David S. Maquera (313) 235-3724 [email protected]
Total Page:16
File Type:pdf, Size:1020Kb
DTE Gas Company One Energy Plaza, 688 WCB Detroit, MI 48226-1279 David S. Maquera (313) 235-3724 [email protected] May 14, 2013 Ms. Mary Jo Kunkle Executive Secretary Michigan Public Service Commission 6545 Mercantile Way, Suite 15 Lansing, Michigan 48909-7721 Re: In the Matter of the Application of Michigan Consolidated Gas Company for approval of a Gas Cost Recovery Plan, 5-year Forecast and Monthly GCR Factor for the 12-months ending March 31, 2014 and for approval to implement a Reservation Charge applicable to Gas Customer Choice Suppliers MPSC Case No. U-17131 Dear Ms. Kunkle: Attached for electronic filing on behalf of DTE Gas Company are the Rebuttal Testimony and Rebuttal Exhibits for James A Brunell and W. Bernard Kramer and also the Rebuttal Testimony, only, for Eric W. Clinton and Barbara J. Goodwin. Also attached is the Proof of Service in the above-captioned matter. Very truly yours, David S. Maquera DSM/lah Attachments cc: Service List STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the Application of ) Michigan Consolidated Gas Company ) for approval of a Gas Cost Recovery Plan, ) Case No. U-17131 5-year Forecast and Monthly GCR Factor ) for the 12 months ending March 31, 2014 ) REBUTTAL TESTIMONY OF JAMES A. BRUNELL DTE GAS COMPANY REBUTTAL TESTIMONY OF JAMES A. BRUNELL Line No. 1 Q. What is your name, business address and by whom are you employed? 2 A. My name is James A. Brunell. My business address is One Energy Plaza, Detroit, 3 Michigan 48226. I am employed by DTE Energy Corporate Services, LLC within 4 Regulatory Affairs as a Consultant. 5 6 Q. Did you previously file direct testimony in this proceeding on behalf of DTE 7 Gas Company (DTE Gas) formerly known as Michigan Consolidated Gas 8 Company? 9 A. Yes, I did. 10 11 Q. What is the purpose of your rebuttal testimony? 12 A. My rebuttal testimony rebuts Lakeshore Energy Services (LES) witness Mr. Charles 13 Galvin’s proposal that the Reservation Charge be collected from customers instead 14 of the Alternative Gas Suppliers (AGSs); rebuts witness Galvin’s and Interstate Gas 15 Supply (IGS) witness Mr. Matthew White’s claim that the Reservation charge will 16 hurt competition in the gas market; rebuts Retail Energy Supply Association 17 (RESA) witness Mr. Michael Haugh’s claim that billing the Reservation Charge to 18 the AGSs violates the principal that cost allocation should follow cost causation; 19 presents the calculation of the Reservation Charge and the maximum GCR factor if 20 the Commission adopts witness Galvin’s proposal to bill the Reservation Charge to 21 customers; and finally addresses Michigan Community Action Agency Association 22 witness Mr. Geoffry Crandall’s concerns regarding the appropriateness of the 23 Reservation Charge itself, and its inclusion in a GCR proceeding. 24 25 Q. Are you sponsoring any rebuttal exhibits? JAB Rebuttal - 1 J. A. BRUNELL Line U-17131 No. 1 A. Yes, I am sponsoring the following rebuttal exhibits that were prepared by me. 2 Exhibit Description 3 A-30 Adjusted GCR Factor and Calculation of Reservation Charge 4 Applied to GCC and GCR Customers 5 A-31 Example GCR and Reservation Charge Reconciliation 6 7 Charging the Reservation Charge to GCC Customers. 8 Q. At page 12 of his testimony, Lakeshore Energy Services witness Charles Galvin 9 claims that if the Commission approves the Company’s proposed Reservation 10 Charge then that charge should be collected from customers and not suppliers. 11 Do you agree with this recommendation? 12 A. No, Witness Galvin’s proposal should be rejected for the reasons listed in my direct 13 testimony on Page JAB - 13. Specifically, the Company’s proposal will not lead to 14 any new line items on customer bills (for both GCC and therefore GCR customers), 15 which will avoid confusion for the customers; the SOLR role is a supply function 16 and is therefore properly recovered through the commodity charge; and total costs 17 of supply should be bundled into one rate for comparability with other commodity 18 supply sources (i.e. GCR) and jurisdictions. 19 20 Q. Does witness Galvin provide any support for his proposal that the Reservation 21 Charge not be collected from Alternative Gas Suppliers (AGSs)? 22 A. Yes, at pages 5-8 of his testimony, witness Galvin claims that the mismatch 23 between how suppliers are paid and how the Reservation Charge is collected will 24 create a need for AGSs to charge varying rates to customers throughout the year. 25 JAB Rebuttal - 2 J. A. BRUNELL Line U-17131 No. 1 Q. Do you agree with witness Galvin’s claim that AGSs may need to charge 2 customers varying rates throughout the year due to the disconnect between 3 how the Reservation Charge is collected and how AGSs are paid? 4 A. No, this claim by witness Galvin is meritless. During the GCR year, AGSs deliver 5 gas to DTE Gas’s system and are paid for that gas at that time. The gas is then 6 stored and delivered to customers later in the GCR year when demand is higher. 7 The Reservation Charge will only be subsequently assessed when the GCC 8 customers use gas, which is AFTER it has been delivered to the Company’s system. 9 Using witness Galvin’s own logic, it is DTE Gas that will have revenue deficiencies 10 due to the timing disconnect between when AGSs are paid for gas, and when the 11 Reservation Charge is collected from the AGSs. This timing issue also exists for 12 the commodity payments as well. DTE Gas pays the AGSs for gas when it receives 13 the commodity, but is not paid until after the GCC customer uses the gas. 14 However, the Company does not alter its GCR charge to equalize its cash flow as 15 witness Galvin suggests that the AGSs would be required to do. The timing 16 difference between cash out lays and cash receipts is simply a part of DTE Gas’ 17 business model. 18 19 Q. At page 9 of his testimony, witness Galvin states that “DTE’s contracts are 20 made subject to all valid laws, orders rules [sic] and regulations of the 21 Commission.” Do you agree? 22 A. Yes, the Company abides by all valid laws, orders, rules, and regulations. 23 24 Q. Witness Galvin then claims that AGSs do not have the same ability to make 25 their contracts subject to all valid laws, orders, rules, and regulations. Are you JAB Rebuttal - 3 J. A. BRUNELL Line U-17131 No. 1 aware of anything that restricts the AGSs from having their contracts subject 2 to those constraints? 3 A. No, I am not. Further, DTE Gas can choose to make its contracts subject to 4 changes by a regulator by including provisions that allow the contract terms to be 5 amended for actions taken by regulators because doing otherwise would put DTE 6 Gas at risk for any such changes. The decision to include language in contracts that 7 allow the terms to be amended based on changes in regulation is one of the many 8 business decisions weighing risk and return that companies participating in 9 regulated markets must consider when conducting business. When an AGS enters 10 into a fixed rate contract with a customer, it can purchase gas to serve that customer 11 to hedge its price risk, but that supplier is still exposed to volumetric risk. 12 Volumetric risk would be the difference between what the supplier forecasted that 13 the customer would use and that customer’s actual consumption. Regulatory risk is 14 just another business risk faced by participants in a regulated market. If an AGS 15 chooses not to include a provision in their contracts that allows their terms to be 16 amended based on changes in regulation when engaging in the sale of product in a 17 regulated market, then the AGS is consciously choosing to bear the risk of that 18 decision. In the case of the SOLR Reservation Charge, DTE Gas’s GCR customers 19 have been subsidizing the GCC program by bearing the entire cost for the 20 Company’s Supplier of Last Resort (SOLR) function. The Company’s proposed 21 Reservation Charge eliminates the undue benefit that has been, and continues at this 22 point to be, received by the GCC program participants by allocating a proper 23 proportionate share of the SOLR costs to the AGSs. 24 25 Q. Interstate Gas Supply, Inc. (IGS) Witness Matthew White claims at page 27 of JAB Rebuttal - 4 J. A. BRUNELL Line U-17131 No. 1 his testimony that the Reservation Charge should not be applied to preexisting 2 fixed rate contracts because doing so would interfere with the AGS contractual 3 relationships with its customers. Do you agree that preexisting fixed rate 4 contracts should be exempt from the Reservation Charge? 5 A. No, if the AGSs have included provisions within their fixed price contracts to allow 6 them to pass along costs that arise due to legal or regulatory changes, then the 7 contractual relationships will remain unchanged even though the costs will change. 8 As noted above, if IGS or any other AGS has chosen to do business in a market that 9 is regulated by the MPSC and to offer contractual terms that do not allow it to 10 collect costs from its contractual counterparties due to changes in regulations, then 11 that is the business model they have elected.