Senior Corporate Counsel Telephone: 304.534.7409
Fax: 330.315.9939
August 23,201 8
s. Ingrid Ferrell Executive Secretary Public Service om mission o f
S
Dear Ms. Ferrell:
Attached for filing is the original and twelve copies of a Joint Stipulation and Agreement for onongahela Power Company, The Potomac Edison Company, Staff, CAD, and Settlement among
WVEUG.
Sincerely,
Senior Corporate Counsel
GAJ : dml
A ~ a c ~ e n t s
cc: Certificate of Service
LIC S E ~ V I ~ ~ eo N
In the Matter of the Effects on Utilities of the 201 7 Tax Cuts and Jobs Act
AG T
Pursuant to W. Va. Code 5 24-1-9(f) and Procedural Rule 13(d), Monongahela Power
The Potomac Edison Company (“Com~anies’~), the Staff of the Public Service
Commission of est Virginia (“W’), the C o n s ~ e r Advocate Division of the e o ~ i s s i o n
(“CAD”), and the West Virginia Energy Users Group (“ EUG,”’ and collectively, the
arties”) join in this Joint Stipulation and Agreement for Settlement (“Joint Stimlation”). In
ulation, the Parties propose a comprehensive settlement of the above-referenced
proceeding as it relates to the Corn anies. The Parties recommend that the Commission approve
the Joint Stipulation without modi~cation.
1 . On December 22, 2017, President Donald Trump signed into law the 2017 Tax
Cuts and Jobs Act (“Tax Act”). ong other things, the Tax Act reduced the federal corporate
income tax rate to 21% from 35% (“Tax Rate Reduction”).
2. On ~ ~ ~ r y 3, 201 , the Commission initiated this proceed~ng to investigate
impact of the Tax Act on the revenue requirements of certain utilities. As a part of that 0
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ArcelorMittal USA LLC; Argos-US; The Chemours Company; Eagle Manufacturing; Linde LLG; ~ a r a t h o n Petroleum Company, LP; Noveiis Corporation; Quad/Graphics, Inc.; Resolute Forest Products (Fibrek); U.S. Silica Company; Weyerhaeuser Company NR, and Zoetis, LLC.
WVEUG members served by the Companies include: Advanced Graphite
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ission mandated the utilities to track the tax savings result~ng from the Tax Act on a
month~y basis b e g i ~ n g with the effective date of January 1 , 2018. The Order also required the
utilities, on or before May 30,201 8, to pre-file testimony explaining the impact the Tax Act has
on their federal income tax expense, as described in that Order.
3. In an Order entered on January 26,2018, t e Commission stated that regulatory
liability recognition on the financial statements ofthe utilities of any cost of service savings would
serve to protect the interests of ratepayers until any federal tax benefits can appropriately be
reflected in rates.
4. On March 8, 201 8, the Commission denied requests by
bifurcation of the proceeding and accelerated schedule, and established a schedule for interested
parties to file testimony.
5 . On May 30, 2018, several utilities filed direct testimony. The Companies filed
the direct testimony of Raymond E. Valdes.
6. On June 22, 2018, the Commission entered an Order scheduling a h e ~ i n g to
commence on July 24, 2018, and continuing on July 25 and July 26, 2018, if necessary. Page 2
of the June 22,201 8 Order also directed utilities to address four questions in the presentation of
their testimony at the hearing.
7 . On July 2, 2018, CA filed the direct testimony of Ralph 6. Smith,
filed the direct testimony of Stephen J. Baron, and other parties filed direct testimony. Also on
July 2,2018, Staff filed an Initial and Final Joint Memorandum.
8. On July 12, 201 8 the Commission entered an Order granting intervenor status to
CAD and MVEUG, among others, and addressing several other procedural matters.
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9. On July 13: 2018, several parties filed rebuttal testimony. The Companies filed
the rebuttal testimony of ayrnond E. Valdes.
10.
1 I .
12.
Staff, CAD, and WVEUG undertook formal and informal discovery.
A hearing was held on July 24 and 25, 201 8 in Charleston.
To avoid the additional expense that u7ill result from litigating this case, and in an
attempt to achieve certainty in the outcome, the Parties have endeavored to address or eliminate
all issues in this case as they relate to the Companies to reach a recommended comprehensive
resolution.
13. Prospective Rate ~ e d ~ c t i o ~ . The Parties agree and recommend that the Co anies wit1 reduce
rates on a prospective basis by $25,569,2 12 (“Prospective Rate Reduction”) in annual revenues
(calculated on the basis shown in on Power/PE Exhibit REV-1 to the Direct Testimony of
Raymond Valdes filed on May 30, 2018) to account for the reduction in current income tax
expense resulting from the Tax Rate Reduction. The rate reduction will be implemente
effective September 1, 2018, by reducing the Companies’ current ENEC rates such that the
amount to be returned to customers will be $8,523,070.68 during Sep te~be r 1, 2018 through
December 3 I , 201 8 representing the reduction for current taxes. The allocation will be on a
50% energy basis, 50% demand basis using energy an demand allocation factors as presente
in the 2016 ENEC case for the forecast year of 2017. The current tax rate reduction shall
continue as an annual reduction of $25,569,212 in ENEC rates, allocated on a 50% energy basis
and 50% demand basis using forecasted energy and demand allocation factors, until rolled into
base rates per the process described in Paragraph 14 below.
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14. Interim Period. The Parties agree and recommend that the Co
the Parties to defer to the Companies’ next general base rate case (“Next Base Rate Case”) the
issue of whether or not the Companies should be required to credit to customers t
adjustment in rates all or a portion of the reduced amount of income tax expense the Company
will have experienced between January I , 201 8 and August 3 1,201 8 resulting from the Tax Rate
Reduction (“Interim Period Amount”). Each Party may take whatever position it wishes to take
on this issue in the Next ase Rate Case. For purposes of this case and the Next
the Interim Period Amount is based on eight-twelfths of the annual reduction
paragraph 13, or $17,046,141.36. If a Next Base Rate Case is not filed by the C
August 3 1 , 2020, then the Companies will initiate a separate proceeding not later than
31, 2020 (“Stand-Alone Case”), to address this Interim Period Amount. The
Reduction described in Paragraph 13 above shall also be addressed and rolled into base rates in
15. Net Excess Ac~umulated Deferred Income Taxes (”ADITs”). The
that the Companies shall defer as a regulatory liability/asset any amortization of net excess ADITs
for the period beginning January 1,201 8, and recommend that the Commission permit the Parties
to defer to the Next Base Rate Case the amount and classification of the excess ADITs resulting
from the Tax Act, including any return of these amounts to customers or the Compa~es . If the
Next Base Rate Case is not filed by August 3 1, 2020, the excess ADITs and the Interim Period
Amounts will be addressed in the S ~ d - A l o n e Case to be filed by the Companies. In either
situation, each Party may take whatever position it wishes to t e on these issues.
N o t w i t h s t ~ d ~ n ~ the date of ecember 3 1,2020 to file any Stand Alone Case, the parties agree
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that if the Compa es file for an increase in ENEC or ve~etation m ~ a ~ e n i e n t in 201 9, not
precludes the parties from r e c o ~ e n d i n g an earlier disposition and nothing requires an earlier
disposition of the net excess ADITS andor Interim Period Amount in that 20 19 proceeding.
16. The Parties support is Joint Stipulation and represent that each of its provisions
acceptably resolves all issues raised in this case with respect to the Companies. Based on the
record, the Parties recommend that the Commission accept this Joint Stipulation in complete
resolution of this case with respect to the Company.
17. This Joint Stipulation results from a review of all evidence and filings in this case,
the Parties' analyses of the existing and foreseeable financial condition of the Companies, the
existing statutory and regulatory framework, and extensive, good faith negotiation. The Joint
Stipulation embodies substantial compromises and modifications by the Parties of their respective
positions, and is proposed to expedite and simplify the resolution of this case in the context of an
overall settlement with respect to the Companies.
18. The Parties recommend that the Commission adopt this Joint Stipulation as being
in the public interest, without adopting or recommending the adoption of any of the compromise
positions set forth herein as ratemaking principles applicable to future regulatory proceedings,
except as may otherwise be provided herein. Each component of the Joint stipulation (including
this paragraph) is integral to and inseparable from the others, and no Party advocates the
Commission's resolution of any issue proposed in this Joint Stipulation other than in the context
of its support for the Joint Stipulation as a whole.
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19. tipulation is subject to the Co ission’s acceptance and appsoval
without mod i~~a t ion , It will be ineffective until and unless approved by the C o ~ i s s i o n in all
of its material terms and without modification. If the Commission does not grant that approval
without modification, then the Parties reserve their rights to fully advocate their positions,
unlimited by the terms of the Joint Stipulation.
[signature page follows]
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e s ~ ~ t ~ l l y recommend and re
make appropriate ~ n d i n g s of fact and conclusiQ~s of law a roving the Joint
Stipulation in its entirety.
Dated and effective this day of August, 20 1 8 .
M O N O ~ G A ~ E ~ A POWER THE POTOMAC EDISON C
JACKSON KELLY PLLC 1600 Laidley Tower Post Office Box 553 Charleston, West Virginia 25322 (304) 340- 1000
Gary A. Jack, Esq. (WJ Bar ID 1855) Senior Corporate Counsel Monongahela PowedPotomac Edison 5001 NASA Boulevard Fairmont, West Virginia 26554
THE STAFF OF THE PUBLIC SERVICE COMMISSION OF WEST VIKGINIA
[% Auville, Esq. Public Service Gommissio 201 Brooks Street, P 0 Box 812 Charles ton, WV 2 5 3 2 3
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CONSUMER ADVOCATE D
Heather Osborn, Esq, Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV 25301
WEST VIRGINIA ENERGY USERS CROUP A
BaEy A. Naum, Esq. Spilman Thomas & Battle, PLLX 1 100 Bent Creek Boulevard, Suite I01 Mechanicsburg, PA 17050
Susan J. Riggs, Esq. Jason C. Pizatella, Esq. Spilman Thomas & Battle, PLLC 300 Kanawha Boulevard, East P. 0. Box 273 Charleston, WV 2532 1-0273
8
2014 Base Rate Filing Cat ego ry Line Number Adj for Settlement
Total Operating Revenues
Income Taxes Total Operating Expenses
Net
Gain from Disposition of Allowances Accretion Expense Interest on Customer Deposits
Net Opera~~ng Income
Weighted Interest Rate Base Interest
Net Income
Income Taxes Earnings before Income Taxes Effective Tax Rate
Federal Income Tax Rate Decrease State Income Tax Rate Weighted Tax Rate Decrease New Effective Tax Rate
New income Taxes
$ 1,508,029,295
$ 1,093,072,191 110,055,403
170,290 (921,597)
70,549,662 46,124,927
$ 1,319,050,876
$ 188,978,419
505,249 352,894 26,636
2.759% $ 2,475,509,066
68,299,295
$ 120,804,843
$ 46,124,9 27 166,929,770
27.63%
- 14.00% 6.50%
-13.09% 14.54%
$ 24,273,820 Decrease in lncome Tax Expense [26]=[3 8]-[25] $ 2l,85 1,107
IDecreased Revenue Requirement [271=[261/(1 -1241) $ 25,569,212 1 Tax Effect of Interest Sync. I281 5
et Equity Income [29]=[17]+(28] 120,804,843 Common Equity Ratio I301 46.477% Common Equity [31]=(1 S]x[30] 1,150,541,771 Return on Equity D21=1~91/[311 10.50%
Annual Revenue Decrease $ (25,569,212.00) Month ly Revenue Decrease $ (2,130,767.67) Sep-Dec 2018 Decrease $ (8,523,070.68)
Energy 50% $ (4,261,535.34) Demand 50% $ (4,261,535.34)
A & R B & G C & E CSH D E2 PH K& PP AGS LIGHTING
Energy Allocator*
0.36403 0.04856 0.16658 0.00247 0.06903 0.34526 0.00008 0.00399
$ (1,551,335.34) $ (206,934.54) $ (709,898.77) $ (10,541.41) $ (294,171.24) $ (1,471,335.40) $ (320.77) $ (16,997.87)
Demand Allocator*
0.43475 0.05291 0.17780 0.00285 0.05785 0.27248 0.00028 0.00108
1.00005 $ (4,261,535.34) 1.00000
231,103,616
1,784,141,969
I Current Jan-hue 2018 ENEC Rates $/kW-kVA
A & R $ 0.04 112 B & G $ 0.04146 C & E $ 0.03698 $ 1.46 CSH $ 0.04086 D & P H $ 0.03483 $ 2.90 K&PP $ 0.03542 $ 1.405 hGS $ 0.02448 $ 0.178 LIGHTING $ 0.04120
*per Case No. 16-1121-E-ENEC
$ (1,852,720.66) $ (225,465.54) $ (757,716.64) $ (12,136.50) $ (246,533.69) $ (1,161,167.98) $ (1,188.36) $ (4,605.97) $ (4,261,535.34)
Sep-Dec 2018 ENEC C h a n g e Energy Demand $ / k w h $/kW-kVA $/kwh
$ (0.00090) $ (0.00090) $ (5.00089) $ $ (0.00087) $ (0.00086) $ $ (0.00082) $ $ (0.00079) $ $ (0.00086)
$ (0.00107) $ (0.00098)
(0.31)
(0.34) (0.319) (0.030)
$ (0.00100)
$ (0.00023)
LIC SERVICE CO OF WEST V I R ~ ~ I A
~ ~ A ~ , ~ S T O ~
atter of the Effects on Utilities of the 201 7 Tax Cuts and Jobs Act
CERTIFlCATE OF SERVICE
1 certify service of Joint Stipulation and Agreement for Settlement on August
by Cnited States First Class Mail, postage prepaid, as addressed:
John R. Auville, Esq. Public Service Commission of WV PO Box 812 Charleston, WV 25323 Counsel for C ~ m m i ~ ~ . ~ i o n Stusf
Susan J. Riggs, Esq. Jason C. Pizatella, Esq. Thomas & Battle, PLLC Spilman Center 300 Kanawha Boulevard, East Charleston, WV 25301 Counsel for WYEUG
Todd M. Swanson, Esq. Steptoe & Johnson,
Tower, Eighth Floor
Charleston, WV 25301 Counsel for Hope Gus, Inc., d/b/a Dominion
niu, & Peoples Gas W
Charleston, W 25336 Counsel for the Kanawha County Commis~ion
Jackie L. Roberts, Esq. Torn White, Esq. Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV 25301 Counsel for Consumer Advocate Division
Derrick Price Williamson, Esq. Barry A. Naum, Esq. Spilman Thomas & Battle, PLLC 1 100 Bent Creek BIvd. Suite 101 Mechanicsburg, PA 17050 Counsel for W E U G
William C. Forth, Esq. Robinson & McElwee, PLLG 700 Virginia Street East Suite 400 Charleston, WV 25301 Counsel for Appalachian Power Company & Wheeling Power Company
Mandi Kay Carter, Esq. 501 Virginia Street, East Charleston, Wlr 253 0 1 Counsel for City of Charleston
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Hanna Law Office 3508 Noyes Avenue
Counsel for Lusk ~ ~ ~ p o . ~ ~ l Seivice, Inc. & Allied Waste Services ~ ~ ~ o r t ~ America, LLC, d/b/a Republic Services of West Virginia
Elizabeth S ~ ~ n d z i ~ l o ~ , Esq. insmore & Shohl, LL
707 Virginia Street East Suite 1300 Charleston, WV 25301 Counsel for Waste ~ u n u g e ~ e n ~ of West Virginia, Inc.
David €3. Hanna, Esq. Hanna & Hanna, PO Box 3967 Charleston, WV 25301 Counsel for Beckley ~ ~ u t e r Company
Marc J. Slotnick, Esq.
PO Box 3710 Charleston, WV 25337 Counsel for ~ u n a w ~ u County ~ ~ m m i ~ ~ s i ~ n
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