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July 19, 2019

PUCT to change process for approving rate case expenses

by Kelso King, Grid Monitor
Source – Grid Monitor
Posted 07/19/2019

Due to concerns about “inter-generational” issues arising from approving rate case expenses incurred years ago, PUCT Chairman Walker expressed interest in changing the current process, i.e., to the rate case they are associated with. The Chair recommended remanding the case and directing parties to settle all of the issues.

At the Open Meeting, Chairman Walker acknowledged that this case follows the manner in which the PUCT has been processing rate case expense cases in the past but she wants to change how these are done. She noted that, in this instance, the Commission would be approving costs tied to a 2014 rate case, something she was concerned could lead to inter-generational issues.

Chairman Walker suggested that now that Transmission Cost Recovery Factors (TCRFs), Distribution Cost Recovery Factors (DCRFs), transmission cost of service (TCOS), etc., are filed on an annual basis and rate cases are filed every three years, this Is not the way the PUCT should be doing these cases. The Chair suggested that rate case expenses are now just “a cost of doing business.”

Chairman Walker explained that these have been done as separate dockets because parties had thought rate case expenses weren’t being adequately scrutinized, an approach that began when rate cases only occurred every 10 years and rate case expenses were not incurred within the test-year.

Chairman Walker wants to continue to ensure that expenses are not extravagant but was concerned that the “pendulum may have swung too far” in severing them. She wants to look deeper at rate case expenses and, although hesitant to open a rulemaking, believes, even within the current rule, they can be treated differently than severing them and “going on and on.”

Chairman Walker suggested that utilities’ goal is to recover every single penny over any period of time and, if so, the PUCT needs look at the risk of setting the Return on Equity (ROE) because there is no risk to a utility when doing this. Chairman Walker concluded that she is frustrated with this situation and recommended remanding the case and telling parties to settle all of the issues.

Commissioner D’Andrea was fine with a remand but added that, although it feels appropriate for a rulemaking, the PUCT has a lot of rulemakings going on and he would like to hear about others options that are available, such as formulas, but was also amenable to letting parties go ahead and see what they could do to address the Chair’s concerns.

Commissioner Botkin added that this has become normal but it doesn’t have to be this way, adding that the Chair’s proposal “makes a whole lot of sense.”

Chairman Walker recalled that in the early 90’s some judges were not severing things. The Chair asserted that some of these need to start being considered in the rate case that they are associated with, adding that this one teed up some of her longstanding concerns and made her want to bring this up at this time.

Commission Advising Staff (CADM) recommended that the Commission reject the proposed order, send it back to Docket Management, see if parties can reach an agreement and, if not, send it back to the State Office of Administrative Hearings (SOAH) for a litigated hearing.

Chairman Walker noted that every issue raised in this case is not even being addressed and some would still have to be decided in another severed case. She reiterated that she wants all issues resolved and does not want to keep going back to these cases, including rate case expenses for this docket.

CADM was instructed to prepare an order consistent with the Commission’s discussion.

Background

Southwestern Electric Power Company (SWEPCO) requested recovery, through its existing rate-case-expense surcharge tariff, of rate case expenses it incurred in Docket Nos. 46449 (“Application of Southwestern Electric Power Company for Authority to Change Rates”) and 48233 (“Application of Southwestern Electric Power Company to Implement a Base Rate Decrease in Compliance with Docket No. 46449”). This proceeding also addresses the recovery, through the same tariff, of the rate-case expenses paid to the municipal group Cities Advocating Reasonable Deregulation (CARD) for its participation in those same dockets.

A unanimous settlement agreement requested the Commission approve SWEPCO’s rate case expenses in the amount of $3,924,633.

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