory filings made by the four domestic electric operating companies of the western portion of AEP: Texas Central Company (AEP TCC), Texas North Company (AEP TNC), Southwestern Electric Power Company (SWEPCO) and Public Service Company of Oklahoma (PSO). Q. PLEASE DESCRIBE YOUR EDUCATIONAL AND PROFESSIONAL BACKGROUND. A. I received my Bachelor of Business Administration, Accounting Major, from McMurry University in Abilene, Texas in May In August 1997, I passed the Certified Public Accountant (CPA) Examination. I am a licensed CPA in the State of Oklahoma. I have been employed by subsidiaries of AEP or its predecessor, Central and South West Corporation (CSW) since I was employed by West Texas Utilities (WTU) from 1987 to 1992 as an Accounts Payable clerk. In 1992, while attending McMurry University I was promoted to Accountant in the Accounts Payable Department. In 1994, I accepted a position as Supervisor of Accounts Payable for Page 3 of 8

4 1 Central and South West Services, Inc. (CSWS). In 1997, I transferred to the Financial Systems Support department as a Senior Accounting Analyst. In 2000, I was promoted to Accounting Consultant. I transferred to my current position as Accounting Consultant in Regulatory Accounting Support in Q. HAVE YOU PREVIOUSLY FILED TESTIMONY? A. No, I have not. 7 8 II. PURPOSE OF TESTIMONY Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS FILING? A. In this application, SWEPCO is seeking approval of amendments to its Energy Cost Recovery Rider (Rider ECR) to allow recovery of the cost of chemicals consumed by environmental controls installed, or to be installed, on various SWEPCO generating units. These controls are required for achieving compliance with environmental regulations adopted by the United States Environmental Protection Agency (EPA) pursuant to the federal Clean Air Act. The purpose of my testimony is to present proposed revisions to SWEPCO s Rider ECR to allow recovery of the cost of chemicals consumed through the operation of the environmental control equipment. I also present the forecasted impact of including the costs of chemicals consumed through the operation of environmental control equipment in the Rider ECR. SWEPCO witness Paul Franklin describes the environmental control equipment required to comply with pending EPA regulations, and the chemicals SWEPCO will be using, including a forecast of the estimated cost of such chemicals. Page 4 of 8

5 1 III. PROPOSED REVISIONS TO RIDER ECR Q. WHAT CHEMICAL COSTS DOES SWEPCO PROPOSE TO RECOVER THROUGH RIDER ECR? A. SWEPCO is proposing to recover the cost of activated carbon, calcium bromide, hydrated lime and urea Q WHY IS IT APPROPRIATE TO RECOVER THE COST OF CHEMICALS CONSUMED BY ENVIROMENTAL CONTROL EQUIPMENT THROUGH RIDER ECR? A. As a result of regulations adopted by the EPA pursuant to the federal Clean Air Act, SWEPCO must install environmental control equipment on all of its coal and lignite fired generating units. The cost of the chemicals is therefore a reasonable and necessary cost that SWEPCO must incur for the continued operation of its coal and lignite fired generating fleet. Further, although Mr. Franklin has provided an estimate of the quantities and cost of the chemicals that must be consumed, these estimates will vary depending on the amount of energy generated by the coal and lignite fired units and the market price of the chemicals. Thus, the chemical costs are beyond SWEPCO s control and will vary directly with generation. Q. WHY IS RECOVERY OF THESE COSTS THROUGH RIDER ECR MORE APPROPRIATE THAN RECOVERY THROUGH BASE RATES? A. As described above, the uncertainty regarding the cost of the chemicals and the amounts that will be needed makes the Rider ECR a more appropriate mechanism for 22 cost recovery. Rider ECR resolves this uncertainty through an annual true up and Page 5 of 8

6 adjustment to the fuel factors. Q. DOES SWEPCO ALREADY RECOVER SIMILAR COSTS THROUGH RIDER ECR? A. Yes, it does. The current Rider ECR provides SWEPCO with recovery of the cost of limestone consumed at the Company s Pirkey and Dolet Hills power plants. In addition, the current Rider ECR permits the recovery of sulfur dioxide (SO 2 ) and nitrogen oxide (NOx) emissions allowance costs, and credits customers with revenues associated with sales of SO 2 and NOx allowances. Q. IS THERE OTHER COMMISSION PRECEDENT FOR RECOVERY OF THE COST OF SUCH CHEMICALS THROUGH AN ENERGY COST RECOVERY RIDER? A. Yes. In Order No. 21, Docket No U, the Commission authorized Entergy Arkansas, Inc. (Entergy) to recover the cost of activated carbon and calcium bromide 14 through that Company s Rider ECR. Those chemicals will be consumed by environmental control equipment Entergy will be installing to comply with the EPA s Mercury and Air Toxics Standards. Q. WHAT ADJUSTMENTS ARE YOU PROPOSING TO THE RIDER ECR? A. My proposed changes are provided in the redlined markup of the existing ECR Rider provided in EXHIBIT TJK-1. The Rider ECR, as marked up, is intended to recover costs related to these required additional pollution control chemicals. Q. HAVE YOU DEVELOPED A FORECASTED IMPACT THIS CHANGE WOULD HAVE ON THE RIDER ECR RATE? Page 6 of 8

7 A. Yes, I have. As shown in Confidential EXHIBIT TJK-2, SWEPCO has presented a forecasted comparison calculated for the Rider ECR for the time period April 2014 through March In the forecast shown, after including Arkansas s portion of SWEPCO s share of the environmental control chemicals, the ECR factor is expected to increase 0.22% for this time frame. 6 7 IV. CONCLUSION Q. PLEASE SUMMARIZE YOUR TESTIMONY. A. SWEPCO is seeking approval to amend its Energy Cost Recovery Rider (Rider ECR) to allow recovery of the cost of activated carbon, calcium bromide, hydrated lime and urea consumed by environmental controls installed, or to be installed, on various SWEPCO generating units. These costs are reasonable and necessary. The costs will vary depending on the amount of energy generated by the coal and lignite fired units and the market price. It is therefore appropriate to seek recovery through Rider ECR since the costs are beyond SWEPCO s control and will vary directly with generation. Q. DOES THIS CONCLUDE YOUR TESTIMONY? A. Yes it does. Page 7 of 8

8 CERTIFICATE OF SERVICE I, Stephen K. Cuffman, attorney for SWEPCO, state that I have on this 19th day of February, 2014, electronically served a true and correct copy of the above and foregoing testimony to the Counsel for the General Staff of the Arkansas Public Service Commission. /s/ Stephen K. Cuffman Stephen K. Cuffman Page 8 of 8

9 Docket No TF Exhibit TJK-1 APSC FILED Time: 2/20/2014 8:56:45 AM: Recvd 2/19/2014 4:44:32 PM: Docket tf-Doc. 9 ARKANSAS PUBLIC SERVICE COMMISSION Revision 43 Sheet No: R-27.5 Sheet 5 of 14 Replacing: Revision 32 Sheet No: R-27.5 Sheet 5 of 14 Name of Company: SOUTHWESTERN ELECTRIC POWER COMPANY CT CT Kind of Service: Electric Class of Service: All Part III. Rate Schedule No. 27 Title: ENERGY COST RECOVERY RIDER (RIDER ECR) PSC File Mark Only ATTACHMENT A (continued) Where Fe j = FUEL EXPENSE CHARGED TO ACCOUNT 501 LESS ACCOUNT 501 COSTS THAT FIT THE DEFINITION OF FERC ACCOUNT 152, LESS FUEL COST ASSOCIATED WITH SALES TRANSACTIONS IN MONTH j OF THE HISTORICAL ENERGY COST PERIOD, PLUS LIMESTONE, ACTIVATED CARBON, CALCIUM BROMIDE, HYDRATED LIME, AND UREA EXPENSE CHARGED TO ACCOUNT 502 PLUS SO 2 AND NO X EMISSION COSTS CHARGED TO ACCOUNT 509 (8) AT Pe j = PURCHASED ENERGY EXPENSE, CHARGED TO ACCOUNTS 555 (10), LESS FUEL COST ASSOCIATED WITH SALES TRANSACTIONS, IN MONTH j OF THE HISTORICAL ENERGY COST PERIOD, LESS THE CLECO PSSA PURCHASED ENERGY EXPENSE MST j = MARGINS FROM SALES TRANSACTIONS MADE TO AFFILIATED AND NON-AFFILIATED COMPANIES RECORDED IN MONTH j OF THE HISTORICAL ENERGY COST PERIOD (2) LA VEMCO j = INCREMENTAL COST OF FUEL REQUIRED TO SERVE THE FORMER VEMCO CUSTOMERS THAT IS NOT BEING SUPPLIED BY THE CLECO PSSA IN MONTH j OF THE HISTORICAL ENERGY COST PERIOD AR ADJ j = ADJUSTMENT FOR INCREMENTAL COST OF SUPPLYING ENERGY WHEN THE TURK PLANT DOES NOT SERVE ARKANSAS LOAD (9) ALLOWREV j = REVENUES ASSOCIATED WITH SALES OF SO 2 AND NO X EMISSIONS ALLOWANCES RECORDED IN ACCOUNT 4118 AND REVENUES RECEIVED FROM THE SALE OF RENEWABLE ENERGY CREDITS, SWEPCO - Rider ECR Sheet to Include Consumables Redlined.doc

10 ARKANSAS PUBLIC SERVICE COMMISSION APSC FILED Time: 2/20/2014 8:56:45 AM: Recvd 2/19/2014 4:44:32 PM: Docket tf-Doc. 9 Revision 4 Sheet No: R-27.5 Sheet 5 of 14 Replacing: Revision 3 Sheet No: R-27.5 Sheet 5 of 14 Name of Company: SOUTHWESTERN ELECTRIC POWER COMPANY CT CT Kind of Service: Electric Class of Service: All Part III. Rate Schedule No. 27 Title: ENERGY COST RECOVERY RIDER (RIDER ECR) PSC File Mark Only ATTACHMENT A (continued) Where Fe j = FUEL EXPENSE CHARGED TO ACCOUNT 501 LESS ACCOUNT 501 COSTS THAT FIT THE DEFINITION OF FERC ACCOUNT 152, LESS FUEL COST ASSOCIATED WITH SALES TRANSACTIONS IN MONTH j OF THE HISTORICAL ENERGY COST PERIOD, PLUS LIMESTONE, ACTIVATED CARBON, CALCIUM BROMIDE, HYDRATED LIME, AND UREA EXPENSE CHARGED TO ACCOUNT 502 PLUS SO 2 AND NO X EMISSION COSTS CHARGED TO ACCOUNT 509 (8) AT Pe j = PURCHASED ENERGY EXPENSE, CHARGED TO ACCOUNTS 555 (10), LESS FUEL COST ASSOCIATED WITH SALES TRANSACTIONS, IN MONTH j OF THE HISTORICAL ENERGY COST PERIOD, LESS THE CLECO PSSA PURCHASED ENERGY EXPENSE MST j = MARGINS FROM SALES TRANSACTIONS MADE TO AFFILIATED AND NON-AFFILIATED COMPANIES RECORDED IN MONTH j OF THE HISTORICAL ENERGY COST PERIOD (2) LA VEMCO j = INCREMENTAL COST OF FUEL REQUIRED TO SERVE THE FORMER VEMCO CUSTOMERS THAT IS NOT BEING SUPPLIED BY THE CLECO PSSA IN MONTH j OF THE HISTORICAL ENERGY COST PERIOD AR ADJ j = ADJUSTMENT FOR INCREMENTAL COST OF SUPPLYING ENERGY WHEN THE TURK PLANT DOES NOT SERVE ARKANSAS LOAD (9) ALLOWREV j = REVENUES ASSOCIATED WITH SALES OF SO 2 AND NO X EMISSIONS ALLOWANCES RECORDED IN ACCOUNT 4118 AND REVENUES RECEIVED FROM THE SALE OF RENEWABLE ENERGY CREDITS, SWEPCO - Rider ECR Sheet to Include Consumables.doc

11 BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION IN THE MATTER OF THE APPLICATION ) OF SOUTHWESTERN ELECTRIC POWER ) COMPANY FOR APPROVAL OF PROPOSED ) REVISIONS TO THE ENERGY COST ) RECOVERY RIDER TO RECOVER ) ENVIRONMENTAL CHEMICALS ) CONFIDENTIAL EXHIBIT TJK-2s Redacted Pursuant to Interim Protective Order No. 1, Docket No TF