Control Number : 42659
Item Number: 16
Addendum StartPage : 0
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DOCKET NO. 42659
APPLICATION OF ENTERGY
TEXAS, INC. FOR PUBLIC UTILITY
COMMISSION OF TEXAS
CONSULTING FEE RIDER
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PUBLIC UTILITY C+^^^MI01''4
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OF TEXAS
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COMMISSION STAFF'S COMMENTS IN SUPPORT OF SETTLEMENT
Comes now the staff (Staff) of the Public Utility Commission of Texas (Commission),
representing the public interest and files these comments in support of settlement, and would
show the following:
1.
BACKGROUND
On June 11, 2014, Entergy Texas, Inc. (ETI) filed an application (Application) seeking
authority to implement a Commission Consulting Fee Rider.
On August 29, 2014, the
Administrative Law Judge issued an order abating the procedural schedule to allow the parties
time to file the settlement documents necessary to resolve all issues in this proceeding.
On
September 4, 2014, ETI, on behalf of the parties, filed a settlement agreement and related
documents that resolve all issues in this proceeding. Staff now files these comments in support
of the settlement.
II.
COMMISSION STAFF'S COMMENTS
Staff recommends approval of the settlement agreement based on the attached Staff
memoranda of Joseph P. Younger, Director of the Legal Division, Slade Cutter, Senior Financial
Analyst in the Rate Regulation Division, and William B. Abbott, Director of the Tariff and Rate
Analysis Section of the Rate Regulation Division.
I LO
DATED: September 4, 2014
Respectfully Submitted,
Joseph P. Younger
Division Director-Legal Division
Karen S. Hubbard
Managing Attorney-Legal Division
Jac J!^aw
Att rney-Legal Division
State Bar No. 24076502
(512) 936-7275
(512) 936-7268 (facsimile)
Public Utility Commission of Texas
1701 N. Congress Avenue
P.O. Box 13326
Austin, Texas 78711-3326
CERTIFICATE OF SERVICE
I certify that a copy of this document will be served on all parties of record on September
4, 2014 in accordance with P.U.C. Procedural Rule 22.74.
Jaco
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Page 2 of 2
Public Utility Commission of Texas
Memorandum
TO:
Jacob Lawler
FROM:
Joseph P. Younger
o
jr
DATE:
September 4, 2014
RE:
Application of Entergy Texas, Inc. for PUCT Consulting Fee Rider, Docket
No. 42659, Recommendation of Joseph P. Younger Regarding Liberty
Contract Fees
You have asked me to review the invoices submitted by Entergy Texas, Inc. (ETI) in
connection with its request to recover $556,977 in fees associated with work performed by
the Liberty Consulting Group, Inc. (Liberty). In my role as contract administrator for the
Commission's contract with Liberty (Contract No. 473-13-00137), I have reviewed and
approved Liberty's invoices submitted to Staff as reasonable. In this docket, I have further
reviewed Entergy's supporting invoices and have confirmed that they are identical to the
amounts previously approved by Staff as Liberty's reasonably incurred expenses.
Accordingly, I recommend that Entergy be permitted to recover $556,977 as the reasonable
costs associated with Liberty's consulting and technical support services. The basis for my
recommendation is detailed more fully below.
1.
Background
On October 26, 2012, the Commission issued an Order in Docket No. 40346,
Application of Entergy Texas, Inc. for Approval to Transfer Operational Control of its
Transmission Assets to the MISO RTO, in which the Commission, inter alia, conditionally
approved ETI's application to transfer operational control of its transmission assets to the
Midwest Independent System Operator (MISO), as modified by and subject to the terms and
conditions of an amended non-unanimous stipulation and agreement and further conditions in
the Order (Docket No. 40346 Order).' The terms and conditions in the Docket No. 40346
Order required, among other things, that the Commission would direct a study regarding the
determination of the impact of ETI leaving the Entergy System Agreement (ESA) and the
earliest feasible date to do so (ESA Transition Study). The Docket No. 40346 Order further
provided that "ETI shall be entitled to seek recovery of these costs."Z
1
Application of Entergy Texas, Inc. for Approval to Transfer Operational Control ofits Transmission
Assets to the MISO RTO, Docket No. 40346, Order (Oct. 26, 2013).
2
Id. at 13.
On November 27, 2013, the Commission opened Project No. 40979 in order to track
Entergy's compliance with the terms and conditions set forth in the Docket No. 40346
Order.3 As part of its activities in this project, the Commission caused to be issued a Request
for Proposals for analyst services to study the issues and effects of ETI leaving the ESA and
joining MISO. After reviewing and interviewing various applicants, the Commission
awarded the consulting contract to Liberty. The Commission and Liberty executed an
agreement for consulting services, Contract No. 473-13-00137, on February 14, 2013.
Under the original terms of the contract, Margaret Pemberton was designated the
contract administrator. Upon her departure from the Commission in June of 2013, I assumed
the duties of contract administrator as part of my functions as Director of the Legal Division.
Under both Ms.. Pemberton's and my direction, Liberty provided technical consulting
services in connection with:
•
evaluating the optimal timing for ETI's exit from the ESA;
•
preparing a comprehensive study of the optimal timing for ETI's exit from the
ESA;
•
supporting Staff's negotiations around the timing of ETI's potential exit from
the ESA with ETI, Entergy Corporation, and other retail regulators; and
•
assisting Staff's efforts to ensure that ETI took the operational steps necessary
to conduct an orderly transition out of the ESA and integration into MISO so
as to realize the qualitative benefits identified by the Commission arising from
ETI's independent operation and planning within the MISO RTO.
Liberty performed these tasks under Staff s supervision, meeting all Commission deadlines
under the $750,000 budget set forth in the Docket No. 40346 Order.
As part of my duties as the contract administrator, I reviewed all invoices submitted
by Liberty for work performed under Contract No. 473-13-00137 to ensure that only
reasonable expenses were passed on to ETI and ultimately ratepayers. This included invoices
from the three-month period (February, March, and April of 2013) in which Margaret
Pemberton served as contract administrator. In addition, I pre-approved and then reviewed
all of Liberty's travel and other significant expenses associated with its consulting work on
the ESA Transition Study to ensure those costs were reasonable. I also monitored Liberty's
total expenditure amounts to ensure that Liberty completed all necessary consulting work
associated with the contract within the $750,000 budget set forth in the Docket No. 40346
Order. Finally, I was responsible for submitting all previously approved Liberty invoices to
ETI for payment.
3
Proceeding to Track Compliance with Terms and Conditions Set Forth in the Commission's Order
Issued in Docket No. 40346 and the NUS, and Associated Studies Arising from this Order and/or NUS, Project
No. 40979.
2
II.
Invoice Review in this Proceeding
As part of my review in this proceeding, I have compared the invoices provided by
Entergy in support of its request in this docket for recovery of $556,977 through a proposed
Public Utility Commission of Texas Consulting Fee Rider (PCF Rider) to the invoices
previously provided by Liberty to Staff. The invoices and amounts submitted by Entergy as
part of this docket are identical to the summary invoices previously reviewed and approved
by Staff as the reasonable fees for Liberty's consulting work on the ESA Transition Study
and related issues.
III.
Recommendation
Based on my review, therefore, I recommend that Entergy be permitted to recover
$556,977 as the reasonable costs associated with Liberty's work in connection with the ESA
Transition Study mandated by the Docket No. 40346 Order, as well as other technical
support services within the scope of work set forth in Contract No. 473-13-00137.
Public Utility Commission of Texas
Memorandum
TO:
Jacob Lawler, Legal
FROM:
Slade Cutter, Rate Regulation, Financial Review ; (^,
DATE:
September 4, 2014
RE:
Docket No. 42659-Application of Entergy Texas, Inc. for Public Utility Commission of Texas
Consulting Fee Rider
Recommendation
I recommend from a financial perspective that the Public Utility Commission of Texas ("PUC" or "the
Commission") grant the request of Entergy Texas, Inc. ("ETI" or "the Company") to recover the carrying
charges that are a part of the consulting fee rider it is proposing in its application in this proceeding, PUC
Docket No. 42659.
Analysis
Financial issues arise in this proceeding because ETI has already paid, at various times from March
2012 through December 2013, the consulting fees described in its application; but, it has not been
compensated for these payments by ratepayers. The Company maintains, and I agree, that, if the
Commission authorizes ETI's recovery of the consulting fees, the Company is also entitled to recover
the cost of financing the delay in the payment of the fees from when the Company paid them until they
are put into rates. In its application, the Company proposes that the cost of the fees be put into rates
effective September 2014. Therefore, assuming the Commission accepts ETI's proposal, the beginning
of the period of time during which the Company will have been incurring carrying costs will vary
depending upon when it was paid and will end in September 2014.
The Company holds that the correct cost of capital to use in calculating the cost of delaying the recovery
of its consulting fees is 8.2217%, which is the rate of return ETI was granted in its last rate case, PUC
Docket No. 41791. I agree because 8.2217% is the most recent estimate that estimated ETI's cost of
debt and its cost of equity at the same time as each other and at the same time that all the other factors
that influence its cost of service were considered.
On page 5 of 6 of Attachment A to Exhibit MLM 1 of the Company's application in this docket, ETI
provides a spreadsheet which correctly calculates the carrying costs of the delay in recovering the
subject consulting fees as $226,447. I have examined this spreadsheet and have determined that it
correctly calculates within an immaterial variance the carrying cost of the delay in recovery of the
consulting fees that ETI has requested authority to recover through the rider described in this docket,
PUC Docket No. 42659. The settlement does not change this calculation or my opinion.
Public Utility Commission of Texas
Memorandum
TO:
Jacob Lawler, Legal Division
FROM:
William Abbott, Rate Regulation Division, Tariff and Rate Analysis
DATE:
September 4, 2014
RE:
Docket No. 42659 - Application of Entergy Texas, Inc. for Public Utility
Commission of Texas Consulting Fee Rider
Backjzround
On July 9, 2014, Entergy Texas, Inc. (ETI) filed to implement a Public Utility Commission
(Commission) of Texas Consulting Fee Rider (PCF Rider). The PCF Rider is intended to
provide for recovery of $1,726,574 in consulting expenses.
On September 4, 2014, a Stipulation and Settlement Agreement (Stipulation) was filed that
would resolve all issues among the parties to the proceeding.
Recommendation
My review is limited to issues associated with the allocation of PCF costs to the rate classes, the
calculation of the rates, and portions of the proposed tariff language. I have reviewed the
application and workpapers provided by ETI as well as the Stipulation documents and associated
workpapers. I have determined that the allocation and resulting rates as shown in the Stipulation,
and the proposed Schedule PCF - PUCT Consulting Fee Rider, are reasonable and appropriate.
Based upon my review, and the attached recommendations of other Staff, I recommend that the
Stipulation be adopted and that the associated PCF Rider be approved with an effective date of
September 29, 2014. In addition, I recommend that upon approval ETI be required to file a
"clean" record copy of its Schedule PCF - PUCT Consulting Fee Rider, to be stamped
"Approved" by the Commission's Central Records Division and retained for future reference.
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