July 16,2018. Michael Granowski, Director Navigant Consulting 175 Jackson Blvd., Suite 500 Chicago, IL 60604

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1 201 Brooks Street, P.O. Box 812 Charleston, West Virginia July 16,2018 Christopher L. Callas, Esq. John Philip Melick, Esq. James Robert Alsop, Esq. Counsel, FirstEnergy Jackson Kelly, PLLC PO Box 553 Charleston, WV Jacqueline Roberts, Director Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV Susan J. Riggs, Esq. Derrick P. Williamson, Esq. Counsel, West Virginia Energy Users Group Spilman Thomas & Battle PO Box 273 Charleston, WV Edward G. Kennedy, Esq. Gerald Deaver, Esq. FirstEnergy 800 Cabin Hill Drive Greensburg, PA Leonard Knee, Esq. Counsel, Longview Power, LLC Bowles Rice McDavid Graff & Love LLP PO Box 1386 Charleston, WV Vincent Trivelli, Esq. Counsel, The West Virginia State Building and Construction Trades Council, AFL-CIO 178 Chancery Row Morgantown, WV E. Dandridge McDonald, Esq. Steptoe & Johnson Counsel, American Bituminous Power Partners, L.P. and Monongalia County General Hospital Company PO Box 1588 Charleston, WV I Michael Granowski, Director Navigant Consulting 175 Jackson Blvd., Suite 500 Chicago, IL Stephen J. Baron Consultant, WV Energy Users Group J. Kennedy & Associates, Inc. 570 Colonial Park Drive, Ste 305 Rosewell, GA Jacqueline A. Hallinan, Esq Counsel, WV Community Action Partnership Hallinan Law Offices, PLLC 100 Capitol Street, Suite 804 Charleston, WV Scott H. Stauss, Esq. Elaine Lippman, Esq. Counsel, Utility Workers of America, AFL-CIO and UWUA System Local 102 Spiegel & McDiarmid 1333 New Hampshire Avenue, NW Washington, DC Kathryn Reed Bayless, Esq. Counsel, Utility Workers Union of America Bayless Law Firm, PLLC 1607 West Main Street Princeton, WV Michael L. Kurtz, Esq. Kurt J. Boehm, Esq. Counsel, Kroger Company 36 East Seventh Street, Suite Cincinnati, OH 45202

2 Case No E-CN; et.al. July 16,201 8 Page 2 Timothy Hairston Thomas N. Hanna, Esq. International Brotherhood of Electrical Workers, Counsel, Kroger Company Local 2357 PO Box 3967 PO Box 346 Charleston, WV Dellslow, WV RE: Case No E-CN both dba Allegheny Power Ladies and Gentlemen: Case No E-PC both dba Allegheny Power Case No E-T both dba Allegheny Power Pursuant to Rule 2 of the Commission s Rules of Practice and Procedure, we are enclosing a copy of the Staff memorandum in these matters. If you wish to respond to the enclosed Staff memorandum, you may do so in writing, within 10 days, unless directed otherwise, of this date. Your failure to respond in writing to the utility s answer, Staffs recommendations, or other documents may result in a decision in your case based on your original filing and the other documents in the case file, without further hearing or notice. If you have provided an address you will automatically receive notifications as documents are filed in this proceeding. The notifications allow recipients to view a document within an hour from the time the filing is processed. If you have not provided your address, please send an to caseinfo@psc.state.wv.us and state the case number in the subject field. General reminder - if you submit any additional documents - in addition to filing an original and 12 copies of all documents with the Commission, you are required to mail a copy to all other parties of record. Please note - the Public Service Commission does not accept electronic filings. Sincerely, IF/tg Enc. - Memo Executive Secretary Division

3 JULY 2018 JOINT STAFF MEMORANDUM ON PROPOSED ADJUSTMENT TO ENVIRONMENTAL CONTROL CHARGES TO: INGRID FERRELL, DATE: July 16,2018 Executive Secretary FROM: WENDY BRASWELL, Staff Attorney RE: CASE NO E-CN (Closed entry) MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY, each doing business as ALLEGHENY POWER, CASE NO E-PC MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY, each doing business as ALLEGHENY POWER, and CASE NO E-T MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY, each doing business as ALLEGHENY POWER (Closed entry) (Closed entry) Commission Staff (Staff) reviewed the Company s proposed semi-annual routine true-up filing and does not object to the proposed rates going into effect. Background On June 29, 201 8, Monongahela Power Company (Mon Power) and the Potomac Edison Company (PE), (collectively Companies) filed a proposed adjustment to the Environmental Control Charges (ECC) contained in their tariffs, to become effective July 15, 201 8, pursuant to W. Va. Code e, and orders of the Commission entered April 7, 2006, June 13, 2006, and January 17, The Companies also filed Tariff Revisions and Workpapers supporting the Environmental Control Charge Normalization Surcharge. The proposed rates will result in an increase in the ECC but the application of the Environmental Control Normalization Surcharge (Normalization Surcharge) will result in no change to customers. The Commission established the ECC and routine true-up adjustments in Cases No E-CN and No E-PC, through a Financing Order entered April 7, 2006, and further orders entered June 13, 2006, and January 17, The Financing Order established a requirement for the Companies to file Routine True-Up Letters at least 15 days before the end of each semi-annual bond payment period to adjust their

4 Case No E-CN, Case No E-PC, and Case No E-T July 16,2018 Page 2 respective ECC. (Financing Order, pp ) In accordance with the Financing Order, the Commission maintains discretion to adjust these charges to correct for any mathematical error, but the ECC will otherwise become effective within fifteen days of filing. Subsequent to the establishment of the ECC mechanism, the Environmental Control Normalization Surcharge was first implemented on January 15, 2008, through Case No E-T. The purpose of Normalization Surcharge is to continue rate equality for customers in each tariff rate class of Mon Power and customers in the corresponding tariff rate class of PE, and also to smooth out rate variations for each tariff schedule. The Normalization Surcharges become effective annually on January 15 of each calendar year. Any subsequent monthly adjustment to the ECC during a calendar year is offset by an adjustment to the annual Normalization Surcharge, resulting in a combined ECC-Normalization Surcharge for both utilities customers that are normalized throughout each calendar year following the annual true up on January 15th. Staff Recommendations Staff does not object to implementation of the Company s proposed charges. The proposed rates will result in an overall increase in the ECC, but the application of the Normalization Surcharge will offset the increase in the ECC rates, resulting in no net change to customer bills. Tara Gilkey, Utilities Analyst in the Commission s Utilities Division, submitted the attached memorandum stating that Staff does not object to the proposed rates going into effect. If Staff should identify a mathematical error resulting in miscalculation of the ECC charges, it will notify the Commission as anticipated by the Financing Order. Legal Staff agrees with Financial Staff. Given that there will be no impact to customer bills as a result of this filing, Staff does not believe the Companies should be required to publish notice. WBlcs Attachment H:\wbraswell\WORD DOX BEG I.01.12\ , OS-0750, (MonPr PE routine true-up)routine true-up memo JULY 2018.docx

5 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA UTILITIES DIVISION MEMORANDUM FROM: Tara Gilkey, Utilities Analyst I1 ~r;, ' Utilities Division DATE: July 13,2018 SUBJECT: CASE NOS E-CN E-PC E-T each doing business as Allegheny Power Application for a certificate of Convenience and Necessity for construction of emission control facilities at the Ft. Martin Generating Station in Monongalia County, West Virginia, Petition for consent and approval for financing and affiliated agreements which complement the certificate application. Tariff filing, by Consumer Advocate Division, for the Commission to establish an Environmental Control Charge normalization surcharge as part of the Expanded Net Energy Charge rates for both Monongahela Power Company and The Potomac Edison Company, both dba Allegheny Power. On June 29,2018, Monongahela Power Company and The Potomac Edison Company (Companies) proposed adjustments to their currently effective Environmental Control Charges (ECC) to be effective July 15, The ECC are in connection with Environmental Control Bonds issued in 2007 and Also on June 29, 2018, the Companies proposed revisions to their currently effective Environmental Control Normalization Surcharges also to become effective July 15, The current ECC and Normalization Surcharges became effective on January 15, The ECC was first charged in April The 05 series cases were reopened in 2009 during which a second series of Environmental Control bond issues were afforded ECC treatment. The second series of bond issues required separate ECC charges which are labeled Environmental Control Charge-2 in the Companies' tariffs. The Commission authorized a guaranteed true-up adjustment mechanism which permits the Companies to change their ECC to provide for amounts deemed necessary to adjust for any over-collection or under-collection of the Environmental Control Charges or otherwise to guarantee the timely and complete payment and recovery of Environmental

6 Monongahela Power Company and The Potomac Edison Company Case No E-CN Case No E-PC Case No E-T July 13,2018 Page 2 Control Costs and Financing Costs. The establishment of the ECC and true-up adjustments were approved through Commission orders in the 05 series case proceedings dated April 7, 2006, June 13, 2006 and January 17, The April 7, 2006 order permitted the Companies to file Routine True-Up Letters at least 15 days before the end of each semi-annual bond payment period to adjust their ECC. Unless modified by the Commission before the end of the semi-annual period to correct any mathematical errors, the adjusted ECC will be effective automatically on the first day of the following semiannual payment period. However, if the Commission finds mathematical errors in a Routine True-Up Letter, it may adjust the ECC. The Environmental Control Normalization Surcharges were first implemented on January 15, 2008 in accordance with the Commission s decision in Case No E-T. The purpose of the Environmental Control Normalization Surcharges is to continue the rate equality for customers of Monongahela Power Company and The Potomac Edison Company in the same tariff rate classes and to smooth out semi-annual variations in rates for each tariff schedule that would take place absent the normalization surcharge. In practice, the combined ECC and Normalization Surcharge is established to become effective on January 15. Any adjustment to the ECC in a subsequent month for that year is off-set by an adjustment to the Normalization Surcharge so that the overall combined rate levels for ECC plus Normalization Surcharges for the Companies are normalized throughout each twelve month period that follows a January 15 routine true- UP. The proposed changes to the ECC in the June 29, 2018 filing represent an overall increase in revenues for the Companies. However, the proposed changes to the Environmental Control Normalization Surcharges will offset that increase so that the Companies customers will experience no change in overall rates as a result of the filings. As noted above, the Commission may adjust the ECC if it finds mathematical errors in the determination of the charges as stated in its April 7, 2006 Order. In addition, the Order specified there shall be no time limit on the Commission s ability to find and correct mathematical errors. Staff has reviewed the calculation of the ECC and Environmental Control Normalization Surcharges filed by the Companies and based on that review has found no problem which would necessitate the Commission to issue an order in the fifteen day period prior to the ECC effective date. Further, if Staff should find a mathematical error in the calculation of the proposed ECC, it will immediately notify the Commission in compliance with its April, 2006 order. TG/tg