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BOEHM, KURTZ & LOWRY ATTORNEYS AT LAW
36 EAST SEVENTH STREET, SUITE 1510 CINCINNATI, OHIO 45202
TELEPHONE (513) 421-2255 TELECOPIER (513) 421-2764
VIA ELECTRONIC CASE FILING September 22, 2017 Kavita Kale, Executive Secretary Michigan Public Service Commission 7109 W. Saginaw Highway Lansing, MI 48909
Re: Case No. U-18255 Dear Ms. Kale:
Please find attached the REBUTTAL TESTIMONY OF KEVIN C. HIGGINS on behalf of THE KROGER CO. and its PROOF OF SERVICE for filing in the above captioned matter.
Please place this document of file. Thank you for your assistance in this matter. Very truly yours, Kurt J. Boehm, Esq. Jody Kyler Cohn, Esq. Michael L. Kurtz, Esq., (Michigan ##P67067) BOEHM, KURTZ & LOWRY MLKkew Enclosure
Cc: Administrative Law Judge Mark D. Eyster ([email protected]) Michigan Public Service Commission 7109 W. Saginaw Highway Lansing, MI 48917
STATE OF MICHIGAN
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
In the matter of the Application of DTE ELECTRIC COMPANY for authority to increase its rates, amend its rate schedules and rules governing the distribution and supply of electric energy, and for miscellaneous accounting authority.
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Case No. U-18255
Rebuttal Testimony of Kevin C. Higgins
on behalf of
The Kroger Co.
September 22, 2017
HIGGINS / 1
REBUTTAL TESTIMONY OF KEVIN C. HIGGINS 1
Introduction 2
Q. Please state your name and business address. 3
A. My name is Kevin C. Higgins. My business address is 215 South State Street, 4
Suite 200, Salt Lake City, Utah, 84111. 5
Q. By whom are you employed and in what capacity? 6
A. I am a Principal in the firm of Energy Strategies, LLC. Energy Strategies is a 7
private consulting firm specializing in economic and policy analysis applicable to 8
energy production, transportation, and consumption. 9
Q. Are you the same Kevin C. Higgins who provided direct testimony on behalf 10
of The Kroger Co. (“Kroger”) in this proceeding? 11
A. Yes, I am. 12
Q. What is the purpose of your rebuttal testimony? 13
A. My rebuttal testimony responds to the direct testimony of Staff witness Nicholas 14
M. Revere regarding the SRM capacity charge rate design applicable to Rate D11, 15
as well as Staff’s approach to allocating Power Supply revenues between Rate 16
D11 and Rider 3, as presented by Staff witness Mark J. Pung. My rebuttal 17
testimony also responds to Association of Businesses Advocating Tariff Equity 18
(“ABATE”) witness James R. Dauphinais regarding Rate D11 rate design. 19
Q. Please summarize the conclusions of your rebuttal testimony. 20
A. 1) I recommend that Staff’s proposal to recover capacity-related costs solely 21
through summer on-peak kW charges for demand-billed customers be rejected by 22
the Commission, as it represents a radical and unnecessary change in rate design 23
HIGGINS / 2
that would result in unwarranted intra-class cost shifting among bundled service 1
customers. 2
2) Staff’s proposed Rate D11 Power Supply rates would recover a portion of 3
Rider 3’s allocated Power Supply costs. If a class cost-of-service study is utilized 4
that treats Rider 3 as a separate class, I recommend that no portion of Rider 3’s 5
allocated Power Supply costs should be recovered in Rate D11’s rates. 6
3) To the extent that Rate D11 rate design changes are implemented that reduce 7
DTE’s proposed energy charges, as proposed by ABATE witness James R. 8
Dauphinais, then the Subtransmission and Transmission energy charge voltage 9
level discounts must be proportionately adjusted downward. 10
11
Response to Staff’s Capacity Charge Rate Design Recommendation 12
Q. What does Mr. Revere recommend in his direct testimony, filed August 29, 13
2017, regarding the recovery of capacity-related costs? 14
A. Consistent with his direct testimony in the SRM proceeding, Case U-18248, Mr. 15
Revere recommends that SRM capacity-related costs be recovered through 16
summer on-peak kWh charges for rate schedules without demand charges, and 17
through summer on-peak kW charges for rate schedules with demand charges.1 18
Q. Do you agree with Staff’s proposal to recover all capacity-related costs 19
through summer on-peak charges? 20
1 Direct Testimony of Nicholas M. Revere p. 12. I note that the D11 rate design presented by Mark J. Pung in Exhibit S-6, Schedule F3, page 24, filed August 29, 2017, is inconsistent with Mr. Revere’s capacity charge recovery recommendation. This exhibit depicts a capacity charge applied to D11’s annual billing demand, rather than summer-only billing demand.
HIGGINS / 3
A. No. I do not agree with Staff’s proposal as described in Mr. Revere’s testimony, 1
which would recover the entirety of the SRM capacity-related costs for demand-2
billed customers through a summer on-peak demand charge. This change would 3
constitute a radical departure in rate design. Today, capacity-related costs are 4
recovered year-round through the demand charge. The current rate design 5
smoothes out the recovery of capacity costs throughout the year. This basic 6
design was determined to be just and reasonable in the last general rate case and 7
in numerous prior proceedings. There is no reason to switch to a dramatically 8
different approach to rate design for capacity cost recovery. 9
Loading the entirety of capacity-related cost recovery into the four 10
summer months would dramatically increase summer bills for bundled service 11
customers. Bundled service customers should not be subject to the significant 12
cash flow spikes that would result simply to accommodate a new SRM capacity 13
charge – particularly when such a change is completely unnecessary. The SRM 14
capacity charge can recover capacity costs throughout the year just as the current 15
demand charge does. 16
Q. What is your recommendation regarding Staff’s capacity charge rate design 17
proposal? 18
A. I recommend that Mr. Revere’s recommendation to recover capacity-related costs 19
solely through summer on-peak kW charges from demand-billed customers be 20
rejected by the Commission. This change would constitute a radical and 21
unnecessary change in rate design that would result in unwarranted intra-class 22
cost shifting among bundled service customers. 23
HIGGINS / 4
Response to Staff’s Power Supply Revenue Allocation Between Rate D11 & Rider 3 1
Q. Does Staff’s class cost-of-service study calculate the Power Supply revenue 2
requirements for Rider 3 (Parallel Operation and Standby Service Rider) 3
and Rate D11/Other separately? 4
A. Yes. The results of the class cost-of-service study utilized by Staff for production 5
costs are summarized in Exhibit S-6, Schedule F1.1, presented by Charles E. 6
Putnam. On page 3 of that exhibit, Staff’s proposed production costs for 7
D11/Other and Rider 3 are separately presented. Staff calculates a production 8
revenue requirement of $839.281 million for D11/Other (D10) and $18.537 9
million for Rider 3. Collectively, Staff’s proposed D11/Other and Rider 3 10
production revenue requirement is $857.817 million. 11
Q. How does Staff propose to recover these production costs among Rate D11, 12
Rate D10, and Rider 3? 13
A. Staff’s proposed Power Supply revenues are summarized in Exhibit S-6, Schedule 14
F2, page 3, presented by Mark J. Pung. Staff’s proposal would increase the 15
Power Supply revenues for Rate D11, Rate D10, and Rider 3 by approximately 16
the same percentage (3.3 percent), despite Staff’s cost-of-service study results 17
indicating that Rider 3 warrants a higher increase. Staff proposes Power Supply 18
revenues of $845.731 million for Rate D11 and $2.266 million for Rate D10 19
($847.997 million for these two rate schedules together), and $9.820 million for 20
Rider 3. 21
Q. What is your response to Staff’s proposed allocation of Power Supply 22
revenues among Rate D11, Rate D10, and Rider 3? 23
HIGGINS / 5
A. Staff’s proposed Power Supply rates would over-recover production costs from 1
the Rates D11/D10 group while under-recovering production costs from Rider 3, 2
based on Staff’s cost-of-service study. If a class cost-of-service study is utilized 3
that treats Rider 3 as a separate rate class for cost allocation purposes, then Rider 4
3’s allocated production costs should not be recovered in Rate D11 or Rate D10 5
rates. I recommend that Staff’s approach for allocating Power Supply revenues 6
among Rates D11/D10 and Rider 3 be rejected by the Commission. 7
8
Response to ABATE’s Rate D11 Rate Design 9
Q. Does Mr. Dauphinais propose to decrease the Rate D11 energy charges 10
relative to DTE’s proposal? 11
A. Yes. ABATE’s proposed D11 rates are compared to DTE’s proposed rates in Mr. 12
Dauphinais’ Exhibit AB-26. Mr. Dauphinais proposes to implement a Non-13
Capacity demand charge to recover transmission costs, while reducing the Non-14
Capacity energy charge. 15
Q. Do you agree with the Subtransmission and Transmission energy charge 16
voltage level discounts in Mr. Dauphinais’ D11 rate design? 17
A. No. Despite reducing the Non-Capacity Primary voltage energy charge, the 18
energy charge voltage level discounts in Mr. Dauphinais’ D11 rate design are 19
unchanged from DTE’s proposal. This is inappropriate. The energy charge 20
voltage level discounts should have a consistent proportionate relationship to the 21
Primary voltage energy charges to which they are applied. 22
HIGGINS / 6
Specifically, since Mr. Dauphinais’ D11 Non-Capacity energy rates are 1
designed to collect 25 percent less revenue than DTE’s, the Subtransmission and 2
Transmission voltage level discounts should be proportionately reduced by 3
approximately 25 percent. Since these rates will produce a greater level of 4
Subtransmission and Transmission revenue, the Primary voltage Non-Capacity 5
energy charge should be commensurately reduced from that proposed by Mr. 6
Dauphinais. 7
If Mr. Dauphinais’ proposed approach to D11 Non-Capacity rate design is 8
approved, I estimate that the Non-Capacity Primary energy charge should be 9
reduced to $0.01850 per kWh, and the proportionate Non-Capacity voltage level 10
discounts should be approximately ($0.00053) per kWh for Subtransmission, and 11
($0.00091) per kWh for Transmission. 12
Q. Does this conclude your rebuttal testimony? 13
A. Yes, it does. 14
STATE OF MICHIGAN BEFORE THE PUBLIC UTILITIES COMMISSION
In the matter of the Application of DTE ELECTRIC COMPANY for authority to increase its rates, amend its rate schedules and rules governing the distribution and supply of electric energy, and for miscellaneous accounting authority.
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Case No. U-18255
PROOF OF SERVICE
Kurt J. Boehm, Esq. duly sworn, deposes and says that on September 22, 2017 he served (via electronic mail) when available or regular U.S. Mail the REBUTTAL TESTIMONY OF KEVIN C. HIGGINS on behalf of THE KROGER CO. and a copy of this Proof of Service upon those listed on the attached Certificate of Service.
Kurt J. Boehm, Esq. Jody Kyler Cohn, Esq. Michael L. Kurtz, Esq., (Michigan #P67067) BOEHM, KURTZ & LOWRY 36 East Seventh Street, Suite 1510 Cincinnati, Ohio 45202 Ph: 513-421-2255 Fax: 513-421-2764 E-mail: [email protected] [email protected] [email protected]
COUNSEL FOR THE KROGER CO. Subscribed to and sworn before me This 22nd day of September, 2017. ____________________________ Notary Public
MPSC Case No. U-18255 Page 1
ABATERobert A.W. StrongClark Hill PLC151 S. Old Woodward Avenue, Suite 200 Birmingham, MI 48009 [email protected]
Michael J. Pattwell Sean P. Gallagher Clark Hill PLC212 E. Grand River Ave. Lansing, MI 48906 [email protected] [email protected]
Stephen A. Campbell Clark Hill PLC 500 Woodward Ave., Suite 3500 Detroit, MI 48226 [email protected]
James R. Dauphinais Brian Andrews Chris Walters Brubaker & Associates, Inc. P.O. Box 412000 St. Louis, MO 63141-2000 [email protected]@[email protected]
CONSTELLATION NEWENERGY, INC. Jennifer Utter Heston Fraser Trebilcock Davis & Dunlap, P.C. 124 W. Allegan Street, Ste. 1000 Lansing, MI 48933 [email protected] [email protected]@[email protected]@[email protected]@[email protected]
DETROIT PUBLIC SCHOOLS Michael G. OlivaLeah J. BrooksLoomis Ewert Parsley Davis & Gotting 124 W. Allegan, Suite 700 Lansing, MI [email protected] [email protected]
ENVIRONMENTAL LAW & POLICY CENTERMargrethe Kearney 1514 Wealthy Street SE, Suite 256 Grand Rapids, MI 49506 [email protected]@elpc.org
Bradley Klein Environmental Law & Policy Center 35 E. Wacker Drive, suite 1600 Chicago, IL 60601 [email protected]
ENERGY MICHIGAN Timothy J. Lundgren Laura Chappelle Varnum LLP 201 N. Washington Square, Suite 910 Lansing, MI [email protected] [email protected]
Toni L. Newell 333 Bridge Street NW Grand Rapids, MI 49504 [email protected]
THE KROGER CO. Kurt J. Boehm, Esq Jody Kyler Cohn, Esq Boehm, Kurtz & Lowry 36 East Seventh Street, Suite 1510Cincinnati, OH 45202 [email protected] [email protected]
MPSC Case No. U-18255 Page 2
Kevin Higgins Energy Strategies, LLC Parkside Towers 215 South State Street, Suite 200 Salt Lake City, Utah 84111 [email protected]
MICHIGAN ATTORNEY GENERALMichael Moody Assistant Attorney General ENRA Division 525 W. Ottawa Street, 6th Floor P.O. Box 30755 Lansing, Michigan [email protected] [email protected]
Sebastian Coppola, President Corporate Analytics 5928 Southgate Rd. Rochester, MI 48306 [email protected]
MICHIGAN CABLE TELECOMMUNICATIONS ASSOC. David E. S. Marvin Michael S. Ashton Fraser Trebilcock Davis & Dunlap 124 West Allegan Street, Suite 1000 Lansing, MI [email protected] [email protected]
MICHIGAN ENVIRONMENTAL COUNCIL; NATURAL RESOURCES DEFENSE COUNCIL; SIERRA CLUBChristopher M. Bzdok Tracy Jane Andrews Lydia Barbara-Riley Olson, Bzdok & Howard, P.C.420 East Front Street Traverse City, MI 49686 [email protected] [email protected]@[email protected] [email protected]@envlaw.com
MICHIGAN WASTE ENERGY, INC. D/B/A DETROIT RENEWABLE POWER AND DETROIT THERMAL, LLC’S Arthur J. LeVasseur500 Griswold St., Ste. 3500 Detroit, MI 48226 [email protected]
MIDWEST COGENERATION ASSOCIATION John R Liskey 921 N. Washington Ave Lansing, MI 48906 [email protected]
Patricia F. Sharkey Environmental Law Counsel, P.C. 180 N. LaSalle Street, Suite 3700 Chicago, IL 60601 [email protected]
MPSC STAFF Lauren D. Donofrio Michael Orris Heather Durian 7109 West Saginaw Hwy, 3rd Floor Lansing, MI 48917 [email protected] [email protected] [email protected]@michigan.gov [email protected]
SIERRA CLUBMichael Soules 1625 Massachusetts Ave. NW Suite 702 Washington, D.C. 20036 [email protected] [email protected]@earthjustice.org
Kristin A. Henry 2101 Webster Street, Suite 1300 Oakland, CA 94612 [email protected]
MPSC Case No. U-18255 Page 3
RESIDENTIAL CUSTOMER GROUPDon L. Keskey Brian W. Coyer University Office Place 333 Albert Avenue, Suite 425 East Lansing, MI [email protected] [email protected]
UTILITY WORKERS LOCAL 223 John A. Canzano Patrick J. Rorai McKnight, McClow, Canzano, Smith & Radtke, P.C. 423 N. Main Street, Suite 200 Royal Oak, MI 48067 [email protected]@michworkerlaw.com
WAL-MART STORES EAST; LP AND SAM’S EAST, INC. Melissa M. Horne Higgins, Cavanagh & Cooney, LLP 10 Dorrance Street, Suite 400 Providence, RI 02903 [email protected]