1 BEFORE THE ARIZONA CORPORATION COMMISSION

2
3COMMISSIONERS
4ROBERT “BOB” BURNS – CHAIRMAN
5BOYD DUNN
6SANDRA D. KENNEDY
7JUSTIN OLSON
8LEA MÁRQUEZ PETERSON
9
10
IN THE MATTER OF THE APPLICATION )
OF TUCSON ELECTRIC POWER )
COMPANY FOR THE ESTABLISHMENT )
OF JUST AND REASONABLE RATES AND )
CHARGES DESIGNED TO REALIZE A ) DOCKET NO. E-01933A-19-0028
REASONABLE RATE OF RETURN ON THE )
FAIR VALUE OF THE PROPERTIES OF )
TUCSON ELECTRIC POWER COMPANY )
DEVOTED TO ITS OPERATIONS )
THROUGHOUT THE STATE OF ARIZONA )
AND FOR RELATED APPROVALS.
______________________________________
11
12
13
14
15 DIRECT TESTIMONY
16
17 OF
18
19 [your name]
20
21 MOCK TESTIMONY ON BEHALF OF
22
23 ECON 574
24
25
26 Spring Semester 2021
1 Table of Contents
2 Page
I. IDENTIFICATION..................................................................................................................1

II. PURPOSE AND SUMMARY............................................................................................... 1

III. [TOPIC 1]................................................................................................................................1

IV. [topic 2].................................................................................................................................... 2

3
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1 I. IDENTIFICATION

2Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS FOR THE RECORD.

3A. My name is XYZ. My business address is in United States only.

4Q. WHERE ARE YOU EMPLOYED?

5A. I am an employee of Tucson Electric Power Company and working in the company for a

6 longer duration by driving myself to achieve organizational goals.

7Q. PLEASE PROVIDE A BRIEF SUMMARY OF YOUR BACKGROUND AS IT IS

8 RELEVANT TO THIS TESTIMONY.

9A. I

10Q. ON WHOSE BEHALF ARE YOU TESTIFYING?

11A. I am testifying on behalf of .

12 II. PURPOSE AND SUMMARY

13Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?

14A. I am testifying on matters in response to Tucson Electric Power Company’s (“Company”

15 or “TEP”) above referenced application under consideration by the Arizona Corporation

16 Commission (“Commission”). Specifically, I will address TEP’s .

17Q. PLEASE SUMMARIZE YOUR RECOMMENDATIONS.

18A. First, I .

19 Second, I recommend .

20 III. RATE ON EQUITY

21Q. HAVE YOU REVIEWED THE COMPANY’S CAPM?

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1A. Yes.

2Q. HOW IS RATE CALCULATED AND WHAT TESTIMONIES ARE

3 CONSIDERED?

4A. The rate was calculated by …

5Q. DOES DOD HAS ANY RECOMMENDATIONS?

6A. The DOD has recommended certain points…

7Q. DO YOU REVIEWED TESTIMONY OF OTHER PARTIES AND DO YOU

8 BELIEVE CAPM IS NECESSARY?

9A. Yes, I have reviewed the testimony of various parties…

10

11 IV. FAIR VALUE RATE BASE

12Q. EXPALIN YOUR COOMPANY’S FVRB ANALYSIS?

13A. The evidence for rate base is presented by evaluating the evidence of various testimonies.

14 The evidence regarding such is presented by RUCO, staff, TEP, Sierra Club and AECC.

15 TEP has used the similar methodology which the company has used in all rate cases and

16 after such evaluation the Reconstruction New Less Depreciation (RCND) valuation by

17 company is noted to be $5,027,927,000.

18 It is also noted that the methodology was not rejected by any other parties. The original

19 cost rate base (OCRB) is used for calculating the RCND. Therefore, each party had

20 different OCRB as each used a different approach for calculating the base rate.

21Q. ARE THERE ANY PROPOSED METHODS FOR YOUR COMPANY?

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1A. Yes, Tucson Electric Power Company proposed a new formula for calculating the rate

2 base at fair valuation. The average of RCND and OCRB is considered for calculating the

3 base rate and such methodology is not suggested by any other party.

4 The contested adjustments variation affects the calculation of FVRB of different parties

5 and such thing is noticed by Tucson Electric Power Company.

6 The RUCO proposed FVRB at $3, 781, 182, staff has proposed the FVRB of $3,855,740;

7 estimation by AECC was $3,586,394 and company has proposed FVRB of $3,867,483.

8 The new jurisdiction rate for Tucson Electric Power Company from the calculations

9 made above is:

OCRB FVRB RCND

$2,703,682 $3,864,127 $5,024,571
10

11 V. RATE DESIGN: INCREASE TO DEMAND CHARGE

12Q. EXPLAIN COMPANY’S DEMAND CHARGE?

13A. The current design which the company followed is proposed by company as no changes

14 were observed in the effective rates of retail. The changes were proposed in the

15 individual charges which are established in the retail rates. The rates can contribute in

16 collecting the requirements of revenue which will be consistent with the CCOSS results.

17 The several parties have argued for the modifications in the rate design of the company

18 however, such basis did not received the support from practical application of cost based

19 analysis and such analysis are considered non equitable.

20 TEP has proposed that the basic service charge must be increased by $2.00 per month for

21 all classes of residential rates. This effect will impact the residential rates of customers on
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1 non-use of time. The change of $12.00 per month from $10.00 per month will be

2 observed in the demand rate option and such is impacting the discount of low income by

3 $3.00 per month.

4 The company is stating that its rate is reasonable for serving the residential customers. If

5 the $2 rate is increased then around 80% of the company fixed cost will be covered by

6 volumetric rates.

7 The support to such rates is extended in some aspects by staff and RUCO as per the

8 company. However, the recommendations by such are lower which was accepted by the

9 CCOSS of the company.

10 The current charges of the company in electric utilities are lower as compared to the other

11 residential BSCs in the state of Arizona. Therefore, it is lowest as such increasing the rate

12 by $2 per month will not show a drastic impact on customer preferences.

13 The testimony by wildfire stated that the increase in rate will not be preferred by

14 customers and to deal with such the company has also introduced the lifetime discounting

15 rate of $3 per month.

16 The basic service charge rate proposed by staff is $14.20; however no changes were

17 made in the rates mentioned for non-residential classes. The staff has supported its rate

18 design stating that it will bring the classes of customers to close parity.

19 The staff has provided an opportunity to company for improving the revenue

20 requirements as well as promoting the gradualism principle for decreasing the burden on

21 the increasing rate.

22 We as a team also state that commission must adopt the suggestions provided by us for

23 the rate design agreement and revenue requirement allocation. The staff also states that
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1 commission must consider several factors such as political, financial conditions, service

2 cost, economic, historical and social.

3 We have also from evaluation suggested that our recommendation will help the company

4 in overcoming the uncertain conditions such as public interest balance, reasonable rates,

5 procedures and rate shocks.

6Q. WHAT ARE COMPANY’S STAFF RECOMMENDATIONS?

7A. The recommendation by staff also shows that the strategy of recommended revenue

8 allocation will set a standard for cross-subsidization which also shows the equitable costs

9 allocation.

10 The recommendation by staff is under the authority needed to be obliged by the

11 commission in its constitution and such recommendations therefore are considered

12 reasonable as it is interclass subsidization.

13 The staff rate design must be approved as it reflects the cost of service which is strict

14 however it is also noticed by the staff that achievement of parity will take time for

15 avoiding the rate shock.

16 The recommendation by RUCO stated that the basic residential rate must not be

17 increased for the class of customer at residential area. The increase is recommended by

18 RUCO in the volumetric charges.

19 RUCO recommendation is revised in the Surrebuttal testimony stating that the basic

20 service charges for the customer class at residential must experience an overall increase

21 but at a limited rate. Therefore, the final recommendation was $13.60 basic charge for the

22 customers at residential class.

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1 The testimony by SWEEP and WRA states that Tucson electric power house request for

2 increasing residential rates must be rejected by commission. New basic service charges

3 which need to be set for the residential customers are $7.23 as per the recommendation of

4 SWEEP and WRA.

5 The reasons for which the TEP’s request for basic service charge is objected are:

6  They reject the usage of MSM by the company as it is believed by them that this

7 included in calculating the basic service charge does not belong to customers and

8 need to be borne by organisation.

9  The next suggestion is to remove the unnecessary improper costs as such will

10 reduce the BSC by half rate as compared to the rate proposed by TEP.

11  It is also argued that higher rates will affect the customers belonging to lower

12 income segment as such rate includes various unnecessary costs which affects the

13 customers consumption pattern.

14  The next argument presented stated that the rate design cost is not supporting the

15 other policies of state which are formed for promoting the conservation and

16 efficiency of the energy.

17 The arguments on the basis of above recommendations are provided by TEP for making

18 their testimony and suggestion more reliable.

19 The first suggestion that was considered baseless is of SWEEP and WRA in which they

20 used the basic customer method for calculating the basic service charge at $7.23. This

21 rate is considered inconsistent with the methodology which the company set in the cases

22 of rate at previous times.

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1 However, the company has also agreed to the fact that the recommendation provided by

2 them is of energy proficient and conservation.

3Q. STATE YOUR COMPANY’S PRIMARY OBJECTIVES FOR RATE DESIGN?

4A. The primary objective of rate designing is cost of service there are some other objectives

5 as well such as:

6  Conservation encouragement

7  Affordable rates

8  Providing the control over the bills to customers

9  Promoting the use of energy in an efficient manner

10  Recovery of revenue

11  Gradualism

12 The high monthly minimum charges extend support to recovery of revenue and

13 objectives of rate designing. It can also result in subsidization in the customers within

14 similar customer class.

15 The placement of higher amounts in the system cost which is minimum is considered

16 more favorable in volumetric charges as compared to basic service charge.

17 The company has also stated that its basic charge is comparatively lower than the

18 competitors which are offering the electric utilities. However, the reasoning behind the

19 charges are unknown sometimes as such can result from the settlement as well.

20 The table represents the changes in current volumetric charges and changes in such which

21 are proposed as per the base, winter and summer:

CURENT TEP STAFF RUCO

Summer First 500 kwh $0.066 l 52 $0.076807 $0.073282 $0.070784
Summer 501- 1000 kwh $0.086652 $0.094223 $0.089899 $0.086835
Summer >l,000 kwh $0.081 152 $0. l 00608 $0.095991 $0.092720
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Winter First 500 kwh $0.066152 $0.076807 $0.073282 $0.070784
Winter 501 - 1,000 kwh $0.081152 $0.094223 $0.089899 $0.086835
Winter >I,000 kwh $0.086652 $0.100608 $0.095991 $0.092720
Base Power Summer kwh $0.03586 l $0.032026 $0.032026 $0.035861
Base Power Winter kwh $0.0325 l5 $0.029038 $0.029038 $0.032515
PPFAC Charge kwh $0.001979 $0.000000 $0.000000 $0.000000
1

2Q. ARE THERE ANY OTHER SUGGESTED RATES FOR DEMAND?

3A. Yes, we also suggested rates as per demand and such can be observed through the

4 pictures presented below:

5Q. DOES THIS CONCLUDE YOUR TESTIMONY?

6A. Yes, it is. Thank you.