Before the Public Utility Commission of Texas

BEFORE THE PUBLIC UTILITY COMMISSION OF TEXAS

APPLICATION OF CENTRAL AND SOUTH WEST CORPORATION AND AMERICAN ELECTRIC POWER COMPANY, INC. REGARDING PROPOSED BUSINESS COMBINATION

PUC DOCKET NO. 19265 SOAH DOCKET NO. 473-98-0839

RESPONSES OF OFFICE OF PUBLIC UTILITY COUNSEL TO EAST TEXAS COOPERATIVES’ SECOND SET OF REQUESTS FOR INFORMATION

December 30, 1998 QUESTION 2-1

Please provide copies of any documents utilized by OPC to explain the proposed settlement to other individuals or parties, as well as all documents that summarize or outline the settlement.

RESPONSE 2-1

Please see Attachment 2-1, consisting of 3 pages, that OPC utilized only in settlement discussions with interested parties to explain the effects or impacts of the November 3, 1998 Stipulation and Agreement upon existing rates.

Prepared By: James K. Rourke, Jr. Sponsored By: No sponsoring witness.

PUC Docket No. 19265; SOAH Docket No. 473-98-0839 Responses of Office of Public Utility Counsel To East Texas Cooperatives’ Second Set Of Requests For Information Page 2 Filed December 30, 1998 QUESTION 2-2

Consistent with the duties described in Section 13.003 of PURA, please provide copies of all documents that relate to OPC’s assessment of the effect of the settlement’s proposed rate decreases on residential customers.

RESPONSE 2-2

Docket No. 19265 is a merger case, not a utility rate case. While the November 3, 1998 Stipulation and Agreement will effectively reduce rates customers of CPL, SWEPCO and WTU pay through immediate cash payments of merger-related savings and settlement rebates directly to customers, it does not propose a change in existing rates. OPC did not generate any document that relates to any assessment by OPC, pursuant to Section 13.003 of PURA, relating to the effect of any proposed rate decrease on residential customers in Docket No. 19265.

Attachment No. 2-2, consisting of 2 pages attached hereto, is the only document prepared by OPC in the course of evaluating the impact of the immediate cash payment of merger-related savings and settlement rebates to customers, including residential customers, pursuant to the November 3, 1998 Stipulation and Agreement.

Prepared By: Clarence Johnson and James K. Rourke, Jr. Sponsored By: No sponsoring witness.

Please provide copies of all documents that relate to OPC’s assessment of the effect of the settlement’s proposed rate decrease on small commercial customers.

RESPONSE 2-3

See Response 2-2 in this set of requests for information.

Please provide copies of all documents that examine, analyze, or identify the effect of the settlement’s proposed rate decrease on the residential customers of (1) SWEPCO; (2) WTU; and (3) CPL.

RESPONSE 2-4

See Response 2-2 in this set of requests for information. In addition, please see Attachment 2-4, consisting of 6 pages attached hereto, which was prepared by CSW.

Please provide copies of all documents that examine, analyze, or identify the effect of the settlement’s proposed rate decrease on the small commercial customers of (1) SWEPCO; (2) WTU; and (3) CPL.

RESPONSE 2-5

See Response 2-4 in this set of requests for information.

Please describe in detail how the settlement addresses the issue of the South Texas Nuclear Project (“STNP”) and any potential stranded cost related to said as asset as it concerns CPL. If the settlement does not address STNP and potential stranded costs, please describe why it does not.

RESPONSE 2-6

Stranded costs are not addressed by the November 3, 1998 Stipulation and Agreement. OPC does not believe that STNP stranded costs should be addressed in isolation, but instead would have advocated a comprehensive resolution of potentially stranded costs, including related issues such as: negative stranded costs existing on other CSW operating companies' systems; the quantification of excess costs over market, if any; and policy questions related to the allocation of stranded cost recovery between shareholders and ratepayers. In OPC's opinion, the Preliminary Order excluded stranded cost issues from this merger application proceeding.

Prepared By: Clarence Johnson Sponsored By: No sponsoring witness.

With reference to the issue of market power, is OPC in agreement with the position taken by the Applicants in the original merger application filing? Is OPC in agreement with the Applicants’ testimony and analysis concerning market power that will be filed in January, 1999? Please explain fully.

RESPONSE 2-7

OPC had not completed its review of the Applicant's initial testimony as of November 3, 1998 when the Stipulation and Agreement was executed. However, OPC generally doubts that it would have supported all aspects of Dr. Hieronymous' filed testimony. The need for any further examination of his originally filed testimony is moot since it will be withdrawn. OPC has no opinion on the testimony that will be filed in January 1999, since it has not yet seen the testimony. In order to reach a settlement with CSW/AEP, OPC does not believe it is necessary to agree to all statements or positions that the Applicant may have taken with respect to market power. OPC reached the conclusion that other, more fundamental, structural conditions in the market which go beyond this one merger must be addressed in order to achieve the potential for workable competition. These competitive issues can be more effectively addressed in a generic manner by the Legislature and the Commission.

Prepared By: Clarence Johnson Sponsored By: No sponsoring witness.

Has OPC and/or the residential and small commercial customers located in the service areas of SWEPCO, WTU, and CPL been provided with notice of the proposed rate decreases referenced in the Settlement? Please provide a copy of all such notices.

RESPONSE 2-8

Docket No. 19265 is a merger case, not a utility rate case. While the November 3, 1998 Stipulation and Agreement will effectively reduce rates customers of CPL, SWEPCO and WTU pay through immediate cash payments of merger-related savings and settlement rebates directly to customers, it does not propose a change in existing rates. Consequently, no such notice is required or appropriate.

Please provide copies of all drafts of the Joint Stipulation Testimony filed on November 25, 1998, as well as any correspondence, comments, revisions, changes or analyses prepared by OPC that address such testimony. Provide copies of all correspondence by and between OPC and the Applicants as it relates to the Joint Stipulation Testimony.

RESPONSE 2-9

OPC has no draft of the Joint Stipulation Testimony filed on November 25, 1998. Please see Attachment 2-9, which consists of a one-page memorandum, dated November 19, 1998, and a two-page memorandum, dated November 24, 1998, from Jim Rourke, Assistant Public Counsel. These are the only documents or correspondence between OPC and Applicants that relate to the Joint Stipulation Testimony.

PUC Docket No. 19265; SOAH Docket No. 473-98-0839 Responses of Office of Public Utility Counsel To East Texas Cooperatives’ Second Set Of Requests For Information Page 10 Filed December 30, 1998