PUBLIC SERVICE COMMISSION OF WEST

CHARLESTON * * * * * * * * *

FELMAN PRODUCTION, LLC * * 13-1325-E-PC

* * * * * * * * * *

HEARING TRANSCRIPT * * * * * * * * * BEFORE: MICHAEL A. ALBERT, Chairman JON W. MCKINNEY, Commissioner RYAN B. PALMER, Commissioner HEARING: Monday, December 9, 2013 9:30 a.m. LOCATION: PSC Howard M. Cunningham Hearing Room 201 Brooks Street Charleston WV

Reporter: Cortney Price

Any reproduction of this transcript is prohibited without authorization by the certifying agency.

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1 A P P E A R A N C E S

2 3 JOHN D. LITTLE, ESQUIRE

4 Public Service Commission of 5 201 Brooks Street

6 P.O. Box 812 7 Charleston, WV 25323

8 Counsel for the PSC 9 10 JAMES V. KELSH, ESQUIRE 11 ROB ALSOP, ESQUIRE 12 Bowles & Rice, LLP 13 600 Quarrier Street 14 P.O. Box 1386 15 Charleston, WV 25325 16 Counsels for Felman Production, LLC 17 18 WILLIAM C. PORTH, ESQUIRE 19 Robinson & McElwee, PLLC 20 700 Virginia Street East 21 P.O. Box 1791 22 Charleston, WV 25326 23 Counsel for Appalachian Power 24 25

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1 A P P E A R A N C E S (cont.)

2 3 BRIAN E. CALABRESE, ESQUIRE

4 Robinson & McElwee, PLLC 5 400 Fifth Third Center

6 700 Virginia Street East 7 P.O. Box 1791

8 Charleston, WV 25326 9 Counsel for 10 11 HEATHER B. OSBORN, ESQUIRE 12 JACQUELINE LAKE ROBERTS, ESQUIRE 13 Consumer Advocate Division 14 723 Kanawha Boulevard East 15 Union Building, Suite 700 16 Charleston, WV 25301 17 Counsels for Consumer Advocate Division 18 19 DERRICK PRICE WILLIAMSON, ESQUIRE 20 Spilman, Thomas & Battle, PLLC 21 1100 Bent Creek Boulevard 22 Suite 101 23 Mechanicsburg, PA 17050 24 Counsel for West Virginia Energy Users Group 25

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1 A P P E A R A N C E S (cont.)

2 3 TAI M. SHADRICK, ESQUIRE

4 Spilman, Thomas & Battle, PLLC 5 300 Kanawha Boulevard East

6 Spilman Center 7 P.O. Box 273

8 Charleston, WV 25321 9 Counsel for West Virginia Energy Users Group 10 11 CHARLES K. GOULD, ESQUIRE 12 Jenkins Fenstermaker, PLLC 13 325 Eighth Street 14 Huntington, WV 25701 15 Counsel for Steel of West Virginia, Inc. 16 17 ALSO PRESENT: 18 ROBERT POWELL, General Counsel, Felman Production, LLC 19 THOMAS WHITE, Consumer Advocate Division 20 21 22 23 24 25

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1 INDEX TO WITNESSES

2 DISCUSSION AMONG PARTIES 9 - 23 3 STATEMENT

4 by Mr. Martin 23 - 26 5 STATEMENT

6 by Mr. Moore 26 - 30 7 WITNESS: Richard Handley

8 DIRECT EXAMINATION 9 by Attorney Kelsh 30 - 31 10 CROSS EXAMINATION 11 by Attorney Osborn 32 - 36 12 CROSS EXAMINATION 13 by Attorney Little 37 - 38 14 QUESTIONS BY THE COMMISSION 38 - 40 15 WITNESS: Christiadi, Ph.D. 16 DIRECT EXAMINATION 17 by Attorney Alsop 41 - 43 18 CROSS EXAMINATION 19 by Attorney Osborn 44 - 53 20 CROSS EXAMINATION 21 by Attorney Williamson 53 - 56 22 CROSS EXAMINATION 23 by Attorney Porth 56 - 68 24 CROSS EXAMINATION 25 by Attorney Little 68 - 70

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1 INDEX TO WITNESSES (cont.)

2 3 QUESTIONS BY THE COMMISSION 70 - 74

4 REDIRECT EXAMINATION 5 by Attorney Alsop 74 - 75

6 DISCUSSION AMONG PARTIES 75 - 77 7 WITNESS: BARRY NUSS

8 DIRECT EXAMINATION 9 by Attorney Kelsh 77 - 88 10 CROSS EXAMINATION 11 by Attorney Osborn 88 - 91 12 DISCUSSION AMONG PARTIES 91 - 112 13 REDIRECT EXAMINATION 14 by Attorney Kelsh 112 - 113 15 RECROSS EXAMINATION 16 by Attorney Osborn 113 - 185 17 CROSS EXAMINATION 18 by Attorney Williamson 185 - 210 19 CROSS EXAMINATION 20 by Attorney Porth 211 - 231 21 CROSS EXAMINATION 22 by Attorney Little 232 - 238 23 QUESTIONS BY THE COMMISSION 238 - 250 24 CERTIFICATE 251 25

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1 E X H I B I T S

2 3 Page

4 Number Description Offered 5 Felman Exhibits:

6 RH-D Direct Testimony of Richard Handley 31 7 C-D Direct Testimony of Dr. Christiadi 42

8 BN-DC Direct Confidential Testimony of 9 Barry Nuss 77* 10 BN-DR Direct Redacted Testimony of Barry Nuss 77* 11 BN-CR Confidential Rebuttal Testimony of 12 Barry Nuss 80* 13 BN-RR Redacted Rebuttal Testimony of 14 Barry Nuss 80 15 BN-DP Direct Public Testimony of 16 Barry Nuss -- 17 18 CAD Cross Examination Exhibits: 19 1 Question and Response 2-01 92 20 2 Request No. 22 125 21 3 Ex Parte Application for Discovery 126 22 4 Two Pages of America 23 Alloy's Tax Return 151* 24 25 * Exhibits Not Attached

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1 E X H I B I T S (cont.)

2 3 Page

4 Number Description Offered 5 WVEUG Cross Exhibits:

6 1 Request No. 8 and 9 and Response 186 7 2 Request No. SWVA-2-2 and Response 200

8 3 Request No. 28 and Response 205 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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1 P R O C E E D I N G S

2 ------3 CHAIRMAN:

4 My name is Mike Albert. I’m Chairman 5 of the Public Service Commission. With me on my right is

6 Commissioner Jon McKinney and on my left is Commissioner 7 Ryan Palmer. We are here this morning in Case Felman

8 Production, LLC, PSC Case Number 13-1325-E-PC. We are 9 webcasting this to --- I’m sure it’s countless thousands. 10 And so if you’ll bear with me, second of all, I’ll give a 11 short history of the filing for the audience, then we’ll 12 move forward. 13 On August the 30th of 2013, Felman 14 Productions, LLC, and we’ll refer to that as Felman from 15 here on, petitioned this Commission to establish a 16 special rate for it to purchase electricity pursuant to 17 West Virginia Code 24-2-1j. Felman asserted that it 18 meets the statutory criteria for a special rate and had 19 previously entered into unsuccessful negotiations with 20 Appalachian Power Company of West Virginia, who we’ll 21 refer to as APCo, to establish a special rate. Felman 22 also requested that the Commission expedite this matter. 23 On September 12th, 2013, the CAD, 24 Consumer Advocate Division of the Commission, petitioned 25 to intervene to represent the interests of the

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1 residential customers. On September the 19th, Felman,

2 Commission Staff and CAD filed a proposed procedural 3 schedule and requested a compressed discovery process.

4 APCo and the West Virginia Energy Users Group, which we 5 refer to as the WVEUG, also concur with the proposed

6 schedule. Finally, the parties recommended that the 7 Commission direct Felman to publish a notice and name

8 APCo as a Respondent, meaning that APCo would be brought 9 into the proceeding as a party to the proceeding. 10 On September the 20th, 2013, WVEUG and 11 SWVA, which was formally Steel of West Virginia and a lot 12 easier to pronounce than SWVA, I might add, petitioned to 13 intervene and represent the interests of its membership 14 of industrial energy users. On October 16th, 2013, the 15 Commission established a procedural schedule, compressed 16 the normal discovery process and attempted to accommodate 17 the requests from Felman to accelerate this matter. 18 The Commission granted pending requests 19 to intervene and directed that the parties other than 20 Felman file Direct testimony on or before November the 21 15th. On November the 15th, parties other than Felman 22 filed Direct testimony. And notwithstanding our usual 23 instructions about discovery disputes being held to a 24 minimum, there have been some disputes, but at this time 25 and to the best of my knowledge, all of those have been

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1 resolved or deferred and the Commission’s not aware of

2 any material pending discovery disputes. 3 The central issue in this case is a

4 request by Felman for a special electricity rate from 5 APCo under the provisions of West Virginia Code 24-2-1j.

6 The legislature by almost unanimous vote enacted 24-2-1j 7 a couple of years ago. Under that provision, the

8 Commission is granted the authority to consider the 9 approval of a special electric rate for energy intensive 10 consumers with electric power in this state. There are 11 two ways an energy intensive rate matter can get before 12 the Commission under the statute. APCo and the energy 13 intensive industrial customer, in this case Felman, could 14 have negotiated a mutually agreeable special rate to 15 recommend to the Commission. That didn’t happen. 16 The case involves instead the 17 alternative approach that’s permitted under the statute 18 and that that Felman, after having unsuccessful 19 negotiations with APCo, can file a petition asking the 20 Commission to consider establishing a special rate. And 21 I might add that’s what the statute says. It says we can 22 consider establishing a special rate. The statute then 23 tells us that in order to qualify for the special rate, 24 any Petitioner, including Felman, must meet certain 25 requirements. It is those requirements and the evidence

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1 about whether Felman meets those requirements that will

2 be the essence of this proceeding. 3 Cases in this statute are odd for the

4 Commission. While they involve cost of service and cost 5 elements, it’s not the traditional concepts of cost of

6 service, of utility O&M expenses, utility return on 7 equity and that sort of thing, or the cost allocation

8 among customer classes, which we typically deal with and 9 which are the hallmark of objective rate regulation. 10 These cases instead involve concepts about energy 11 intensive customers requesting a special rate that may 12 not be fully cost based and that are a function of the 13 customer’s cost, not necessarily the utility’s cost. 14 In fact, the rate may impose some level 15 of burden on the utility and its other customers and 16 actually favor the industrial customer. Quite frankly, 17 that’s what the Code says. It says that these provisions 18 are okay, as long as it’s not an unreasonable burden. So 19 under the statute, the Commission can determine whether 20 the excess revenue or the revenue shortfall under that 21 special rate can be allocated among any other customers 22 of the utility. 23 In making that determination, however, 24 we’re required to consider all relevant factors, 25 including whether the allocation is just, reasonable and

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1 fairly balances the interests of other customers, the

2 utility and the customers receiving the special rate. 3 That then in a nutshell is what this proceeding is about

4 and what the witnesses will be addressing today, or over 5 the next couple days, as the case may be.

6 Staff, CAD, APCo and WVEUG argue that 7 Felman has not proven a need for the rate or its future

8 viability. Staff is also concerned that Felman has not 9 shown that the rate proposal meets the policy goals of 10 the statutes. Near as I can tell, all Respondents oppose 11 the Felman proposal. Felman argues, on the other hand, 12 that the ratepayers are no worse off under its proposal 13 than if the plant remains closed because the discount 14 mechanism is APCo’s contribution to fixed costs. Felman 15 is stating it will re-open the New Haven --- it will not 16 re-open the New Haven plant without a special rate. That 17 in a nutshell is the case before us. 18 Because we have some new folks here, 19 people who are not used to our normal admonitions, let me 20 repeat a couple of them. As I said, we are webcasting 21 this order and in order --- or this proceeding in order 22 for people that are interested to be able to view it and 23 hear it. We are slowly, gradually and grudgingly moving 24 into the electronic age and what you see up here embedded 25 in the ceiling is a system of cameras that is voice

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1 activated. And it’s voice activated by the --- these

2 (indicating), and these are fairly good, except that 3 they’re directional and unless you speak into them, you

4 won’t --- you will not project into the audience, or --- 5 nor will you trigger the voice activated camera. So I

6 urge you to make sure that the microphone is on and 7 snuggle up to it as you talk. You’ll be able to tell

8 when it’s working. Your volume of your voice will 9 increase perceptibly. 10 And lawyers at the bench, please feel 11 free to remain seated. I know some of you are creatures 12 of habit and want to jump up, but when you do, it makes 13 it difficult to --- for the microphones to pick you up. 14 So we’re not in any bit put off or offended if you remain 15 seated. In fact, we encourage you to do so. 16 If you have a cell phone, please 17 disable the ringer. If you need to make a call, go 18 outside. If you need to take a call, go outside. If you 19 want to text, that’s okay, but --- and I will add we do 20 have a WiFi. We’ve even gone to that. It is not 21 protected; you use it at your risk. And it should be 22 fairly good, but Lord knows who’s listening, as they say. 23 The NSA apparently. 24 In getting ready for the hearing, 25 there’s --- and I like to just whine a little bit, so let

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1 me do that. In getting ready for the hearing and

2 reviewing the testimony, there was an awful lot of data 3 that was protected. We’ve not ruled on any of that ---

4 even though the parties have agreed among themselves that 5 --- to treat it that way under protective agreements.

6 But I’m going to repeat our standard admonition, and that 7 is we don’t like closing hearings. We don’t like going

8 in-camera. It’s viewed with suspicion by people, it’s in 9 most instances unnecessary. 10 We will urge you to either look at what 11 you’ve redacted and determine that, in fact, you were 12 overly enthusiastic about your redaction and stuff should 13 not be redacted. And I will help you with that if you 14 need help, because I think there’s a lot of it that is 15 not trade secrets. It’s just stuff you don’t want out 16 there. So we urge you to review your testimony as we go 17 forward and review your confidentiality requests 18 realistically. 19 I said we want to keep the closed 20 sessions to a minimum, but we were disappointed by the 21 extent of it. I don’t mean to go on and on. We even had 22 things redacted in testimony that weren’t redacted by 23 Felman, and I didn’t quite understand that. Deanna 24 White’s testimony, pages four and five discusses Felman 25 Exhibit BN-4 regarding numbers that are marked premiums

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1 and discounts, and yet I don’t think the monthly premiums

2 and discounts on BN-4 as filed are redacted. So I don’t 3 know that that was necessary.

4 In any event, it just appears that 5 there is a lot of material that has been redacted. Some

6 of it is just --- we just don’t want that out there. 7 Well, that’s not --- that’s not the test. So as we go

8 through this, if you have a question, feel free to raise 9 it. But we’re going to try not to go into closed 10 session, in-camera. 11 As we say, we don’t like it and --- if 12 it’s necessary we do it, but I urge you in that regard to 13 keep the flow of your case in mind. And if you can --- 14 if you think that there is material that truly is worthy 15 of in-camera discussion and not appropriate for the 16 public, try to group it so that we only have to go in 17 closed session once or twice as opposed to going in and 18 out and running --- what we do is close the hearing, make 19 everybody that hasn’t executed a protective agreement or 20 non-disclosure document leave the room. Then we go off 21 the record, then --- we go off the public record. We do 22 the hearing, then we come back in, everybody comes back 23 in, and it --- so we end up with confidential and non- 24 confidential testimony. We end up with confidential and 25 non-confidential briefs, and it gets --- it’s a mountain

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1 of paperwork, and as I say, I don’t mean to --- well, I

2 do mean to whine, but I urge you to be very circumspect 3 about the use of confidentiality.

4 With that, and feeling much better, I 5 might say, why don’t we go ahead and start taking

6 appearances? Mr. Kelsh? 7 ATTORNEY KELSH:

8 Thank you. Good morning, 9 Commissioners. My name is James V. Kelsh from the law 10 firm of Bowles Rice, here on behalf of Felman Production, 11 LLC. I have with me Rob Alsop from Bowles Rice and 12 Robert Powell, the general counsel for Felman Production. 13 CHAIRMAN: 14 Hold on just a second. What is your 15 name, sir? 16 ATTORNEY OSBORN: 17 Heather Osborn. 18 CHAIRMAN: 19 No, no, no. 20 ATTORNEY OSBORN: 21 Oh, I’m sorry. 22 CHAIRMAN: 23 I’m sorry. 24 ATTORNEY POWELL: 25 Robert Powell.

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1 CHAIRMAN:

2 Robert Powell. All right. Ms. Osborn? 3 ATTORNEY OSBORN:

4 Thank you. Heather Osborn on behalf of 5 Consumer Advocate Division, and I have with me Thomas

6 White, attorney for CAD, and Deanna White, witness for 7 CAD.

8 CHAIRMAN: 9 Okay. All right. Mr. Williamson?

10 ATTORNEY WILLIAMSON: 11 Good morning, Mr. Chairman. Good 12 morning, Commissioners. My name is Derrick Williamson. 13 With me today is my colleague, Tai Shadrick. We’re with 14 the law firm Spilman, Thomas & Battle. We represent the 15 West Virginia Energy Users Group. 16 CHAIRMAN: 17 For the record, would you list the 18 Energy Users Group? 19 ATTORNEY WILLIAMSON: 20 Thank you for that request. Yes, sir. 21 Members of the Group for purposes of this case are Air 22 Products & Chemicals, Inc., Aciall Corporation, 23 CropScience, Bayer MaterialScience, Constellium, E.I. du 24 Pont de Nemours and Company, EQT Corporation, Huntington 25 Alloys and West Virginia Manufacturing.

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1 CHAIRMAN:

2 I don’t see Damon Xenopoulos. Is ---? 3 ATTORNEY GOULD:

4 This is Charlie Gould --- 5 CHAIRMAN:

6 Okay. 7 ATTORNEY GOULD:

8 --- local counsel with Jenkins 9 Fenstermaker, SWVA, Inc. Damon is ---

10 CHAIRMAN: 11 You’re in the wrong ---. 12 ATTORNEY GOULD: 13 --- participating via ---. 14 CHAIRMAN: 15 You’re in the wrong seat, you know 16 that; don’t you? I’m just kidding. Go ahead, make your 17 announcement. 18 ATTORNEY GOULD: 19 Charlie Gould, Jenkins Fenstermaker on 20 behalf of SWVA, Inc. I would note that Mr. Xenopoulos is 21 participating via the webcast. 22 CHAIRMAN: 23 Okay. Mr. Little? 24 ATTORNEY LITTLE: 25 John Little, Staff attorney with the

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1 Public Service Commission.

2 CHAIRMAN: 3 All right. Mr. Porth?

4 ATTORNEY PORTH: 5 Thank you, sir. William C. Porth of

6 the firm of Robinson & McElwee, PLLC. I’m appearing with 7 my colleague, Brian E. Calabrese, of that firm on behalf

8 of Respondent, Appalachian Power Company.

9 CHAIRMAN: 10 You don’t sound good. You feeling all 11 right? 12 ATTORNEY PORTH: 13 Not too good, but I’ll last. 14 CHAIRMAN: 15 Stay your distance. All right. Well, 16 you’re out of place, too. I’m just going to have a devil 17 of a time today. All right. I said there were no 18 preliminary matters. Was I wrong? 19 ATTORNEY KELSH: 20 One preliminary matter which Felman 21 would like to raise is the CAD filed supplemental Direct 22 testimony one day before Rebuttal testimony from Felman 23 was due. We would like to have one witness provide live 24 sur-rebuttal for the limited purpose of responding to 25 CAD’s supplemental Direct testimony.

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1 CHAIRMAN:

2 Ms. Osborn? 3 ATTORNEY OSBORN:

4 Thank you, Your Honor. We received no 5 supplemental Rebuttal testimony from the Felman witness,

6 which I had discussed with Mr. Alsop when we provided Ms. 7 White’s supplemental Direct, that we did not object to

8 Felman providing supplemental Rebuttal after its Rebuttal 9 was filed on the date provided in the procedural order. 10 And we received nothing in writing, so to the extent that 11 Felman wishes to provide that Rebuttal testimony now, I 12 mean, I believe we’re at a disadvantage because we 13 haven’t been provided it to date. 14 CHAIRMAN: 15 Is there anything in writing? 16 ATTORNEY KELSH: 17 There’s nothing in writing. 18 CHAIRMAN: 19 What is the extent of the Rebuttal? 20 ATTORNEY KELSH: 21 The extent of the Rebuttal is in 22 regards to an issue raised by CAD in their supplemental 23 Direct regarding --- slipped my mind right now. 24 CHAIRMAN: 25 Happens to me all the time.

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1 ATTORNEY KELSH:

2 Yeah. 3 BRIEF INTERRUPTION

4 ATTORNEY KELSH: 5 What’s that? Oh, the delivery

6 charges. It’s a very narrow issue and I don’t think 7 it’ll be very burdensome to the parties.

8 CHAIRMAN: 9 Ms. Osborn, I think you can handle it. 10 We’re not a big fan of having people get up and make 11 speeches off the cuff, but I think the testimony in that 12 regard is fairly clear in the record, and I don’t think 13 you’ll be at any great disadvantage. I’ve read your 14 testimony, so I think you’re prepared, depending on what 15 he says, of course. And if it’s outrageous, well, we’ll 16 listen further. 17 ATTORNEY OSBORN: 18 That’s fine. Thank you. 19 CHAIRMAN: 20 All right. Anything else? All right. 21 Call your first witness, Mr. Kelsh. 22 ATTORNEY KELSH: 23 All right. 24 CHAIRMAN: 25 You seem surprised.

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1 ATTORNEY KELSH:

2 Well, in my outline I had public 3 comments and opening statements, but ---.

4 CHAIRMAN: 5 Well, call your first witness.

6 ATTORNEY KELSH: 7 All right. Felman Production would

8 call Rick Handley as its first witness.

9 CHAIRMAN: 10 Okay. Oh, Commissioner McKinney 11 reminds that there were sign bearing protestants or 12 supporters. Does anybody want to make a public comment 13 that is not party to the proceeding? Good catch. 14 All right. Would you take your seat 15 again? All right. Please come up --- come forward. 16 State your name and spell it, please. 17 MR. MARTIN: 18 Hello, Commissioners. My name’s Roy 19 Martin, R-O-Y --- R-O-Y, M-A-R-T-I-N. I’m going to start 20 --- good morning, Commissioners. My name is Roy Martin. 21 I started working in June of 2006 as an hourly employee 22 at Felman Production, LLC, in New Haven, West Virginia. 23 And currently I’m vice president of United Steel Workers 24 Local 5171. I am a single parent with three kids, ages 25 6, 12 and 14. I am here today to represent my union

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1 members, my employer, my community, my state and most of

2 all, my family. 3 Felman has been an asset to New Haven,

4 Mason County, West Virginia and to the surrounding areas 5 for almost eight years. Felman has a minimal staff of

6 250 employees, including 208 union members. From here to 7 date, Felman unfortunately had to lay off 155 union

8 members and several salary employees. We now have 46 9 union members left to maintain and repair our 61-year-old 10 plant. Felman has spent millions to repair and rebuild 11 our plant since 2006 and has continued to present time. 12 There is still --- there’s still an extreme amount of 13 money and time that needs to be put into Felman Plant. 14 Felman has committed their investment 15 to make ferrosilicomanganese at the New Haven plant until 16 now. The market conditions are so poor, the 17 manufacturing costs are too high to produce 18 silicomanganese, that Felman had to cease production, lay 19 off hard-working people and cut costs throughout the 20 plant. It depresses me every day I walk into my plant to 21 not see my family, my friends or my neighbors. I see a 22 manufacturer of steel shutting down every day in the 23 news. I don’t want to see Felman shut down because they 24 can’t go on paying a high electric bill to product 25 silicomanganese at a low market price.

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1 USW Local 5171 and Felman Production

2 has had a good relationship. We have negotiated several 3 contracts since 2006 and we hope to continue to work

4 together as a team to be a successful plant. We are one 5 of two plants in the United States that produce

6 silicomanganese. The other is Eramet in Marietta, . 7 In the report that the wrote in

8 the Economic Impact of Felman Production on West 9 Virginia, 2012, it states that the total impact of 10 employment is 525 jobs, which generates a business volume 11 of $187 million, $31 million in employee compensation and 12 $1.9 million in state taxes. 13 So what I’m trying to say is Felman is 14 an asset to the town, to the county and to the state. I 15 know by working at Felman and being involved in everyday 16 struggles, that Felman needs a special power rate to --- 17 in order to survive the poor market conditions, high 18 material costs and high electricity costs. I went to 19 D.C. to --- in July to testify to keep the anti-dumping 20 duty and silicomanganese for other countries, and we were 21 successful keeping those orders in place. I then 22 realized how much Felman is struggling to stay above 23 water. 24 Now Felman, its employees and their 25 families are just asking for a little break in a power

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1 rate to continue operation at Felman. I pray,

2 Commissioners, that you make the right decisions and 3 Felman can call back its employees and they can continue

4 to provide for their families. Thank you for your time. 5 Thank you for listening.

6 CHAIRMAN: 7 Thank you, Mr. Martin.

8 MR. MOORE: 9 Good morning, Commissioners.

10 CHAIRMAN: 11 Good morning. 12 MR. MOORE: 13 Thank you for the opportunity to be 14 here and speak to you today. And I will be very brief. 15 CHAIRMAN: 16 We appreciate that. 17 MR. MOORE: 18 My name is Randall Moore, 19 R-A-N-D-A-L-L, M-O-O-R-E. I’m the sub-district director 20 for the United Steel Workers here in West Virginia. We 21 represent some 15,000 members across the state. That 22 number has dwindled over the past decade by a good 23 margin, some 5,000 to 6,000 good manufacturing jobs. All 24 up and down the Ohio and valleys, we’ve 25 seen production facilities go away, good jobs and jobs

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1 leave West Virginia and West Virginia families,

2 sustainable income jobs. 3 In the early 2000s, the Steel Workers

4 had a facility that was the old American Alloys at that 5 time, which is the current Felman Production plant that

6 was just in shattered rambles. It had been shut down, we 7 had lost --- we had lost that income there, that tax base

8 for the county and the income for our members there for 9 several years. We entered into a working relationship 10 with a company at that time that wasn’t --- they were, 11 let me just say, disingenuous in some of their promises. 12 And that didn’t work out. 13 I have had the pleasure, though, I can 14 tell you, to work from the inception with the current 15 chain of owners that currently operate the Felman 16 Production. I had a meeting with Governor Manchin and 17 you all know how Governor Manchin can get very aggressive 18 when he gets serious about wanting something to work. 19 And Governor Manchin wanted this facility to work. We 20 worked together. There were some tough decisions for the 21 Union. We addressed the issues that normally faced 22 investors, such as labor relations. You know, where are 23 we going to be if we invest money in this place, what’s 24 going to happen with that? 25 I sit in front of you today to tell you

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1 that we have a tremendous working relationship with

2 Felman Production. We have a contract in place through 3 2016. It’s a contract that is not everything that the

4 Union wanted, but it is --- was the right thing to do. 5 It is in some ways a concessionary contract, and in other

6 ways, it’s a very good contract for our members. We now 7 have viable income --- or had, I should say,

8 Commissioners, viable income at that facility up until 9 --- up until August. 10 In August due to a cyclical nature of 11 the commodities business, you know, they bleed guts so 12 great that there had to be some business decisions made. 13 And in keeping with the promises that Felman had made to 14 the Union and it made to the community and to the 15 Governor of West Virginia, keeping with that, they didn’t 16 just curtail things in and walk away and wait. There was 17 work to be done in the facility. 18 And up until this time, Felman has put 19 millions, as they promised they would do. They have put 20 millions back in that facility. When you drive by that 21 facility now, I mean, it looks like a working, viable 22 facility, not a shambled --- not a shambled, caving in 23 hull or skeleton of a facility that it once was. They 24 continued to work. They have revitalized furnaces, 25 furnaces that are ready, that stand ready today to go

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1 back to work if they can get --- if they can get some

2 consideration. 3 I’ve sat, and we talked before, with

4 the other facilities in the area, and a lot of the folks 5 that are in protest of this --- of this ask of Felman,

6 the Steel Workers represent. They have their own 7 reasons, but we have our reason to be here today to

8 support Felman. And that is that we believe in Felman. 9 Felman has been a good corporate partner with us, a good 10 partner. They have come through on everything that 11 they’ve ever said that they would do. And today, if you 12 see fit to let this ask go through, we will fire two of 13 those furnaces right back up, employing people again 14 there. 15 They could have laid people off. In 16 August they did. There was a layoff. They didn’t 17 immediately lay them off. Like I said, they revitalized 18 those furnaces, they held all --- they held all the 19 trades and craft people to work on those, working all 20 people, local people. Not people out of state. Keeping 21 that income going as long as they could. The rest of the 22 production employees they held as long as they could 23 before they furloughed them. They cleaned, they 24 revitalized, they painted in the event that we could get 25 started back up, that we would be on the cutting edge

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1 ready to go and capture this market again when it took

2 off. 3 So I ask, and the Steel Workers stand

4 in support, wholehearted support of the ask that Felman 5 Production is making before you today. Thank you for

6 this opportunity. 7 CHAIRMAN:

8 Thank you, sir. Are there others that 9 want to make a public statement? All right. Thank you. 10 Mr. Handley? 11 ------12 RICHARD HANDLEY, HAVING FIRST BEEN DULY SWORN, TESTIFIED 13 AS FOLLOWS: 14 ------15 A. Good morning, sir. 16 DIRECT EXAMINATION 17 BY ATTORNEY KELSH: 18 Q. Mr. Handley? 19 A. Yes, sir. 20 Q. Where are you employed? 21 A. Mason County Commission. I’m the president of 22 the Commission. 23 Q. How long have you been a commissioner? 24 A. This is my 17th year. 25 Q. Okay. And did you prepare or cause to be

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1 prepared the Direct testimony of Rick Handley, consisting

2 of four pages of questions and answers? 3 A. Yes, sir.

4 ATTORNEY KELSH: 5 I’d like to have this marked as RH-D.

6 CHAIRMAN: 7 All right. So marked.

8 (Felman Exhibit RH-D marked for 9 identification.)

10 ATTORNEY KELSH: 11 My assistant, Ms. Parsons, is handing 12 that to the court reporter. 13 BY ATTORNEY KELSH: 14 Q. Mr. Handley, do you have your testimony in front 15 of you? 16 A. Yes, I do. 17 Q. Okay. Did you prepare this testimony or have it 18 prepared under your supervision? 19 A. Yes, sir. 20 Q. If I were to ask you all the same questions 21 today, would your answers be the same? 22 A. Yes, sir. 23 Q. Do you adopt this as your testimony? 24 A. Yes, sir. 25 Q. All right.

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1 ATTORNEY KELSH:

2 I’d like to move into exhibit --- into 3 evidence Exhibit RH-D.

4 CHAIRMAN: 5 All right. Without objection, it’ll be

6 admitted. 7 ATTORNEY KELSH:

8 The witness is available for Cross 9 Examination.

10 CHAIRMAN: 11 All right. Ms. Osborn? 12 CROSS EXAMINATION 13 BY ATTORNEY OSBORN: 14 Q. Good morning, Mr. Handley. 15 A. Good morning, ma’am. 16 Q. I just have a few questions for you this 17 morning. And again, my name is Heather Osborn and I 18 represent the Consumer Advocate Division of the PSC. Mr. 19 Handley, if you could take a look for me, please, at the 20 first page of your Direct testimony --- 21 A. Yes, ma’am. 22 Q. --- at line 20 there on the first page. 23 A. Yes. 24 Q. And there on line 20, you state that during 25 normal operation, Felman Production has employed around

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1 240 employees; correct?

2 A. Yes, ma’am. 3 Q. I want to ask you first what you mean by the

4 term normal operation. 5 A. Well, when they were in full capacity to have

6 all their furnaces fired up, we had --- or they had 240 7 at the time.

8 Q. So in other words, all three furnaces going; 9 correct? 10 A. As far as I’m aware, ma’am. 11 Q. Okay. Have you reviewed the Direct or Rebuttal 12 testimony of Barry Nuss in this case? 13 A. No, ma’am. 14 Q. Just a moment, Mr. Handley. I can represent to 15 you, Mr. Handley, on page 13 of the confidential Rebuttal 16 testimony of Barry Nuss, beginning at line 5 on page 13, 17 Mr. Nuss testified that under a two-furnace plant, Felman 18 Production would expect to engage fewer employees than it 19 did in either 2011 or 2012. Is that your understanding? 20 A. All right. So you’re talking --- if it went 21 back in, I would say approximately 155 jobs that was 22 mentioned by Mr. Martin there earlier. 23 Q. Okay. So that would be consistent with Mr. 24 Nuss’s Rebuttal testimony then? 25 A. Yes, ma’am, as far as I know.

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1 Q. And beginning on line 6 of page 13 of his

2 confidential Rebuttal testimony, Mr. Nuss states that 3 when market conditions justify the further investment and

4 a restart of furnace number seven, which would be the 5 third furnace, employment levels would increase up to 200

6 employees. And I’m just wondering if you have an 7 explanation for the difference between your testimony

8 that under normal conditions, Felman Production employed 9 240 employees, versus Mr. Nuss’s testimony that if all 10 three furnaces are started up, assuming the special rate 11 is approved, that employment levels would increase only 12 to 200, some 40 less than what you’ve testified normal 13 capacity for employees is. 14 A. Well, as far as I --- I have been there 17 years 15 and I do know that it has been up to 240 at one time. 16 Now, whatever happened, there could be some part-time 17 people in there. I’m not sure if they’re all full time 18 or if they’re part time or what. But we just --- we’ll 19 take any jobs we can get, ma’am. 20 Q. And do you have an understanding, Mr. Handley, 21 of Felman’s plan --- assuming that the Commission 22 approves the special rate request, do you have an 23 understanding of Felman’s plan regarding the restart of 24 furnaces, how many furnaces would be restarted? 25 A. No, not initially I do not, no,

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1 Q. Okay.

2 A. But we’re hoping that all of them are fired up. 3 Q. Okay. Do you know and are you able to tell us

4 how many of Felman employees are --- and let’s --- 5 regarding the 240 employees that you mentioned in your

6 testimony, how many of those Felman employees were West 7 Virginia residents versus non-West Virginia residents?

8 A. I would say approximately 50 to 75 percent, 9 because we are a border town, border county. Right 10 across the river you have Gallia County and Meigs County. 11 So you have --- yeah, you have both states. And the same 12 way with some of the plants over in Ohio. Some of our 13 West Virginia people work over there. So I would say 50 14 to 75 percent of them are West Virginia people. 15 Q. But you don’t have any data with you today to 16 refer to --- 17 A. No, ma’am. 18 Q. --- to substantiate that number; correct? And 19 finally, Mr. Handley, in your testimony, you mentioned 20 that if Felman --- if production of silicomanganese stays 21 curtailed and Felman Production does not restart their 22 furnaces, there’s the potential lost property taxes and 23 real taxes of $800,000 a year; correct? 24 A. $800,000 to the County, approximately $200,000 25 to the County Commission.

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1 Q. Now, at this time, Felman Production --- the

2 plant is not shut down; correct? It’s actually operating 3 in some capacity; is that correct?

4 A. There are workers there, yes. 5 Q. And is your understanding that at least some of

6 those workers are in the facility at this time processing 7 slag in the slag --- slag processing facility that was

8 opened in 2013? 9 A. I do not know that answer. 10 Q. Does the fact that the plant is currently 11 operating, is not shut down, is not --- its doors aren’t 12 locked, does that have an impact on taxes? In other 13 words, Felman Production is paying property and real 14 taxes at this time; correct? 15 A. Yes, but not what we would receive as a County 16 Commission and the Board of Education if they were back 17 in full operation again. 18 Q. Do you know at this time how much in property 19 taxes Felman is paying, and real taxes? 20 A. No, I don’t have those figures in front of me 21 right now. 22 Q. Okay. I believe that’s all the questions I have 23 for you, Mr. Handley. 24 A. All right. Thank you. 25 CHAIRMAN:

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1 All right. Mr. Williamson?

2 ATTORNEY WILLIAMSON: 3 No questions, sir.

4 ATTORNEY PORTH: 5 No questions.

6 CHAIRMAN: 7 Staff?

8 ATTORNEY LITTLE: 9 Just briefly, Your Honor. 10 CROSS EXAMINATION

11 BY ATTORNEY LITTLE: 12 Q. Mr. Handley, have you considered the --- if the 13 Commission were to grant Felman’s Petition, the impact of 14 the discounted rate would have on other industrial 15 customers in not only Mason County, but West Virginia? 16 A. Yes, but I also know that if the rate is not 17 given, we lose all these jobs, not just jobs --- not just 18 the finances of people and the taxes we receive, but also 19 the social impact it would have on our people. Now, to 20 go back and answer your question, if Felman has to shut 21 down, I’m also aware that the --- I would assume that 22 Appalachian Power Company would have to make up the money 23 they would be losing, so therefore, they would be 24 charging their residential customers more money to make 25 up for the money they’re losing with Felman.

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1 Q. Thank you. One other question. You obviously

2 want to keep the plant operation open. Have you have had 3 any discussions with representatives from Felman about

4 possible tax breaks to keep Felman Production open? 5 A. No, sir, they have not asked us for that at the

6 present time. 7 Q. Thank you.

8 ATTORNEY LITTLE: 9 That’s all I have, Your Honor.

10 CHAIRMAN: 11 All right. Commissioner? 12 COMMISSIONER PALMER: 13 No questions. 14 CHAIRMAN: 15 Mr. Handley, you say you’re a --- 16 you’re president of the Mason County Commission. Are you 17 here as the Mason County Commission or in your individual 18 capacity? 19 A. I’m here as the president of Mason County 20 Commission, but sir, I’m here as a citizen of Mason 21 County because I know quite a few people who work there, 22 represent Mason County, represent the Town of New Haven. 23 I’m just here to support them, support Felman Productions 24 in asking for this special rate from the Commissioners. 25 And we just hope that you take all the evidence that you

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1 hear over the next two days and seriously consider giving

2 them the rate. 3 CHAIRMAN:

4 If we could figure out how not to take 5 the evidence, believe me, we’d do that.

6 A. Yes, sir. 7 CHAIRMAN:

8 Well, I’m not sure you answered my 9 question. My question is, were you designated by the 10 Mason County Commission to come here and speak? 11 A. I represent both --- the other two County 12 Commissioners, Miles Epling and Tracy Doolittle. Yes, 13 they are very aware I am here today. 14 CHAIRMAN: 15 Did the County Commission adopt an 16 order suggesting that you come? 17 A. Not an order, but we discussed it at a couple 18 meetings and we discussed it recently at our meeting this 19 past Thursday. 20 CHAIRMAN: 21 All right. I was just trying to make 22 sure I understood the capacity in which you are here. 23 A. Yes. 24 CHAIRMAN: 25 How long have you been on the Mason

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1 County Commission?

2 A. This is my 17th year. 3 CHAIRMAN:

4 What did the Mason County Commission do 5 with respect to the Century proposal? I don’t remember

6 Mason County ---. 7 A. Obviously, it was in Jackson County, but we had

8 no statement on --- I want to call it Kaiser because my 9 father worked there at one time, but Constellium Century? 10 Okay. No, we took no stand on that.

11 CHAIRMAN: 12 Okay. You didn’t appear in support of 13 it? 14 A. No. 15 CHAIRMAN: 16 All right. Thank you, Mr. Handley. 17 A. All right. 18 CHAIRMAN: 19 That’s all I have. 20 A. All right. Thank you, Your Honor. Merry 21 Christmas. 22 CHAIRMAN: 23 Any Redirect? 24 ATTORNEY KELSH: 25 No Redirect.

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1 CHAIRMAN:

2 All right. You’re excused, sir. 3 ATTORNEY ALSOP:

4 Good morning. Our next witness will be 5 Dr. Christiadi.

6 CHAIRMAN: 7 Okay.

8 ------9 CHRISTIADI, PH.D., HAVING FIRST BEEN DULY SWORN, 10 TESTIFIED AS FOLLOWS: 11 ------12 DIRECT EXAMINATION 13 BY ATTORNEY ALSOP: 14 Q. Good morning, Dr. Christiadi. 15 A. Good morning. 16 Q. And if I remind you --- I know you’re soft 17 spoken, so speak up in the microphone so everybody could 18 hear. Could you please state your name and business 19 address, please? 20 A. My name is Dr. Christiadi. I am a research 21 associate and demographer with the Bureau of Business and 22 Economic Research. My office address is 1601 University 23 Avenue, College of Business and Economics, Morgantown, 24 West Virginia. 25 Q. And I may have missed this. By whom are you

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1 employed?

2 A. Bureau of Business and Economic Research, West 3 Virginia University.

4 Q. Thank you. And did you cause to prepare in this 5 case Direct testimony consisting of seven pages, as well

6 as two exhibits? 7 A. Yes.

8 Q. Do you have a copy of that with you on the 9 witness stand? 10 A. Yes.

11 ATTORNEY ALSOP: 12 We’ll mark for identification purposes 13 the Direct testimony of Dr. Christiadi as C-D, including 14 two exhibits, which are CH-1 and CH-2. 15 CHAIRMAN: 16 Be so marked. 17 (Felman Exhibit C-D marked for 18 identification.) 19 BY ATTORNEY ALSOP: 20 Q. And this testimony, was it prepared by you or at 21 your direction? 22 A. Yes. 23 Q. And the exhibits as well were prepared by you or 24 at your direction? 25 A. Yes.

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1 Q. Are there any changes or corrections you believe

2 need to be made to your testimony to make it truthful? 3 A. The only change that my office --- my physical

4 office moved from 150 Clay Street, Morgantown to 1601 5 University Avenue, Morgantown.

6 Q. Okay. So that I’m clear, on --- then you’re 7 speaking about on page one of your testimony, lines five

8 and six, you’re no longer at that address. You’re at the 9 new address you just mentioned; is that correct? 10 A. Correct. 11 Q. With that change, if I were to ask you those 12 same questions today, would your answers be the same? 13 A. Yes. 14 Q. And do you intend these documents, your 15 testimony and two exhibits, to be your sworn Direct 16 testimony in this case? 17 A. Yes. 18 ATTORNEY ALSOP: 19 I move the admission of C-D and make 20 Dr. Christiadi available for Cross Examination. 21 CHAIRMAN: 22 All right. Without objection, it’ll be 23 admitted. Ms. Osborn? 24 ATTORNEY OSBORN: 25 Thank you, Mr. Chairman.

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1 CROSS EXAMINATION

2 BY ATTORNEY OSBORN: 3 Q. Good morning, Dr. Christiadi.

4 A. Good morning. 5 Q. My name is Heather Osborn and I’m here today

6 representing the Consumer Advocate Division and I have a 7 few questions for you. First of all, if you would take a

8 look for me, please, at your Exhibit Two to your 9 testimony, Exhibit Two being the economic impact of 10 Felman Production, LLC, of West Virginia, 2012. 11 A. Okay. 12 Q. In looking at that, it appears to me that you 13 prepared this report in March of 2013; is that correct? 14 A. Yes. 15 Q. And the data that you included in this report, 16 is that data that was available to you at the time you 17 prepared it in March of 2013, or is it data from 2012? 18 Just so I’m sure. 19 A. Data from 2012. 20 Q. Okay. Do you know what time period of 2012 or 21 did you look at the year as a whole? 22 A. It’s one year --- 23 Q. Okay. 24 A. --- information. 25 Q. And when you prepared it in March of 2013, you

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1 didn’t revise any numbers that you had included from your

2 2012 data; correct? 3 A. Correct.

4 Q. In your testimony and in your Exhibit Two, you 5 talk about the direct impact and the indirect impact of a

6 closing of the New Haven plant upon West Virginia jobs; 7 correct?

8 A. Correct. 9 Q. And then you also speak of and provide numbers 10 with respect to the direct impact and the indirect impact 11 of the closing of the plant upon Mason County jobs 12 specifically; correct? 13 A. Yes. 14 Q. Okay. And for both of those, for both the West 15 Virginia jobs and the Mason County jobs specifically, 16 according to your data and your report, you’d indicated a 17 loss --- a direct impact of 273 jobs; is that correct? 18 If you look at your Exhibit Two, page four, I believe you 19 might find that there. 20 A. Okay. 21 Q. And 273 jobs; correct? 22 A. Yes. 23 Q. Where do you --- where did you get that number, 24 the 273 jobs? 25 A. The number is provided by Felman Production.

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1 Q. And was provided to you in 2012; correct?

2 A. Yes. Yes. 3 Q. Who from Felman provided that information, do

4 you know? 5 A. I think it was Mr. John Konrady.

6 Q. Mr. John Konrady? 7 A. Yes.

8 Q. And he was the plant manager for Felman; 9 correct? 10 A. Yes. 11 Q. You also, with respect to both West Virginia 12 jobs and Mason County jobs, as I mentioned a moment ago, 13 provided numbers with respect to the indirect impact upon 14 jobs by the potential for the plant closure; correct? 15 A. Yes. 16 Q. And looking at West Virginia jobs first, the 17 state as a whole, you’d indicated in your testimony and 18 in your Exhibit Two to your testimony, that there is an 19 indirect impact upon 251 West Virginia jobs; correct? 20 A. Correct. 21 Q. Where does that number come from? 22 A. Well, to answer this question, so I need to 23 explain a little bit about how things work, to answer 24 this indirect --- indirect and induced impact, so explain 25 a little bit ---.

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1 Q. Yes, explain to us what you mean by indirect

2 impact. 3 A. So indirect impact is based on a theoretical

4 input-output theory. Basically when you produce an 5 output, you need a certain amount of input. So when

6 businesses make production, the purchases --- they 7 purchase input from their suppliers. And these

8 suppliers, to produce these inputs, they purchase inputs 9 from the following suppliers. And the following 10 suppliers also purchase inputs from the next following 11 suppliers. 12 So this backward linkage, chain reaction 13 continues until we reach the final supplier. That is 14 when the purchase of the input equals zero. So that’s 15 --- so the indirect impact represents the sum of all 16 these purchases of inputs from the suppliers. That’s one 17 side of input. And then the induced impact represents 18 the impact generated from the spending of the part of the 19 income that received by workers employed in this indirect 20 --- implied in this direct and indirect activities. 21 So the total impact represents the sum of this 22 direct --- indirect and induced impact. And based on the 23 ratio of output to number of employees, from the sum of 24 indirect and induced, I can come up with the total value 25 of the output produced. And then based on that, I can

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1 compute the number of employees, the number of jobs

2 associated with that production of output. Is that 3 clear?

4 Q. Let me just make sure I understand what you’re 5 saying. And I’m wondering whether I’m understanding it

6 in too literal a sense of the word. When you mention 7 input and suppliers, ---

8 A. Right. 9 Q. --- are you literally speaking of those 10 employees who work for companies that in this instance 11 supply raw materials to Felman Production for use in 12 producing silicomanganese? 13 A. That’s the first round of suppliers. 14 Q. Okay. So that is what you meant? I understood 15 that correctly? 16 A. But there are other suppliers --- 17 Q. Those would be ---? 18 A. --- that supply inputs to that first round 19 suppliers. 20 Q. Okay. So supplier and then a supplier to that 21 supplier, and so on and so forth back until you 22 essentially reach zero; --- 23 A. Zero. 24 Q. --- correct? 25 A. Correct.

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1 Q. Now, in this case, do you have an understanding

2 of where the raw materials that Felman Production 3 utilizes to manufacture siliconmanganese come from?

4 A. Not 100 percent, but the data that Felman 5 provided for me distinguishes the suppliers --- the

6 inputs that come from outside of the region, as well as 7 within the region. And the inputs that come outside of

8 the --- from outside of the region, the impact is not 9 going to circulate in the economy. So in other words, 10 the indirect and induced impact is zero if the input 11 comes from outside of the region. So this estimate 12 represents the impact of all those inputs that come from 13 within the region. 14 Q. Okay. And you just used the word estimate, Dr. 15 Christiadi, so --- 16 A. Yes, I did. 17 Q. --- the number 251, despite the fact that that 18 is a pretty specific number, it’s not a round number, 19 that is, in fact, an estimate; correct? 20 A. Yes. 21 Q. And likewise, the number 118 that’s set forth in 22 your testimony in your Exhibit Two, which is as you state 23 the number of Mason County jobs that are indirectly 24 impacted by a potential closure of the Felman plant, is 25 that also an estimated number?

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1 A. Correct, although it is based on some theory.

2 Q. Okay. And the 118, your explanation for how you 3 derived the number 251, does that same explanation work

4 for the 118 Mason County jobs indirectly impacted? 5 A. Yes.

6 Q. Okay. And again, the data for that was supplied 7 to you by Felman; correct?

8 A. Felman provided me the data on the direct 9 impact. 10 Q. I thought you testified a few moments ago, 11 correct me if I’m wrong, that with respect to those 12 entities from which Felman obtains the raw materials used 13 in the production of its products, silicomanganese, you 14 obtained that information from Felman? 15 A. Yes. 16 Q. In other words, who those suppliers are. 17 A. Yes, in terms of the dollar values. 18 Q. In your testimony and in your Exhibit Two, I 19 don’t believe I recall seeing any information as far as 20 who those suppliers are that result in these indirect 21 impact numbers; is that correct? You didn’t include that 22 in your testimony? 23 A. No. 24 Q. Okay. Do you maintain that information 25 somewhere that Felman supplied to you that you used in

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1 preparing your report --- or your testimony, rather?

2 A. Yes. 3 Q. Okay. And Dr. Christiadi, the total number of

4 Mason County jobs that you’ve indicated are impacted 5 either directly or indirectly by the potential closure of

6 the New Haven plant, that total being 391, --- 7 A. Yes.

8 Q. --- it’s correct that some of those employees 9 are not residents of Mason County; correct? 10 A. This number represents jobs in terms of place of 11 work. I am aware that there are --- some of the 12 employees that are not living in West Virginia. I guess 13 --- I believe the number given to me was about 90 14 workers. 15 Q. Was that number given to you by Felman? 16 A. Yes. 17 Q. Okay. And in your testimony, Dr. Christiadi, 18 you mention and you discuss a little Armstrong World 19 Industries, which is located in Jackson County; correct? 20 A. Correct. 21 Q. Tell me why you included Armstrong World 22 Industries in a reference to --- in your testimony? 23 A. The evidence was presented to me in terms of a 24 copy of newspaper, which mentions that one of the main 25 reasons Armstrong located in that region is because of

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1 the proximity to the input. We just mentioned slag. And

2 I know that Felman produces a byproduct, slag. So the 3 newspaper doesn’t mention exactly the name of Felman, but

4 it does mention that, you know, the reason --- one of the 5 reasons is the proximity to the input.

6 Q. This newspaper article that you mentioned, it 7 was provided to you by Felman; is that correct?

8 A. Yeah, but I --- yes, but I also the news 9 and I got about the same information. 10 Q. Did you at any time during the process of 11 preparing your testimony in this case, including your 12 Exhibit Two, did you have occasion to speak to, 13 interview, otherwise question anyone associated with 14 Armstrong World Industries regarding whether a potential 15 closure of Felman would have an impact upon that company? 16 A. No, I did not. 17 Q. Any independent investigation at all aside from 18 Googling to see what information you could find out 19 there? 20 A. No, I did not. 21 Q. And, in fact, in your testimony --- in your 22 Exhibit Two rather, I believe beginning on page and 23 continuing onto page two, you do concede, do you not, Dr. 24 Christiadi, that it’s, quote, difficult to quantify any 25 connection between the New Haven plant and Armstrong

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1 World Industries?

2 A. Because even though Armstrong suppose is 3 interested in purchasing inputs from Felman, but there’s

4 also an option. If Felman is closed, I mean --- that if 5 availability of the input did attract Armstrong to look

6 at there, but when Felman is closed, Armstrong may have 7 another option to get the input, so it’s not necessarily

8 that when Felman is closed that Armstrong is going move 9 away. In that case, the impact of Felman will be equal 10 to Armstrong being --- moving away. 11 Q. And that’s sort of my point, Dr. Christiadi, is 12 that you don’t have any information to suggest --- and I 13 just want to make sure there’s no confusion on this. You 14 have no information to suggest to the Commission that you 15 have an understanding that this company in Jackson 16 County, Armstrong World Industries, is going to go under 17 or is going to move out of the area even if the Felman 18 Production plant is eventually closed; is that correct? 19 A. That’s correct. 20 Q. Okay. 21 ATTORNEY OSBORN: 22 That’s all the questions I have. 23 CHAIRMAN: 24 Mr. Williamson? 25 CROSS EXAMINATION

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1 BY ATTORNEY WILLIAMSON:

2 Q. Good morning, Dr. Christiadi. 3 A. Good morning.

4 Q. My name is Derrick Williamson. I represent a 5 group of large manufacturers and industrial consumers of

6 electricity in West Virginia. We’re very interested in 7 the case. I just have a couple of questions for you.

8 You have never testified before; is that correct? 9 A. Correct. 10 Q. Are you having fun? 11 A. I can handle it. 12 Q. I think you can. I think you’re most able. In 13 your CV that’s attached to your testimony, your 14 Curriculum Vitae, if you turn to page three of that, a 15 few lines down you reference a research report regarding 16 the economic impact of Felman Production on the West 17 Virginia economy. And the data associated with that is 18 January 2012. Is that a separate report from the report 19 that is attached to your testimony? 20 A. Yes, that’s the previous --- it’s based on the 21 previous calendar year data. It’s a separate report, 22 yes. 23 Q. And you mention that that was prepared in 24 association with somebody by the name of Tom Witt. Who 25 is Tom Witt?

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1 A. He’s my director.

2 Q. At ---? 3 A. At the Bureau of Business and Economic Research.

4 Q. And did he assist with preparation of the March 5 2013 report?

6 A. Yes. Although the majority of work was done by 7 me.

8 Q. And if we turn to that exhibit in the report, 9 the cover page of that report, there’s a description 10 underneath the date indicating that the report was funded 11 by Felman Production. Do you see that? 12 A. Yes. 13 Q. And was the prior report --- the January 2012 14 report likewise funded by Felman Production? 15 A. Correct. 16 Q. And are the conclusions that you draw and the 17 opinions that you express in your testimony here in 18 writing and within the report yours or those of West 19 Virginia University? 20 A. It’s mine. 21 Q. Have you reviewed the special rate that is at 22 issue in this case? 23 A. I describe the general --- general news on that. 24 Q. Did you do that in preparation of the March 2013 25 report, since that was several months prior to the filing

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1 of the special rate?

2 A. No. 3 Q. Did your analysis, with respect to the reports

4 in 2012 and March 2013 report --- did that analysis 5 consider the economic impacts associated with other

6 manufacturers and industrial customers in West Virginia 7 subsidizing a portion of Felman’s electric costs inputs?

8 A. I’m sorry. Could you repeat the question? 9 Q. Yeah. Did your report consider or did your 10 analysis consider the economic impact of other 11 manufacturers and industrial customers in West Virginia 12 having to subsidize Felman’s electric input costs? 13 A. No. 14 Q. All right. Thank you. 15 CHAIRMAN: 16 All right. Mr. Porth? 17 ATTORNEY PORTH: 18 Yes, thank you. 19 CROSS EXAMINATION 20 BY ATTORNEY PORTH: 21 Q. Good morning, Dr. Christiadi. My name is --- 22 A. Good morning. 23 Q. --- William Porth and I’m Counsel for 24 Appalachian Power Company which provides electric power 25 to the Felman plant. I’ll try not to repeat questions

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1 you’ve been asked previously. Have you read the

2 testimony of any of Felman’s other witnesses in this 3 proceeding?

4 A. No. 5 Q. Okay. Later on I may represent to you certain

6 items from some of that testimony and I’ll give you the 7 opportunity of accepting it subject to check if you wish

8 to, or if you don’t wish to do that, I’ll just ask you to 9 accept it hypothetically. 10 On page one of your testimony, you indicate that 11 you have performed 16 economic impact studies since 1999. 12 Have you performed most or all of those studies under the 13 egis of West Virginia University? 14 A. All of them. 15 Q. All of them? 16 A. Yes, all of them. 17 Q. Okay. How many of those studies have been 18 commissioned by third parties? 19 A. By third party meaning ---? 20 Q. Well, let me jump ahead to Felman. Would you 21 characterize the two Felman studies you performed as 22 being commissioned by Felman? 23 A. Yes. 24 Q. Okay. So were some of the other 16 economic 25 impact studies commissioned by other companies or

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1 interested parties?

2 A. Most of them, yes. 3 Q. Okay. Now, if you look to page three of your

4 Curriculum Vitae where Mr. Williamson had directed your 5 attention, your more recent Felman study is called in the

6 title on your CV an update; correct? 7 A. Yes.

8 Q. Okay. But now that word update does not occur 9 anywhere on your Exhibit Two; does it? 10 A. That’s an overlook. 11 Q. I’m sorry? 12 A. That’s an overlook. 13 Q. Okay. Do we --- to fully understand your 2013 14 study, since it’s an update of your 2012 study, do we 15 need to look at your 2012 study, would you say? 16 A. I don’t understand the question, please. 17 Q. Well, since --- the only one of your two studies 18 that you’ve introduced into this proceeding is your March 19 2013 study --- 20 A. Uh-huh (yes). 21 Q. --- which you indicate is, in fact, an update of 22 your 2012 study. So my question is in order to fully 23 understand your 2013 study, do we need to look at your 24 2012 study, or does it stand independent? 25 A. The 2012 study --- the study entitled an update

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1 is the same exact study presented in this hearing. And

2 to understand my study, you don’t really need to look at 3 the previous study.

4 Q. Thank you. You’ve explained who Tom Witt is. 5 With regard to the Felman funding, was 100 percent of the

6 funding for your studies provided by Felman? 7 A. Yes.

8 Q. Okay. Now, who receives the Felman funding? Is 9 that WVU or is it you personally? 10 A. WVU. 11 Q. You simply get a salary for working for WVU? 12 A. Correct. 13 Q. If you recall this, when was the earlier of your 14 two Felman studies first requested? 15 A. I think about early 2012. 16 Q. And could you estimate approximately when the 17 work on it was performed? 18 A. It was conducted --- it took about a month to do 19 that, so --- I need to look it up. So I believe it’s 20 January 2012 for the first study. 21 Q. Okay. And that first study covered Felman’s 22 operations in calendar year 2011? 23 A. Yes. 24 Q. Okay. Was it ever explained to you why an 25 update of that first study was needed?

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1 A. No.

2 Q. When did you perform your work on the second 3 study?

4 A. Early 2013. 5 Q. Were you asked to perform any study of Felman’s

6 operations in 2013? 7 A. I’m sorry. Say that again, please.

8 Q. Were you asked to perform any analysis of 9 Felman’s operations in 2013? 10 A. No. 11 Q. Have you been asked to perform any study of 12 Felman’s expected future operations if and when it 13 resumes production at its Mason County plant? 14 A. No. 15 Q. And I take it, not having been asked to do that, 16 you have not done any such studies; correct, on your own? 17 A. Right. 18 Q. Let me now focus on your most recent study, the 19 one you’ve attached to your testimony. You state at page 20 4 of your testimony, lines 11 to 12, that you used the 21 --- and I’ll spell this for the reporter --- IMPLAN, 22 I-M-P-L-A-N, economic impact modeling system; correct? 23 A. Correct. 24 Q. Now, is IMPLAN some species of computer program? 25 A. Yes, it’s a software.

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1 Q. Okay. And did you play any role in creating

2 IMPLAN? 3 A. No, but I understand how it is generated in

4 general. 5 Q. Okay. When you use IMPLAN as you did for your

6 Felman study, what do you do? 7 A. First, I --- well, IMPLAN has three patterns,

8 three patterns. The intel industry purchases patterns, 9 household spending patterns, and county to county trade 10 flow. And when I first use IMPLAN, I created --- excuse 11 me. I created a model, a pattern specifically for Mason 12 County and West Virginia economy. And then using the 13 data provided by Felman, I specify that the expenditures 14 that --- spent by Felman go into certain kind of 15 industries in the county, as well as in West Virginia. 16 And then I run --- I ran the software. 17 Q. Okay. So was it the IMPLAN program that 18 produced, just as an example, the indirect and induced 19 impact employment number of 251? 20 A. Correct. 21 Q. If you’ll turn to page five of your testimony, 22 you’ve already indicated in response to Ms. Osborn that 23 you used data provided by Felman. Lines five through 24 seven you say you used data regarding business volume, 25 number of employees, total compensation to employees and

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1 taxes paid, which were provided to me by Felman

2 Production based upon its operations in calendar year 3 2012; is that correct?

4 A. Yes. 5 Q. I take it you did not do anything to verify the

6 accuracy of any of the data provided by Felman; is that 7 right?

8 A. I trusted them. 9 Q. Okay. Now, turn to page six of your testimony, 10 if you would, and the table that you provide there, that 11 --- is that table your summary of the economic impact of 12 Felman’s operations in 2012? 13 A. Yes. 14 Q. Okay. Assuming, if you will, that Felman 15 resumes operations January 1, 2014, does that table on 16 page six of your testimony indicate the economic impact 17 that can be expected from Felman’s operations in 2014, in 18 your opinion? 19 A. If Felman operates in this capacity, then this 20 is the impact, the estimated impact. 21 Q. And to the extent that any of the input data for 22 2014 are different, the table would be different? 23 A. Correct. 24 Q. The impact table? 25 A. Correct.

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1 Q. One quick question about the last line on your

2 table, the assorted state taxes, one of those state tax 3 items is real property taxes; is that right?

4 A. No. 5 Q. Sorry?

6 A. No. 7 Q. It is not?

8 A. No. 9 Q. Okay. What assorted state taxes are included in 10 that line then? 11 A. Included in this line is consumer sales and use 12 tax, personal income, business franchise taxes and 13 corporate net income taxes. 14 Q. Okay. So in addition to not including real 15 property taxes, I take it that doesn’t include personal 16 property taxes? 17 A. It doesn’t. 18 Q. Okay. Now, would you look at the employment 19 line? In 2012, the data was 273 employees at Felman; 20 correct? 21 A. Yes. 22 Q. Company Witness Konrady testifies that if this 23 Commission approves the special rate proposed by Felman, 24 Felman will restart at least two of its three furnaces 25 and employ at least 155 employees. Would you accept that

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1 number subject to check?

2 A. I don’t know. 3 Q. Okay. Let me ask you then to assume

4 hypothetically that that is the number that Mr. Konrady 5 testified to.

6 A. Okay. 7 Q. Okay. I’ll further represent to you that

8 Company Witness Konrady testified that if market 9 conditions are good, Felman will restart its third 10 furnace and employ as much as 200 employees. Will you 11 accept that hypothetically? 12 A. Yes. 13 Q. Now, would you agree that either 155 jobs or up 14 to 200 jobs would have a significantly smaller economic 15 impact than 273 jobs? 16 A. The impact really depend more on the value of 17 the dollars spent for the operation. So if the total 18 possible expenditures, say, decline, that’s lower --- 19 five percent lower than this provided here, then the 20 impact is estimated to be proportionately five percent 21 lower as well. 22 Q. The first line item on your table is labeled 23 business volume, parenthesis, sales, dollar sign, close 24 parenthesis; correct? 25 A. Yes.

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1 Q. Would you please explain what sales are

2 reflected in that line item? 3 A. This represents the total expenditures that

4 Felman spent in 2012. 5 Q. Okay. So it’s not in any sense sales of

6 Felman’s product; correct? 7 A. No, because the impacts would be based on the

8 expenditure, --- 9 Q. Right. 10 A. --- the amount of money circulated in the 11 economy. 12 Q. The total operational expenditures are the 13 combination of all the sales of other entities to Felman, 14 including the sale by employees of their labor; correct? 15 A. What do you mean by the sales by employees? 16 Q. Well, for example, your business volume number, 17 $130 million, that includes within it the $18,450,000 of 18 employee compensation; does it not? 19 A. Yes. 20 Q. So given your title of business volume sales, 21 that piece of the $130 million number are the sales of 22 labor by those employees to Felman? 23 A. It could, yes. 24 Q. All right. 25 A. It could.

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1 Q. Now, if the 2014 employment figures are

2 significantly lower than they were in 2012, other things 3 being equal, the labor component of the business volume

4 direct impact would be lower as well; correct? 5 A. Correct.

6 Q. And the business volume, I take it, would also 7 include the sales of electricity to Felman by Appalachian

8 Power Company? 9 A. Yes. 10 Q. If Felman’s proposed special rate is approved, 11 would you expect there to be a significant decrease in 12 Felman’s expenditures on electricity in 2014? 13 A. But --- well, not necessarily because there’s 14 got to be some money from other --- from other sources 15 used to pay for their electricity. So the use of the 16 electricity by Felman, even though with a lower --- will 17 still generate the impact. So in other words, the value 18 of the electricity that generates impact is the total 19 value of the payment for the electricity, no matter where 20 it comes from. 21 Q. Okay. But if --- is it your understanding that 22 the purpose of this proceeding is because Felman would 23 like to have a rate under which it has lower expenditures 24 for electric power going forward? 25 A. For Felman to pay, yes.

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1 Q. Right. And to the extent Felman’s expenditures

2 on electric power are smaller than they were in 2012, 3 that would decrease the business volume line of any

4 summary studies such as you’ve indicated on page six; 5 would it not?

6 A. No, because there’s going to be money from 7 different source that will be used to pay for the

8 electricity as well. 9 Q. I guess I don’t follow you. What is this other 10 source likely to be? 11 A. From my understanding is that if Felman gets the 12 special rate, then that’s going to --- this will create 13 an increase in the rate of electricity for the customers. 14 So the general ---. 15 Q. I think I follow you now, sir. In other words, 16 if you were doing this study for the year after Felman 17 had the special rate, you would include in business 18 volume not only what Felman pays for electricity, but the 19 portion of APCo’s fixed costs that are borne by other 20 customers? 21 A. If it is based on --- if it is an object of the 22 study, yes, I would include that. 23 Q. Had Felman decided to provide you with more 24 updated information about its operational data expected 25 --- well, either its operational data in 2013 or its

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1 projected operational data in 2014, you could have done

2 another study; correct? 3 A. If they provided me with that, yeah.

4 Q. Okay. That’s all the questions I have. Thank 5 you very much.

6 A. Thank you. 7 CHAIRMAN:

8 Staff? 9 CROSS EXAMINATION

10 BY ATTORNEY LITTLE: 11 Q. Dr. Christiadi, does your report take into 12 account whether or not Felman Production will be 13 operating at a profit or loss, or is it just that the 14 plant is operating? 15 A. In terms of impact, it doesn’t matter. I guess 16 what matter is how many --- how much money is spent and 17 created in the economy. 18 Q. And have you --- you testified a little bit 19 about that you haven’t reviewed the special rate. If I 20 will represent to you that there is a possibility that 21 under the proposed special rate as proposed by Felman 22 Production that the plant could be operating, yet not 23 making a profit and not paying the full amount of 24 electricity bills, accruing a deficit for the electricity 25 bills, and then at some point if that continues beyond a

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1 point where Felman Production is not economically viable,

2 that those bills would have to be paid to the power 3 company at some point, which we have --- do you follow

4 me? I was kind of rambling. Do you understand what I 5 said?

6 A. You can go ahead. 7 Q. If we have this deficit for the electric bills

8 that Felman Production accrued, --- 9 A. Uh-huh (yes). 10 Q. --- those bills will have to be paid, and those 11 bills will have to be paid by all the other industrial 12 customers, the other ratepayers of Appalachian Power 13 Company. Would that have possibly an adverse impact on 14 the economy of not only Mason County, but the rest of the 15 state? 16 A. No, because in terms of the money generated in 17 the economy, it’s going to be still the same. But the 18 impact attributed to Felman will decline. 19 Q. But this deficit, if there is one, of the 20 avoided electric payments for Felman if the special 21 rate’s proposed, would you subject to check --- could be 22 possibly $99 million over a ten-year period. And then 23 that ten --- $99 million, which is due to the power 24 company, which they are by statute allowed to collect, 25 would then have to be dealt with. And if that were to

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1 happen, you’re saying that that would not have an adverse

2 impact on the economy of West Virginia? 3 A. In terms of the magnitude of the impact, yes.

4 I’m sorry. In terms of the magnitude of the impact, it’s 5 not going to --- it’s not going to reduce the impact.

6 But in terms of who bears the consequences, that’s a 7 different question. That’s ---.

8 Q. But there will be consequences of paying that 9 back that will have to be borne by somebody, some other 10 entity other than Felman if they’re no longer operating; 11 correct? 12 A. Yes, I would say yes. 13 ATTORNEY LITTLE: 14 That’s all I have, Your Honor. 15 COMMISSIONER MCKINNEY: 16 Good morning, Doctor. 17 A. Good morning. 18 COMMISSIONER MCKINNEY: 19 In the early 2000s, the chemical 20 industry was going through similar studies. Were you 21 involved in any of those? 22 A. No. 23 COMMISSIONER MCKINNEY: 24 Dr. Witt uses --- used IMPLAN for those 25 studies. Are you aware of that?

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1 A. I was not involved in the study.

2 COMMISSIONER MCKINNEY: 3 Very good. One of the questions I have

4 based on that, though, is --- the ratio caught me a 5 little bit by surprise. The earlier studies that I’ve

6 been involved with had about a three to one ratio of 7 implant jobs to affected jobs. Are you aware of any of

8 those studies? 9 A. No, sir.

10 COMMISSIONER MCKINNEY: 11 One of the things that I have a 12 question about is, does your --- does this particular 13 study bring into account that --- and look at whether 14 hairdressers, doctors, schoolteachers, restaurant owners, 15 pharmacies, groceries, police, are those people --- are 16 they --- do they get captured in your study? 17 A. If they were a part of the suppliers, then ---. 18 COMMISSIONER MCKINNEY: 19 So if they didn’t have a direct supply, 20 they’re --- but they’re still indirect? In other words, 21 if you have 2,000 people and you go down to one person, 22 you don’t need six policemen. 23 A. I’m sorry. Could you repeat that question? 24 COMMISSIONER MCKINNEY: 25 Sure. One of the things that I looked

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1 at, one of the things that we looked at was just really

2 the economy of a county and the fact that if you had a 3 large number of employees, those employees were supported

4 by --- and let’s just pick someone that cuts hair. 5 Someone that cuts hair. If you go from 2,000 people that

6 need haircuts down to one person that needs a haircut, 7 the number of people cutting hair goes away; is that

8 correct? Does that make sense? 9 A. Yeah, sorry.

10 COMMISSIONER MCKINNEY: 11 Okay. That was one of the study points 12 that came out from Dr. Witt that I’m just trying to 13 explore with you a little bit. Are you aware that we’ve 14 used IMPLAN to --- as for economic impact for a lot of 15 the wind turbine projects that have been here in the 16 state to determine economic impact? 17 A. I don’t believe our office has done that study. 18 COMMISSIONER MCKINNEY: 19 Okay. You don’t think that you all 20 have been involved in those in any way? 21 A. I was not, but I don’t think ---. 22 COMMISSIONER MCKINNEY: 23 Okay. 24 A. I don’t recall. 25 COMMISSIONER MCKINNEY:

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1 One of the questions that came to you

2 was about Armstrong and whether or not you really knew 3 anything about whether Armstrong was going to be or not

4 to be. One of the questions --- one of the answers to 5 one of the questions was about that the reason Armstrong

6 was there was because they were given --- they’re local 7 to the producer and they use material from Felman. Would

8 the fact that they have to buy from another supplier that 9 might be not close and the fact that transportation would 10 be an issue, would that impact that company? 11 A. They have the options. I mean ---. 12 COMMISSIONER MCKINNEY: 13 Yes, but would be the option be at the 14 same price? 15 A. Well, if the distance is --- transportation 16 costs is significant, then it’s not going to be at the 17 same price. 18 COMMISSIONER MCKINNEY: 19 And would that have an impact on that 20 company if it’s not at the same price? 21 A. Well, it will lower the profit margins. 22 COMMISSIONER MCKINNEY: 23 One of the things that kept coming up 24 was the fact that funded --- that Felman funded these 25 results. Did the fact that Felman funded have any impact

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1 on the results of your study?

2 A. No. 3 COMMISSIONER MCKINNEY:

4 Okay. Thank you. 5 CHAIRMAN:

6 All right. That’s all I have. I don’t 7 have anything, actually. Redirect?

8 ATTORNEY ALSOP: 9 Just briefly, Mr. Chairman. 10 REDIRECT EXAMINATION

11 BY ATTORNEY ALSOP: 12 Q. Dr. Christiadi, on page six of your Direct 13 testimony, you refer to a direct impact of employment 14 jobs of 273; correct? 15 A. Correct. 16 Q. Is it your understanding that that number 17 includes not only the employees hired by Felman, but also 18 contract employees that they had during the period of 19 2012? 20 A. Yes. 21 Q. Okay. There were a lot of questions you 22 received about whether in the future if Felman Production 23 had less employees than 273, it might have an impact on 24 the study. Let me ask this question. Assuming Felman 25 Production had made investments in the plant where it

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1 could burn --- it could use the furnaces at a higher

2 level of productivity such that it was able to maintain 3 its business volume at a similar rate going forward in

4 the future, would that also have an impact on the 5 economic output in the future?

6 A. Yes. 7 Q. So any variable that would maintain that sales

8 volume would have an impact on the economic productivity 9 of Felman in the future? 10 A. Yes, only that --- if Felman operates in the 11 same capacity, then this is the impact. I’m sorry if 12 I --- 13 Q. All right. 14 A. --- misunderstand the question. 15 Q. That’s all I have. Thank you. 16 CHAIRMAN: 17 Ms. Osborn, do you have any Recross? 18 ATTORNEY OSBORN: 19 No. 20 ATTORNEY WILLIAMSON: 21 No, sir. 22 CHAIRMAN: 23 All right. Staff? 24 ATTORNEY LITTLE: 25 Nothing from Staff, Your Honor.

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1 CHAIRMAN:

2 All right. Okay. You’re excused, sir. 3 Thank you.

4 A. Thank you. 5 CHAIRMAN:

6 Okay. It’s 11:06. We’ll take a break 7 until 11:20. And who is the next witness up?

8 ATTORNEY KELSH: 9 Barry Nuss will be the next witness.

10 CHAIRMAN: 11 All right. Okay. We’ll be back at 12 11:20. 13 SHORT BREAK TAKEN 14 CHAIRMAN: 15 All right. We’re back on the record. 16 Mr. Kelsh, call your next witness. 17 ATTORNEY KELSH: 18 Thank you. 19 ATTORNEY OSBORN: 20 Mr. Chairman, I’d like to enter the 21 appearance before we call the next witness, Jackie 22 Roberts for CAD. Thank you. 23 CHAIRMAN: 24 Your appearance is noted. CAD was well 25 represented, though.

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1 ATTORNEY KELSH:

2 Felman Production would like to call as 3 its next witness Barry Nuss.

4 ------5 BARRY NUSS, HAVING FIRST BEEN DULY SWORN, TESTIFIED AS

6 FOLLOWS: 7 ------

8 DIRECT EXAMINATION

9 BY ATTORNEY KELSH: 10 Q. Mr. Nuss, where are you employed? 11 A. I am chief financial officer of Georgian 12 American Alloys and its subsidiary, Felman Production, 13 LLC. 14 Q. Okay. And did you prepare or prepare under your 15 supervision both the Direct confidential testimony of 16 Barry Nuss and the Direct redacted testimony of Barry 17 Nuss? 18 A. Yes, I did. 19 ATTORNEY KELSH: 20 I’d like to have those marked as BN-DC 21 and BN-DR. 22 CHAIRMAN: 23 All right. They’ll be so marked. 24 (Felman Exhibits BN-DC and BN-DR marked 25 for identification.)

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1 BY ATTORNEY KELSH:

2 Q. Do you have any changes to those testimonies? 3 A. Yes, I do. In my Direct testimony, page 13,

4 line 7, the words delivery charge should be changed to 5 the words delivery and specification up-charge.

6 CHAIRMAN: 7 I’m sorry? Page 13, line 7?

8 A. Yes.

9 CHAIRMAN: 10 $50 ton delivery ---. 11 A. Delivery charge. 12 CHAIRMAN: 13 Should be? 14 A. It should be delivery and specification 15 up-charge. Also on Exhibit BN-3, special contract 16 pricing, the first bullet point, the last line ---. 17 COMMISSIONER MCKINNEY: 18 Slow down for just a second. 19 A. Oh, sorry. Okay. 20 COMMISSIONER MCKINNEY: 21 One more time. Where? 22 A. Exhibit BN-3, special contract pricing. First 23 bullet point, last line, same change. 24 ATTORNEY ROBERTS: 25 I’m sorry. Could you just repeat that

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1 change once more?

2 CHAIRMAN: 3 Yeah, you’re going to have to ---.

4 A. The words? The words are to change delivery 5 charge to delivery and specification up-charge.

6 ATTORNEY WILLIAMSON: 7 So it’s in the section regarding

8 special contract pricing, that first lengthy bullet 9 point; is that ---?

10 ATTORNEY KELSH: 11 Yes. 12 A. Yes. 13 ATTORNEY KELSH: 14 If everyone’s clear? 15 CHAIRMAN: 16 Reasonably. 17 ATTORNEY KELSH: 18 Okay. 19 BY ATTORNEY KELSH: 20 Q. And that change would be made to both the 21 redacted version and the confidential versions of your 22 testimony; correct? 23 A. Yes, correct. 24 Q. With those changes, if I were to ask you the 25 same questions today, would your answers be the same?

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1 A. Yes, they would.

2 Q. Do you adopt these testimonies as your testimony 3 in this proceeding?

4 A. Yes, I do. 5 Q. Did you also prepare the Rebuttal testimony of

6 Barry Nuss, consisting of 25 pages of questions and 7 answers and then one exhibit?

8 A. Yes, I did. 9 Q. And likewise, you prepared that in confidential 10 and public versions? 11 A. Yes, that’s correct. 12 ATTORNEY KELSH: 13 I’d like to have those marked as BN-CR 14 and BN-RR. 15 CHAIRMAN: 16 Be so marked. 17 (Felman Exhibits BN-CR and BN-RR marked 18 for identification.) 19 BY ATTORNEY KELSH: 20 Q. And do you have any changes to those 21 testimonies? 22 A. Yes, I do. 23 Q. Do you have a document showing that change? 24 A. Yes. 25 Q. And that document’s been distributed to the

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1 Commissioners and to the parties and to the court

2 reporter. But let’s talk about where that change needs 3 to occur so everyone’s clear. Where in your Rebuttal

4 testimony does this change need to be made? 5 A. On page nine, line five.

6 Q. Actually the document that we circulated with 7 the corrections starts on line four.

8 A. Four. 9 Q. With the sentence beginning, it is also? 10 A. That is correct. 11 Q. Okay. And with that change, if I were to ask 12 you the same questions today, would your answers be the 13 same? 14 A. Yes, they would. 15 Q. Do you adopt this as your rebuttal testimony in 16 this proceeding? 17 A. Yes, I do. 18 ATTORNEY KELSH: 19 We’d like to move into evidence these 20 four exhibits as the Direct and Rebuttal testimony of 21 Barry Nuss. 22 CHAIRMAN: 23 All right. Without objection, they’ll 24 be admitted. 25 ATTORNEY KELSH:

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1 We’ll now --- like now to move to the

2 live Sur-rebuttal testimony of this witness in response 3 to the supplemental Direct testimony of Diana --- Deanna

4 White. 5 CHAIRMAN:

6 Let’s keep it narrow. 7 ATTORNEY KELSH:

8 Yes.

9 BY ATTORNEY KELSH: 10 Q. Mr. Nuss, the cost of purchasing coal and 11 getting that coal delivered to the New Haven plant is a 12 component in Felman’s gross margin index; correct? 13 A. Yes, that’s correct. 14 Q. In her supplemental Direct testimony, Ms. White 15 states on page two, line ten that the company claims to 16 pay $50 a ton for coal delivery. Does Felman pay $50 per 17 ton just for coal delivery? 18 A. No, it does not. That $50 charge reflects 19 delivery costs, as well as differences in the 20 specification between the index coal and the coal that 21 Felman requires for its operation. 22 Q. What type of coal does Felman purchase for the 23 New Haven plant? 24 A. Felman uses a type of coal that’s referred to as 25 stoker coal. It is higher in carbon and it is also

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1 specified to a size, which carries a premium in cost.

2 Q. Okay. Is that the same as central Appalachian 3 coal as reported in Platts?

4 A. No. 5 Q. Is the cost of that coal greater or lesser than

6 central Appalachian coal as reported in Platts? 7 A. It’s greater.

8 Q. Explain how the cost of acquiring and delivering 9 coal functions in Felman’s calculation of the gross 10 margin index. 11 A. In the calculation of the gross margin index, we 12 use the Platts Index as a cost for coal. It gets 13 formulated into the cost of our raw materials compared to 14 the selling price of our product. We add $50 to the 15 Platts Index for the price of coal to cover the fact that 16 it is a more expensive specification, and also for 17 delivery charges. 18 Q. I’d like to refer you to ---. 19 CHAIRMAN: 20 I assume that completes your 21 additional ---? 22 ATTORNEY KELSH: 23 No, it does not. 24 CHAIRMAN: 25 All right. I assume you’re getting

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1 very close to the end of it, though.

2 ATTORNEY KELSH: 3 I am. I won’t be much longer.

4 BY ATTORNEY KELSH: 5 Q. I’d like to refer you to Exhibit DWL-SD Two to

6 Ms. White’s supplemental Direct testimony. 7 A. Yes.

8 Q. Is this a discovery response which you prepared? 9 A. Yes, it is. 10 Q. What does the chart on this discovery response 11 show? 12 A. The chart shows for the period from January ’12 13 through June of ’13 on a monthly basis how much coal we 14 charged into our furnaces, the cost of that coal and 15 compares to the index of Platts for that month and 16 calculates the difference. 17 Q. All right. Was that difference --- does that 18 difference include both delivery charge and the 19 specification up-charge? 20 A. Yes, it does. 21 Q. And for that period, was the amount greater or 22 less than $50? 23 A. The average for that period was $59 and change. 24 It was greater. 25 Q. Okay. But in our proposal we used $50?

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1 A. That’s correct.

2 Q. All right. 3 CHAIRMAN:

4 Why is this --- this is something that 5 --- why is this confidential?

6 ATTORNEY KELSH: 7 The cost of the inputs are

8 confidential.

9 CHAIRMAN: 10 Confidential to whom? 11 ATTORNEY KELSH: 12 To Felman. 13 CHAIRMAN: 14 Why? I mean, why are they confidential 15 in this proceeding? 16 ATTORNEY KELSH: 17 Because our cost structure is how we 18 compete with other providers in this industry. 19 CHAIRMAN: 20 I mean, coal --- coal people --- APCo 21 has to make its coal prices known. I mean, they’re 22 published. 23 ATTORNEY KELSH: 24 Well, APCo’s a regulated utility and 25 we’re a competitive business, so our competitors are

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1 interested in our cost structure. We try to keep that

2 cost structure information confidential. 3 CHAIRMAN:

4 Okay. I’m just --- I’m going to 5 question these.

6 ATTORNEY KELSH: 7 Sure.

8 CHAIRMAN: 9 I don’t know --- I don’t know that I 10 agree with you, but that’s your explanation. Okay.

11 ATTORNEY KELSH: 12 Okay. 13 ATTORNEY ROBERTS: 14 A point of clarification, Your Honor. 15 This is marked confidential, but we’re talking about it 16 in an open hearing that’s being broadcast to the public. 17 So I’m a little confused about ---. 18 CHAIRMAN: 19 Anything that’s said in an open 20 hearing ---. 21 ATTORNEY ROBERTS: 22 It’s no wonder confidential ---. 23 CHAIRMAN: 24 Clearly the $59 number is --- it’s out 25 there.

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1 ATTORNEY ROBERTS:

2 In the public domain, yeah. I just 3 wanted to make sure I understood. Thank you.

4 BY ATTORNEY KELSH: 5 Q. On page three of her supplemental testimony, Ms.

6 White states that she was unable to match Felman’s coal 7 purchases and coal delivery costs to Felman’s general

8 ledger. Can you explain where on Felman’s general ledger 9 it records coal costs? 10 A. Historically coal was not an input. The plant 11 run --- ran with coke. And over the years it was able, 12 because of the increase in the cost of coke, to be able 13 to substitute coal in certain specifications. And the 14 general ledger accounts were combined. At one point in 15 history it was all in one account of raw materials, and 16 then they began to divide up. And currently the general 17 ledger has a separate account, but the historical general 18 ledger does not have a separate account for coal. 19 Q. Ms. White contends that the coal delivery price 20 for Felman far exceeds APCo’s. Do you agree? 21 A. Yes. 22 Q. How does Felman procure coal delivery? 23 A. Felman issues a request for quotation based on 24 its requirements and its specifications. It receives 25 competitive bids and it awards the business accordingly.

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1 Q. All right. Why does APCo have a lower cost of

2 coal delivery than Felman? 3 A. It’s a different type of coal. It’s referred to

4 as a thermal coal. It has different specifications. 5 Most significant is lower carbon is --- and the sizing.

6 Felman requires that there be no fine particles in its 7 coal because you introduce it to the furnace and it blows

8 out and could cause other problems in the operation. 9 That’s normally not the case with thermal coal. 10 Q. Okay. Does Felman purchase coal on the same 11 scale as APCo? 12 A. No, it does not. 13 Q. Does that affect the delivery price? 14 A. I would assume so, yes. 15 ATTORNEY KELSH: 16 That’s all the questions I have for 17 this witness. He’s available for Cross Examination. 18 CHAIRMAN: 19 All right. 20 ATTORNEY OSBORN: 21 Thank you. 22 CROSS EXAMINATION 23 BY ATTORNEY OSBORN: 24 Q. Mr. Nuss, I’m Heather Osborn. I represent the 25 Consumer Advocate Division in this matter. And I want to

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1 begin just by following up on some of your Sur-rebuttal

2 that you just made regarding coal delivery prices. You 3 made a change to your testimony to reflect that the $50

4 that you’d referenced in your prior testimony does not 5 represent just the coal delivery charge, but also the

6 specification charge; correct? 7 A. That’s correct.

8 Q. What is the explanation for why your testimony 9 in that regard needed to be revised? Why was it --- why 10 was it indicated in your testimony previously that it was 11 simply a delivery charge? 12 A. It was an oversight. The $50 was an adjustment 13 to the index to get to a place that represented what our 14 landed cost of coal is. And I just --- I referred to it 15 as a delivery charge when, in fact, it’s more than that. 16 Q. And being that it’s more than that, are you able 17 to tell us what portion of that $50 relates to delivery 18 versus the remainder that relates to the specifications? 19 A. Well, we purchase coal both on a delivery basis 20 and at the mine where we pay for the delivery. Delivery 21 charges do vary over time based on trucking costs. We 22 transport our coal by truck, and that generally ranges 23 $25 to $35. 24 Q. And are you aware of any data responses filed by 25 Felman in this case that actually reflect or otherwise

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1 show this $50 that you’ve been discussing? In other

2 words --- let me rephrase that. Has Felman produced --- 3 are you aware of whether Felman has produced any

4 documents, any invoices in this case that reflect the 5 payment by Felman or a bill to Felman of this $50

6 delivery and specification charge? 7 A. The exhibit I just referred to, Exhibit DLW-SD

8 Two, where we provided our monthly costs and compared 9 them to the index, is meant to show where that $50 charge 10 comes from. 11 Q. And that’s ---. 12 A. We also have provided a number of invoices from 13 coal suppliers that showed a delivery price and that 14 showed an at-mine price. 15 Q. Okay. So the first document that you’re 16 speaking of that was attached to Ms. White’s testimony is 17 the document that was prepared by Felman; correct? 18 A. Yes, that’s correct. 19 Q. Okay. And the invoices that you referred to, 20 were those produced in response to CAD Request 12-D as in 21 dog? 22 A. Yes, that’s correct. 23 Q. There were four invoices; correct? 24 A. Yes, I believe that was correct. 25 Q. Okay. Are those all of the invoices that Felman

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1 maintains that are responsive to that data request?

2 A. No, the data request was for contracts and our 3 response was to provide those as examples of spot

4 purchases. So those are not all of the invoices, but 5 they’re representative of the purchases, spot purchases.

6 Q. Okay. I’m going to move on and then potentially 7 come back to that.

8 A. Uh-huh (yes).

9 ATTORNEY OSBORN: 10 Permission to approach the witness? 11 Actually before I do, I want to seek some clarification 12 as to whether the document that I’m about to distribute 13 is intended to be confidential. Somewhere in my notes I 14 had it written down that it was supposed to be, but the 15 document itself does not indicate that it is. It’s 16 APCo’s response to Staff’s second request for 17 information, question number one. 18 OFF RECORD DISCUSSION 19 CHAIRMAN: 20 So this is the way it was filed? 21 ATTORNEY OSBORN: 22 Yes. And I’ll just wait until I 23 can ---. 24 OFF RECORD DISCUSSION 25 ATTORNEY KELSH:

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1 We believe this information is

2 confidential. 3 CHAIRMAN:

4 Are you going to have this marked as 5 CAD Cross One?

6 ATTORNEY OSBORN: 7 Yes.

8 CHAIRMAN: 9 All right.

10 ATTORNEY OSBORN: 11 Sorry about that. 12 CHAIRMAN: 13 It’s all right. We’re having marked 14 for identification as CAD Cross Exhibit Number One a two- 15 page document that is a question and response 2-01 for 16 supply and billing revenue information which demonstrates 17 the revenue impact on the rates. 18 (CAD Cross Examination Exhibit One 19 marked for identification.) 20 CHAIRMAN: 21 All right. Well, it sounds to me like 22 we’re at a point where we need to debate this, or argue 23 it. Somebody tell me what you want to do. I mean, ---. 24 ATTORNEY KELSH: 25 The bases for believing this document

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1 is confidential twofold. First, it does pertain to our

2 cost structure, which is ordinary confidential; not 3 something we typically share with our customers --- or

4 our competitors. And second, it’s confidential customer 5 information. The Commission typically treats customer

6 bills as confidential. 7 CHAIRMAN:

8 It was filed in unredacted form. When 9 was it filed?

10 ATTORNEY KELSH: 11 This was filed by APCo. I don’t have 12 the entire response, so I’m not certain of that. 13 CHAIRMAN: 14 Well, ---. 15 ATTORNEY OSBORN: 16 I can find that for you. 17 ATTORNEY LITTLE: 18 Your Honor, the Commission’s web docket 19 maintained by the Executive Secretary’s office, the 20 response to Staff’s second set of discovery requests was 21 filed as confidential on November the 12th. 22 CHAIRMAN: 23 I’m sorry. You’re saying this was 24 filed as confidential? 25 ATTORNEY LITTLE:

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1 And there was a --- on November the

2 8th, there was a non-confidential version filed. And 3 just for the record, I’m accessing the Commission’s web

4 docket of the Executive Secretary’s office, looking at 5 the filings.

6 ATTORNEY OSBORN: 7 And Mr. Chairman, if I could, I have a

8 copy of the November 12th cover letter to Ms. Ferrell, 9 which does not indicate that it was being filed 10 confidentially.

11 CHAIRMAN: 12 That’s this document? 13 ATTORNEY OSBORN: 14 That’s that document, yes. It is 15 APCo’s response to Staff’s second set of discovery 16 requests, and the cover letter does not indicate that 17 it’s being filed confidentially. 18 CHAIRMAN: 19 And that was filed by APCo? 20 ATTORNEY OSBORN: 21 It was filed by APCo. 22 ATTORNEY PORTH: 23 Your Honor, if it’s --- if it’s 24 helpful, my ---. 25 CHAIRMAN:

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1 I’m sure it will be.

2 ATTORNEY PORTH: 3 My understanding of what we did on

4 behalf of APCo was we did file this response initially 5 without any request for confidentiality. And we were

6 then contacted by Felman’s Counsel and informed that they 7 regarded the information as confidential. I believe they

8 took some steps with the Executive Secretary’s office to 9 pull it back so that it would not appear on the website 10 and would be treated confidentially from that point 11 forward. 12 And thereafter we developed a procedure 13 with the agreement of all of the parties where when APCo 14 was responding with data which Felman regarded as 15 confidential, that we would provide those responses 16 directly to Felman, who would then distribute them to the 17 other parties, since Felman had individual bilateral 18 interim confidentiality agreements with the various 19 parties, and APCO did not. I don’t know if that’s 20 helpful, but that’s my understanding of things. 21 CHAIRMAN: 22 It’s helpful. I’m not sure that it 23 clarifies where we are on this. 24 ATTORNEY PORTH: 25 Probably not.

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1 ATTORNEY WILLIAMSON:

2 Mr. Chairman? I might as well weigh 3 in; right? Everybody’s got to have a say. I’m not here

4 to do Felman’s bidding, and WVEUG, as you noted at the 5 outset, opposes their special rate. And obviously, they

6 bear the burden in this case and they’ve decided to come 7 forth and they have to deal with some of the ancillary

8 consequences of that, like having to disclose data. But 9 I would say that from the perspective of our clients, we 10 would view this type of special contract, which includes 11 unitized rates and percentages of savings based on a 12 special contract that should be reflecting a unique fixed 13 cost of service, as confidential. 14 CHAIRMAN: 15 Okay. Well, I’m not sure that helps us 16 much either, but --- has the CAD stated its position 17 other than what has happened? What is confidential on 18 here? All of it? Because it’s not --- on the thing I 19 have --- 20 ATTORNEY KELSH: 21 No. 22 CHAIRMAN: 23 --- nothing is marked. 24 ATTORNEY KELSH: 25 We filed both a public version and

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1 confidential version.

2 CHAIRMAN: 3 All right. And what does the --- this

4 is obviously the public --- or the confidential version. 5 ATTORNEY KELSH:

6 Correct. 7 CHAIRMAN:

8 And the only thing that I see marked is 9 a box around some annual total LCP transportation and IP 10 transportation, I guess, and per kilowatt hour 11 information. I don’t know if that’s what’s confidential 12 or if the whole document is confidential. 13 ATTORNEY KELSH: 14 No, the entire document is not 15 confidential, as the Commission’s practice just favors 16 making entire documents confidential. In the redacted 17 version, we redacted all the data under the columns, 18 metered kilowatts, off-peak kilowatts, highest previous 19 peak kilowatts, on-peak metered kilowatt hours, KVAR, 20 KVA, LCP tran, IP trans ---. 21 CHAIRMAN: 22 That’s pretty much all of it; isn’t it? 23 ATTORNEY KELSH: 24 And all the numbers in the annual total 25 and dollars per kilowatt block.

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1 CHAIRMAN:

2 Well, let me ask this. What was not 3 redacted?

4 ATTORNEY KELSH: 5 What was not redacted was the year,

6 month, date and days. 7 ATTORNEY OSBORN:

8 And Mr. Chairman, if it’s any 9 assistance to the Commission, CAD was simply seeking 10 clarification before I began spouting out numbers that 11 were intended to be confidential. I wanted to make sure, 12 you know, I wasn’t going to do that. So we’re fine with 13 however the Commission wants to handle it. We don’t 14 really --- not very helpful, probably. 15 CHAIRMAN: 16 Okay. Well, let me tell you my 17 reaction to some of this. And quite frankly, it’s what 18 Mr. Williamson said in half of a throwaway comment there, 19 and that is you’re in here seeking a special rate from a 20 utility. And if we grant that rate and if the situation 21 comes about as I think you hope, a portion or all of that 22 difference is going to be put onto the other customer. 23 Then to say that we should bend over backwards to make 24 things confidential, particularly some of the things that 25 are in the testimony, I have a difficult time with that.

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1 I mean, yeah, you’re not a utility, but

2 you are in here seeking a special circumstance and I’m 3 troubled by simply making confidential anything that you

4 say is part of a trade secret. I don’t think all 5 information --- all financial information is a trade

6 secret. So I don’t know, I’m willing to listen to 7 further argument.

8 COMMISSIONER MCKINNEY: 9 Mr. Chairman, may I speak?

10 CHAIRMAN: 11 Sure. 12 COMMISSIONER MCKINNEY: 13 I come from an industry that 14 understands a little bit more about what’s confidential 15 and what’s not. And anything that led to the ability to 16 determine in a competitive industry what was my actual 17 cost and led me to a non-competitive situation when I was 18 selling against an actual person who is not in a rate- 19 related situation, I considered confidential. 20 One of the things that really used to 21 bug me was as I dealt with the Environmental Protection 22 Agency, we would have issues that wound up hitting some 23 of our competitors and actually was harmful to our 24 industry. So I am very interested in making sure that we 25 don’t harm the industry, we don’t give out competitive

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1 information, especially that affects your pricing. So

2 just understand that that is a source of real concern for 3 me.

4 CHAIRMAN: 5 Is there a column or combination of

6 columns that if excised would protect the information, 7 but still make the overall information available? This

8 is going to be a long hearing. 9 OFF RECORD DISCUSSION

10 ATTORNEY KELSH: 11 If I could have a minute to confer with 12 Mr. Konrady? 13 CHAIRMAN: 14 Sure. 15 OFF RECORD DISCUSSION 16 ATTORNEY KELSH: 17 Chairman, we’ve taken a look at the 18 columns that were redacted and see if there’s any of 19 those that we feel could have the redaction removed, or 20 at least discussed openly without waiving confidential 21 information. And yeah, both our level of usage and the 22 amount we pay for electricity are confidential. And 23 we’ve reviewed these columns and we don’t believe we can 24 unredact anything that’s been redacted. 25 CHAIRMAN:

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1 Meaning metered kilowatts?

2 ATTORNEY KELSH: 3 Correct.

4 CHAIRMAN: 5 And what?

6 ATTORNEY KELSH: 7 Off-peak, everything to the --- all to

8 the columns to the right of metered kilowatts we’ve fully 9 redacted. 10 OFF RECORD DISCUSSION

11 CHAIRMAN: 12 It’s 11:56. We were going to keep 13 going and let you all get to, say, 12:30 before we broke. 14 But why don’t we break now, come back at 1:00 and we’ll 15 talk further about this over the lunch hour? I would 16 look at some of the things you’ve redacted and see what 17 you can unredact. And when we come back at 1:00, we’ll 18 deal with CAD Cross One. 19 LUNCH BREAK TAKEN 20 CHAIRMAN: 21 All right. We’re back on the record in 22 PSC Case 13-1325-E-PC. As a first question, Ms. Osborn, 23 do you intend to ask questions of this and do you intend 24 to move it into evidence? 25 ATTORNEY OSBORN:

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1 Yes as to both.

2 CHAIRMAN: 3 All right.

4 ATTORNEY OSBORN: 5 And the questions I was going to ask

6 basically center around those three lines at the bottom 7 where certain calculations have been made. The total

8 annual bill under special contract savings, savings, 9 total percent savings. I think that’s probably the 10 extent of my questions about this.

11 CHAIRMAN: 12 Okay. In opening statements, I 13 mentioned that we were concerned about the extensive use 14 of confidentiality and redaction. Not sure that 15 sufficient thought has been given to what needs to be 16 redacted and what doesn’t. In any event, given the 17 nature of the statute that we’re dealing with and the 18 showings that have be made, our feeling is, and 19 Commissioner McKinney will speak separately, but the 20 ruling of the Commission at least is that this matter is 21 going to go in unredacted. 22 And the reason is, one, it was filed 23 unredacted. And you can’t un-ring that bell, although 24 apparently it was done, not with the help, consent or the 25 permission of the Commission, but in some other fashion.

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1 And secondly, the information that is on here we believe

2 is necessary or helpful, if you want, for the full review 3 of what we’re trying to do here. I don’t think there’s a

4 ruling here that going to the concern of the WVEUG that 5 says that all these contracts are either privileged or

6 not privileged or confidential or not confidential. But 7 I don’t think the process was followed here, and quite

8 frankly, we think that we’re going to allow the document 9 to go in in the form in which it was delivered. So ---.

10 COMMISSIONER MCKINNEY: 11 I understand the process reason and 12 that is of a concern to me as well. I have maybe a 13 broader concern in the fact that I believe that this 14 ruling has the potential to subject Felman to harm. An 15 example of that is I’ve seen where exposing manufacturing 16 costs, and in reality since this represents --- 17 supposedly represents a certain percentage that’s in the 18 case of the manufacturing costs, you could then determine 19 the entire manufacturing costs. To competition, to take 20 advantage --- it can be taken advantage by that industry. 21 And I’ve seen that to the point where it actually led to 22 a shutdown of a plant. So I’m very sensitive to this and 23 with that, you’ve heard my opinion and why I believe this 24 probably should be protected. 25 ATTORNEY KELSH:

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1 Okay. If I may, Chairman, we

2 respectfully request the Commission to reconsider its 3 ruling. The Commission frequently receives competitive

4 confidential information from utilities. The competitive 5 local exchange carriers, telecom carriers, in their

6 annual eligible telecommunication carrier filings with 7 the PSC often file parts of that application under seal.

8 They are utilities that receive a determination from the 9 Commission, and it’s been the Commission’s practice to 10 refrain from making any information of that nature public 11 until there’s --- the Commission receives a FOIA request. 12 And in this proceeding, there hasn’t been any entity that 13 has requested that this material be made confidential. 14 And ---. 15 CHAIRMAN: 16 Made public you mean. 17 ATTORNEY KELSH: 18 Made public, right. And before this 19 proceeding, there was some discussion about the extensive 20 confidential materials in this proceeding and how the 21 Counselors would handle that. And we thought we could 22 tiptoe around it. We thought we could be careful in our 23 questioning, have --- instruct our witnesses to be 24 careful in how they responded, and that we could avoid 25 going into closed session possibly altogether, but

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1 certainly minimize that and that it would not be the

2 cumbersome choppy proceeding that you get when you go 3 into closed session frequently. And ---.

4 CHAIRMAN: 5 And that’s all well and good. And I

6 don’t see that --- that that has changed. What we have 7 here is a document that was delivered that was posted on

8 our website and is now, through some process whereby APCo 9 gave Felman the right to withdraw it, withdrew it from 10 our website. And we are now trying to figure out what to 11 do with it. It’s been tendered as a Cross Examination 12 exhibit. I don’t know, the one I have doesn’t have a 13 mark on it, doesn’t say anything on it. And I think this 14 is the one that was filed; is it not? 15 ATTORNEY KELSH: 16 Well, APCo made the initial filing and 17 they did not consult us before making this filing. After 18 they made the filing, they confronted them with it and 19 they said, yeah, that does contain confidential 20 information. I contacted the Executive Secretary’s 21 office. I asked her to remove that from the website and 22 she did so. This was subsequently re-filed with both the 23 public version and confidential version. And this was 24 --- the public version had redactions; the confidential 25 version did not.

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1 CHAIRMAN:

2 Well, we don’t need to go into who had 3 the right to request that something be withdrawn, or that

4 if the CAD requests information of APCo and APCO 5 responds, that they have --- you have the right or

6 obligation then to decide what is confidential and what 7 is not. I think under the statute, and I think at least

8 two of us think that under the statute at issue here, we 9 think that there ought to be erring on the side of 10 Sunshine and not on the side of confidentiality. 11 Now I don’t disagree with your 12 assessment or how you want to proceed. If we can go 13 forward and avoid as much in-camera discussion as 14 possible, that’s fine. And we’re not --- we’re certainly 15 not going to push anything like that. But if issues come 16 up and it’s information that we think is relevant to this 17 matter and needs to be put on the record, we’re going to 18 put it on the record. 19 And, you know, I’m not a big fan of 20 having in-camera discussions. I have --- to my 21 knowledge, we’ve not written an order yet that used 22 confidential information and had, at least while I’ve 23 been here, a confidential order and a non-confidential 24 order. I think we’ve had --- I mean, we have --- as you 25 said, we’ve tiptoed around it on occasion, but we’re not

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1 tiptoeing around this one. It’s been put in. It’s been

2 marked as a Cross Examination exhibit. I don’t know what 3 to make of all the process that went before. But right

4 now, this was tendered, it was filed, it was delivered 5 and it’s being asked to be marked as a Cross Examination

6 exhibit. 7 ATTORNEY KELSH:

8 Well, we’ve also marked confidential 9 testimony. I presume that testimony’s been marked 10 confidential and tendered to the court reporter, will be 11 treated in a confidential manner. 12 CHAIRMAN: 13 To the extent it is left as 14 confidential, it will be. 15 ATTORNEY KELSH: 16 Well, I don’t see how this exhibit is a 17 cat that’s out of the bag in terms of its being 18 introduced at this hearing. 19 CHAIRMAN: 20 Well, the bell was rung for one thing, 21 and you can’t un-ring it. You know that. 22 ATTORNEY KELSH: 23 Well, this is information that’s 24 confidential to Felman, that it did not have any 25 involvement in releasing public. That was APCo made that

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1 release, and I think this is --- that was an error by

2 APCo in two ways. It violated the terms of its 3 protective agreement with Felman. It’s also typical that

4 utilities do not file customer billing information 5 publicly with the Commission. I mean, typically that’s a

6 restricted document on the Commission’s docket. And I 7 think this should have been treated in the same manner.

8 CHAIRMAN: 9 Well, it wasn’t. It was filed, it was 10 put out on the Internet and our feeling is that we go 11 forward. 12 ATTORNEY KELSH: 13 Can I have a minute to confer with my 14 client? 15 CHAIRMAN: 16 You can have a minute. You can note 17 your exceptions. You can do whatever you want. 18 OFF RECORD DISCUSSION 19 ATTORNEY KELSH: 20 Chairman, I appreciate your indulging 21 our argument on this issue. Felman is very concerned 22 that not only our competitors, but also the people who 23 buy our product could find out about our costs. It’s 24 important to limit the amount of information that they 25 have about our cost structure. The questions CAD are

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1 going to ask do not pertain to the column on-peak metered

2 kilowatt hours. If we could just have that column 3 entirely redacted, we believe that would give us

4 sufficient protection in the circumstances. 5 CHAIRMAN:

6 I thought I suggested that before the 7 break, that was --- I thought that was the column, either

8 that one or the --- well, that one particularly because 9 if you take that out, I don’t think the rest of it’s a 10 problem.

11 ATTORNEY KELSH: 12 All right. 13 CHAIRMAN: 14 And I don’t think you could make that 15 determination either. 16 ATTORNEY KELSH: 17 Pardon? 18 CHAIRMAN: 19 I don’t --- if you take out the on-peak 20 metered kilowatt hours, I think the document is in 21 essence sanitized. 22 ATTORNEY KELSH: 23 We would like to have the document, the 24 exhibit entered into evidence with that column redacted. 25 CHAIRMAN:

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1 Do you have a problem with that?

2 ATTORNEY OSBORN: 3 I do not have an objection to that.

4 CHAIRMAN: 5 All right. We will take a ten-minute

6 break. Somebody go out and put a piece over that column, 7 make copies of it, and we’ll substitute that for CAD

8 Cross One.

9 ATTORNEY KELSH: 10 Appreciate your accommodation. 11 CHAIRMAN: 12 All right. 13 SHORT BREAK TAKEN 14 CHAIRMAN: 15 All right. For the record, we have 16 been handed a revised document that is a partially 17 redacted response 2-01 to request 2-01. It’s my 18 understanding that the parties all agree to this. All 19 right. So the redacted page will be substituted for the 20 prior CAD Cross One. And with that, Ms. Osborn, are you 21 prepared to begin Cross on --- with that exhibit? 22 ATTORNEY OSBORN: 23 I’m sorry? 24 CHAIRMAN: 25 That’s all right.

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1 ATTORNEY OSBORN:

2 I apologize. 3 CHAIRMAN:

4 It’s okay. All I did was substitute 5 the redacted version for the unredacted version and ask

6 you if you’re ready to proceed --- you have had CAD Cross 7 One marked for identification.

8 ATTORNEY OSBORN: 9 Yes. Actually before I proceed, during 10 the break I was speaking with Mr. Kelsh, and he advised 11 me that there are a few instances throughout Mr. Nuss’s 12 testimony, I believe Mr. Nuss’s Rebuttal testimony, where 13 certain numbers were identified as confidential that 14 Felman has now decided can be made public. And I think 15 Mr. Kelsh was hoping that he could take Mr. Nuss through 16 those --- through that testimony briefly, just to make 17 sure everyone’s on the same page and --- 18 CHAIRMAN: 19 Sure. 20 ATTORNEY OSBORN: 21 --- understands what’s now public. 22 CHAIRMAN: 23 Sure. 24 ATTORNEY KELSH: 25 Thank you, Ms. Osborn. Thank you,

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1 Commissioners.

2 REDIRECT EXAMINATION 3 BY ATTORNEY KELSH:

4 Q. Mr. Nuss, do you have your Rebuttal testimony in 5 front of you?

6 A. Yes, I do. 7 Q. I’d like to refer you to page four, line 12.

8 A. Yes. 9 Q. There’s a confidential component on that. Is 10 that item, in fact, confidential?

11 CHAIRMAN: 12 I’m sorry. Now, where --- are you on 13 your --- on Mr. Nuss’s Direct or Rebuttal? 14 ATTORNEY KELSH: 15 Rebuttal. 16 CHAIRMAN: 17 I’m sorry. That explains it. All 18 right. Page four, line 12. All right. 19 BY ATTORNEY KELSH: 20 Q. Mr. Nuss, is that information confidential? 21 A. No. 22 Q. I’d like to refer you to page 12. The 23 information on line 16, is that confidential? 24 A. No, it is not. 25 Q. On that same page, line 23, the information at

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1 the bottom of that page, is that confidential?

2 A. No. 3 Q. And then on page 23, line one, is that

4 information confidential? 5 A. No, it is not.

6 Q. All right. 7 ATTORNEY KELSH:

8 Those are all the modifications we have 9 to make at this time.

10 CHAIRMAN: 11 All right. Ms. Osborn, you’re up. 12 ATTORNEY OSBORN: 13 Thank you, Mr. Chairman. 14 RECROSS EXAMINATION 15 BY ATTORNEY OSBORN: 16 Q. Mr. Nuss, you’ve been handed what’s been marked 17 as CAD Cross Two, I believe. And this is the --- it’s a 18 response by APCo to a discovery request by Staff; is that 19 correct? 20 A. Yes, that’s correct. 21 Q. And specifically it is ---. 22 CHAIRMAN: 23 One, I think. CAD Cross One. 24 ATTORNEY OSBORN: 25 Yes, it is CAD Cross --- CAD Cross Two,

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1 question one, I believe.

2 ATTORNEY ROBERTS: 3 CAD Cross One.

4 CHAIRMAN: 5 No, there is no ---.

6 ATTORNEY OSBORN: 7 I’m sorry. I’m sorry, Staff data

8 request --- the second data request, question one.

9 CHAIRMAN: 10 Right. But it’s CAD Cross ---. 11 ATTORNEY OSBORN: 12 Sorry about that. 13 CHAIRMAN: 14 CAD Cross Examination Exhibit One is 15 how it’s been marked for identification. 16 ATTORNEY OSBORN: 17 Oh, okay. I apologize. I’m sorry, I’m 18 getting on a different track than you. 19 CHAIRMAN: 20 That’s all right. 21 BY ATTORNEY OSBORN: 22 Q. All right. Mr. Nuss, looking at what we have 23 now redacted, which is page two of that data response, a 24 rate comparison using a 12-month history, look for me, if 25 you would, and tell me whether this document identifies

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1 --- actually let me back up, just to sort of preface

2 this. 3 Currently, Felman Production is under a special

4 rate contract with APCo; is that correct? 5 A. Yes, that’s correct.

6 Q. And that contract was entered into in 2006; is 7 that correct?

8 A. That’s correct. 9 Q. Has Felman operated under that special contract 10 consistently since 2006 to the present? 11 A. Yes, it has. 12 Q. Okay. And now, looking at the document, the 13 second page of CAD Cross One, does this document identify 14 what would be Felman Production’s annual total 15 electricity costs absent the special rate with APCo, the 16 special rate contract? 17 A. I’m not aware of what our rates would be absent 18 the special contract. 19 Q. Okay. So looking at this document, you cannot 20 identify for us where it states that? 21 A. I can see where it states that, but I can’t say 22 whether that’s correct or not. 23 Q. Okay. Fair enough. Does this document also 24 identify the total annual bill under the special 25 contract?

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1 A. Yes, I can see that.

2 Q. The figure that’s shown there, $25,519,185.19, 3 do you have any independent knowledge whether that’s

4 accurate? 5 A. That seems accurate.

6 Q. Okay. And so the savings under the special 7 contract as indicated on this document are a little less

8 than four and a half million dollars; correct? 9 $4,478,685.77, according to this document. 10 A. Well, you’re characterizing it as savings under 11 the special contract. And our special contract is a 12 different product, which is priced differently because it 13 has different costs. 14 Q. Well, with all due respect, --- 15 A. So there is a difference. 16 Q. --- I’m not characterizing it as savings under 17 the special contract. That’s how APCo has characterized 18 it; correct? 19 A. Yes, this is their exhibit. 20 Q. Okay. And APCo has also identified then on this 21 exhibit the percentage savings under the special contract 22 as 14.93 percent; is that correct? 23 A. Yes, that’s what’s on the document. 24 Q. Okay. In this case, Felman Production is 25 requesting an annual discount for its fixed cost from the

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1 Commission; is that correct?

2 A. Yes, that’s correct. 3 Q. And when the Petition was filed with the

4 Commission, those fixed costs were identified as what, 5 what annual amount?

6 A. They were estimated by APCo as approximately 7 nine and a half million dollars.

8 Q. Okay. I understand from some data responses 9 that that number has changed a bit; is that correct? 10 Since the Petition was filed? 11 A. Not that I’m aware of. 12 Q. Okay. We’ll come back to that. Using the nine 13 and a half million dollars as the annual discount that 14 Felman has requested in this case and taking into 15 consideration that the current total annual bill under 16 the special contract with APCo is the $25,519,185.19, 17 would you agree with me if I represent to you that if you 18 do the calculation, a nine and a half million dollar 19 discount annually on that $25 million approximately 20 amount constitutes approximately a 35 percent discount? 21 A. I would not agree with characterizing it that 22 way. 23 Q. And why is that? 24 A. Because if I went to car dealer and I was given 25 a choice to buy a Rolls Royce or a Chevrolet and I chose

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1 to buy the Chevrolet, I would not consider that as a

2 discount. I would consider that as buying a different 3 product at a different price.

4 Q. Okay. And perhaps we’re talking about two 5 different things now. I understand that you don’t agree

6 with APCo’s characterization as there being savings under 7 the special contract constituting the $25 million. I

8 understand that. We talked about that a moment ago. But 9 you do agree, I believe based upon your testimony and the 10 Petition and the language that’s been used throughout 11 this case, that if we look at the $25 million that is the 12 current electricity rate annually under the special 13 contract, and we talk about the fact that Felman has 14 requested a nine and a half million dollar annual 15 discount off of that, is that approximately a 35 percent 16 discount off of that $25 million number? 17 A. Yes. 18 Q. Okay. And so if we take the discount that 19 according to APCo, the savings rather, under the special 20 contract, which is approximately 15 percent as 21 characterized by APCo as savings under the special 22 contract, and we add that together with the approximately 23 35 percent discount that Felman is requesting in this 24 case, you agree with me that that equals approximately 50 25 percent of a discount from what Felman would be paying

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1 absent the special contract with APCo and absent a

2 special rate that is requested in this case? 3 A. I do not agree that it’s a 50 percent discount.

4 It’s a 50 percent discount off of a different rate. 5 Felman doesn’t get the $25 million rate because it ---

6 you know, it agrees to an interruptible rate for doing 7 that. There are cost savings involved with that; there

8 are costs to the company involved with doing that. So I 9 think it’s unfair to characterize it as a 50 percent 10 discount off a rate which isn’t our rate, which isn’t the 11 product that we buy. 12 Q. But it is a 50 percent discount off the IP 13 tariff rate. Would you agree with that? 14 A. I’ll agree that the math is $15 million is 50 15 percent of $30 million. 16 Q. In your testimony, Mr. Nuss, moving on from this 17 exhibit, you refer more than once to the shareholder of 18 Felman Production, shareholder singular. 19 A. Uh-huh (yes). 20 Q. And I’m wondering if you’ll tell me who is that 21 shareholder --- the singular shareholder that you’ve 22 referred to in your testimony? 23 A. Currently the shareholder of Felman Production 24 is Georgian American Alloys. 25 Q. And Georgian American Alloys has also, of

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1 course, been identified as the parent company of Felman

2 Production? 3 A. That’s correct.

4 Q. At this time, are there other --- there are no 5 other shareholders of Felman Production? I just want to

6 be sure I understand that. 7 A. Right, Georgian American Alloys owns 100 percent

8 of Felman Production. 9 Q. Okay. And prior to Georgian --- well, let me 10 ask you this. In what year did Georgian American Alloys 11 take over ownership of Felman Production? 12 A. In 2012. 13 Q. And prior to that, from 2006 to 2012, the parent 14 company of Felman Production was Haftseek Investments; 15 correct? 16 A. Correct. 17 Q. Okay. And if you’ll just kind of bear with me 18 for a moment, I want to sort of take you through a chain 19 of who owns what and --- 20 A. Uh-huh (yes). 21 Q. --- the interrelation. Haftseek Investments was 22 owned 100 percent by Divot or Divot (changes 23 pronunciation) Enterprises; is that correct, to the best 24 of your knowledge? 25 A. I don’t believe it was 100 percent.

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1 Q. Do you know what that ownership rate was?

2 A. I believe that’s confidential information. I 3 believe Haftseek was owned by two other companies.

4 Q. And you say you believe that’s confidential 5 information. Is that information that you possess, but

6 you simply don’t want to testify to it now because it’s 7 considered confidential? I mean, do you have that

8 information? 9 A. I don’t have that information in my mind or with 10 me. I’m sure that information is available. 11 Q. With respect to --- and am I pronouncing it 12 incorrectly? Divot, Divot (changes pronunciation)? 13 A. Divot (corrects pronunciation). 14 Q. Divot. Divot Enterprises. Is it true that, if 15 you know, that it was owned 100 percent by a gentleman by 16 the name of Igor Kolomoisky? 17 CHAIRMAN: 18 Can you spell that for the court 19 reporter? 20 ATTORNEY OSBORN: 21 I will. Igor, I-G-O-R, Kolomoisky, 22 presuming I’m pronouncing that correctly, 23 K-O-L-O-M-O-I-S-K-Y, I believe is correct. 24 A. The answer is ultimately, indirectly, I believe 25 that’s the case.

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1 BY ATTORNEY OSBORN:

2 Q. That Mr. Kolomoisky owned 100 percent of Divot 3 Enterprises?

4 A. Correct. 5 Q. And in data responses, you have indicated I

6 believe that --- well, you had indicated that Haftseek 7 Investments was the 100 percent owner of Felman

8 Production and Felman Trading until they were contributed 9 to Georgian American Alloys in February of 2012; correct? 10 A. That’s correct. 11 Q. And the term contributed to Georgian American 12 Alloys, what do you mean by that? 13 A. The equity of those companies was exchanged for 14 equity in Georgian American Alloys. 15 Q. Now, are there documents that you’re aware of 16 that reflect that exchange, that contribution to Georgian 17 American Alloys? 18 A. Yes. 19 Q. Have those been produced in this case, if you’re 20 aware? 21 A. Not that I’m aware. 22 Q. Did Georgian American Alloys exist prior to that 23 contribution of the two Felmans being made to it? 24 A. Georgian American Alloys was established in 2012 25 for the purpose of organizing the U.S. companies under a

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1 U.S. parent company. So it existed shortly before. It

2 was set up to become the holding company. 3 Q. And Divot is not a U.S. company; correct?

4 A. That’s correct. 5 Q. Okay. And currently, Haftseek Investments is

6 one of the owners of Georgian American Alloys; correct? 7 A. That’s correct.

8 Q. Who are the other owners of Georgian American 9 Alloys? 10 A. A company called Optima Group, LLC, and a 11 company called GM Holdings, GM ---- GM Manganese 12 Holdings, Limited. 13 Q. And Mr. Mordechai Korf, who’s been identified 14 throughout this proceeding as a director of Georgian 15 American Alloys, a director and president and CEO of 16 Felman Production and Felman Trading, is he --- does he 17 have some ownership interest in Optima Group, LLC? 18 A. He does. 19 Q. What do you --- do you know the nature of that 20 interest? 21 A. I don’t recall the exact number, but he has an 22 ownership interest in Optima Group and an ownership 23 interest in Haftseek. 24 Q. Okay. Give me just a moment. And you just 25 testified, Mr. Nuss, that Mr. Mordechai Korf does have an

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1 ownership interest in Haftseek Investments; correct?

2 A. That’s correct. 3 Q. And I presume you are aware by virtue of data

4 responses that were provided by Felman in this case of 5 the nature of that ownership; is that correct, the extent

6 of the ownership by Mr. Korf in Haftseek Investments? 7 A. I believe it’s a quarter of one percent.

8 Q. Okay. In other data responses I believe served 9 upon Felman by CAD, you’d identified Igor Kolomoisky, who 10 we mentioned a few moments ago, as an indirect minority 11 shareholder of Felman Production and Felman Trading; is 12 that correct? 13 A. That’s correct. 14 Q. And you testified a few moments ago that 15 Georgian American Alloys is the 100 percent owner of 16 Felman Production; correct? 17 A. That’s correct. 18 Q. So how --- what role does Igor Kolomoisky then 19 play as an indirect minority shareholder? How does that 20 situation work if, in fact, Georgian American Alloys owns 21 100 percent of Felman Production? 22 A. Igor Kolomoisky owns the Divot interest in 23 Haftseek. Haftseek owns an interest in Georgian American 24 Alloys, and Georgian American Alloys owns 100 percent of 25 Felman Production.

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1 Q. It’s all very difficult to keep straight. Okay.

2 ATTORNEY OSBORN: 3 Permission to approach the witness?

4 I’m going to hand you what we’ll ask be marked as CAD 5 Cross Two. Correct?

6 CHAIRMAN: 7 Yeah, except you’re not broadcasting

8 when you’re walking around.

9 ATTORNEY OSBORN: 10 Sorry about that. 11 CHAIRMAN: 12 It’s okay. Thank you. We have had 13 marked for identification as CAD Cross Examination 14 Exhibit Two a request and response 22. That’s what it’s 15 captioned, anyway, request number 22. 16 (CAD Cross Examination Exhibit Two 17 marked for identification.) 18 OFF RECORD DISCUSSION 19 BY ATTORNEY OSBORN: 20 Q. All right. Mr. Nuss, I’ve handed you what we’ve 21 marked as CAD Cross Two, which is Felman Production’s 22 response to CAD’s data request number 22. And that 23 request by the CAD had asked Felman --- had asked Felman 24 Production whether Felman Production or any affiliate of 25 Felman Production have any lawsuits pending related to

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1 Felman. And in response, Felman has provided a chart

2 that lists I believe 19 pending lawsuits or litigation 3 involving either Felman Production or Felman Trading; is

4 that correct? 5 A. That’s correct.

6 Q. And Mr. Nuss, I’m going to hand you what we will 7 ask be marked as CAD Cross Three.

8 (CAD Cross Examination Exhibit Three 9 marked for identification.)

10 BY ATTORNEY OSBORN: 11 Q. Mr. Nuss, the document I’ve handed you that’s 12 been marked as CAD Cross Three, have you seen this 13 document before today? 14 A. Yes, I have. 15 Q. And could you state for the record what this 16 document is to your understanding? 17 A. My understanding is, and it’s pretty narrow 18 about this matter, but there is an arbitration matter 19 going on between two people and we were asked to provide 20 information in connection with that. 21 Q. And this is a --- this is a matter that’s been 22 filed in the United States District Court for the 23 Southern District of ; correct? 24 A. That’s correct. 25 Q. By a gentleman, and I’ll have to spell this as

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1 well, by the name of Victor Mikhaylovich Pinchuk.

2 Victor, V-I-C-T-O-R, Mikhaylovich, 3 M-I-K-H-A-Y-L-O-V-I-C-H, Pinchuk, P-I-N-C-H-U-K. Now if

4 you would turn back to what we marked as CAD Cross Two, 5 which is Felman’s response to CAD's data request number

6 22, this matter is not listed in that response by Felman 7 Production; is that correct?

8 A. Yes, that appears to be correct. 9 Q. Okay. Do you know --- do you know why that is? 10 A. No, I don’t. 11 Q. Okay. And as the CFO of Felman Production and 12 Georgian American Alloys, the matters that have been 13 raised in this application by Mr. Pinchuk for discovery, 14 have those been brought to your attention in your role as 15 CFO? 16 A. The request for the information has been brought 17 to my attention. 18 Q. What about the allegations that are asserted 19 against Georgian American Alloys, Felman Production, 20 Felman Trading and CC Metals and Alloys in this 21 application? 22 ATTORNEY KELSH: 23 I’m going to object to this line of 24 questioning. We’re getting pretty far away from any 25 relevance to this proceeding. I don’t want to get

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1 involved in what appears to be early allegations in a

2 lawsuit that’s --- I don’t see a relationship to what 3 Felman’s requesting in this proceeding.

4 CHAIRMAN: 5 It is Cross Examination, of course, but

6 you are fairly far afoot. How about some demonstration 7 of relevance or materiality or something?

8 ATTORNEY OSBORN: 9 Yes, Mr. Chairman. Give me just a 10 moment here.

11 CHAIRMAN: 12 I guess it’s far afield as opposed to 13 far afoot, but close enough. 14 ATTORNEY OSBORN: 15 Looking at page 6 of 18 of the 16 application, in the first paragraph, some allegations 17 that are asserted against Georgian American and the 18 Felman entities are set forth there. One of those 19 allegations by Mr. Pinchuk ---. 20 CHAIRMAN: 21 I’m sorry. You’re in the application 22 on page six? 23 ATTORNEY OSBORN: 24 Page 6 of 18, yes. 25 CHAIRMAN:

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1 Right. Where ---?

2 ATTORNEY OSBORN: 3 CAD Cross --- CAD Cross Three.

4 CHAIRMAN: 5 Yes, ma’am, but where on page six?

6 ATTORNEY OSBORN: 7 We’re in the first paragraph on the

8 page. In starts, in particular --- about halfway through 9 that paragraph.

10 CHAIRMAN: 11 Okay. All right. 12 ATTORNEY OSBORN: 13 In particular, the corporate discovery 14 subjects who are identified in this application as 15 Georgian American, Felman Production, Felman Trading, are 16 alleged to have been parties to Mr. Kolomoisky’s and 17 another gentleman’s self-dealing transactions, either by 18 directly or indirectly selling raw materials at above- 19 market prices to entities within Ferroalloy Holding, or 20 buying products at below-market prices from entities 21 within Ferroalloy Holdings. 22 That would be one of the allegations, 23 Mr. Chairman, that I believe makes this document relevant 24 to this proceeding and something to be explored and 25 considered, because there are allegations contained here.

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1 And while they are only allegations, they have been

2 raised in a verified pleading by Mr. Pinchuk against 3 Georgian American Alloys, Felman Production, Felman

4 Trading, having to do with financial dealings of these 5 companies who are requesting a special rate from this

6 Commission, but are alleged to have financial dealings 7 that are subject to --- should be closely examined.

8 CHAIRMAN: 9 I mean, you can allege anything, as you 10 correctly observe.

11 ATTORNEY OSBORN: 12 And to the extent that these 13 allegations have bearing upon the profits of Georgian 14 American Alloys, the profits of Felman Production in 15 particular, as well as their costs, I believe that makes 16 the allegations relevant to this proceeding as something 17 that should be considered. And, you know, essentially 18 I’m not --- I don’t want to ask Mr. Nuss to tell us 19 whether these allegations are true or false. I simply 20 wanted to know if in his role as CFO of Georgian American 21 and Felman Production, he’s been made aware of the 22 allegations and is privy to this litigation essentially. 23 CHAIRMAN: 24 You may ask that question. 25 ATTORNEY KELSH:

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1 I’d just like to make sure that the

2 Commission’s clear about the nature of this proceeding. 3 Okay. This is a third party discovery request and Felman

4 Production is not a Defendant and Georgian American is 5 not a Defendant in this litigation. And it is obviously

6 in a very early stage. 7 CHAIRMAN:

8 Okay. We’ll note your comment.

9 BY ATTORNEY OSBORN: 10 Q. And another allegation set forth within this 11 application ---. 12 CHAIRMAN: 13 No, you were going to ask a question 14 --- you told us what you were going to ask. 15 ATTORNEY OSBORN: 16 I am going to ask him if he is aware of 17 the allegation made in the application that --- made by 18 Mr. Pinchuk, wherein he contends that Georgian American 19 Alloys, Felman Production, Felman Trading and CC Metals 20 and Alloys are among a group of ferroalloy companies to 21 which Igor Kolomoisky is alleged to have illegally 22 diverted ferroalloy assets and profits to the detriment 23 of a number of other companies in which Mr. Pinchuk has 24 an interest. 25 BY ATTORNEY OSBORN:

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1 Q. Have you been made aware of that allegation as

2 CFO? 3 A. Yes, I’ve been made aware of the allegations,

4 yes. 5 Q. And while Georgian American and Felman

6 Production and Felman Trading are not parties to this 7 litigation and rather are identified therein as discovery

8 subjects, an appearance has, in fact, been made on behalf 9 of Georgian American, Felman Production, Felman Trading 10 in the case; is that correct, an appearance of counsel? 11 A. Yes, that’s correct. 12 Q. And moving on from that, can you tell, Mr. Nuss, 13 when did Felman Production first consider requesting 14 approval from the Commission for a special rate under the 15 statute? 16 A. First consider it? I think when we first became 17 aware of the statute, so it would be --- 18 Q. 2010? 19 A. --- 2011. 20 Q. 2011. Earlier today your Counsel produced to 21 CAD and the other parties in this case copies of some 22 unanimous consents. CAD had asked for discovery relating 23 to board meetings and Georgian American and Felman 24 Production, copies of board meeting minutes, and in turn 25 we were advised that they are no board meetings,

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1 essentially. Everything is done by unanimous consent.

2 Is that your understanding? 3 A. Yes.

4 Q. And of those unanimous consents that were 5 produced to us this morning, are you aware of anything

6 within those documents that consists of a discussion or a 7 resolution or agreement to request the special rate from

8 the Commission? In other words, is there any discussion 9 of it whatsoever? 10 A. I don’t believe there are any unanimous consents 11 which discuss that. 12 Q. Would there be some other documents that --- 13 something else in writing that discusses it? 14 A. Well, we have meetings internally, management 15 meetings on a quarterly basis. And, you know, there 16 would have been internal discussions among the management 17 about this new statute and its potential applicability to 18 us. 19 Q. Going back to my earlier question about when 20 Felman Production first considered requesting the special 21 rate from the Commission, earlier today we heard the 22 testimony of Dr. Christiadi --- 23 A. Uh-huh (yes). 24 Q. --- and there were some questions asked to him 25 about the fact that he had prepared a study in 2012 for

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1 Felman Production regarding nuances of the plant if it is

2 shut down and the effect on the economy; correct? 3 A. That’s correct.

4 Q. And was that 2012 study --- did Felman 5 Production request that Mr. Christiadi prepare that 2012

6 study in anticipation of going forward with this request 7 for a special rate?

8 A. No, it did not. 9 Q. What was the reason for that study in 2012? 10 A. The company was discussing potential EPA 11 regulations and as part of that discussion, we 12 commissioned that to show the EPA that if they 13 promulgated unreasonable regulations that we couldn’t 14 comply with, then it would have a significant impact on 15 the economy, the local economy. 16 Q. On page three of your Direct testimony at line 17 14, you testify that in 2012, $3.7 million was invested 18 in capital improvements at the New Haven plant; is that 19 correct? 20 A. That’s correct. 21 Q. And on line 15 of that same page number three, 22 you go on to say that in the first half of 2013, $1 23 million was invested in capital improvements at the New 24 Haven plant, including a new slag processing facility; is 25 that correct?

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1 A. That’s correct.

2 Q. Now, based on my review of Mr. Konrady’s 3 testimony, it’s my understanding that the slag processing

4 facility that was built in early 2013 actually cost in 5 excess of $2 million; is that correct?

6 A. That’s correct. 7 Q. What’s the reasoning for --- with respect to

8 your testimony in line 15 of page three, stating that a 9 million dollars was invested, including the new slag 10 processing facility, and the reference to $2 million or 11 in excess of $2 million by Mr. Konrady? 12 A. Yeah, the --- in the first half of 2013, $1 13 million was invested in the New Haven plant. Among that, 14 a significant portion of that was actually money invested 15 in the new slag plant. The new slag plant was 16 commissioned in May and there were expenses that were 17 incurred both in 2012 within the $3.7 and subsequent to 18 the first half of 2013 for expenditures that were made. 19 Q. Okay. 20 A. But the total project was $2 million --- over $2 21 million. 22 Q. Okay. Thank you for clarifying that. And I 23 guess what I’ve been wondering is if Felman Production 24 first became aware that it might have a reason to come to 25 the Commission in early 2011 and request a special rate

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1 under the statute, and based upon all the testimony we

2 reviewed about the financial condition and the 3 loss/profits of Felman Production, why is it that in

4 early 2013 Felman spent all this money to build a slag 5 processing facility? I mean, it’s my --- it’s my

6 understanding that a slag processing facility, the 7 purpose of it is to produce slag that comes --- or to

8 utilize and make usable the slag that is a byproduct of 9 silicomanganese; correct? 10 A. The slag processing facility allows us to 11 process the slag that we produce and extract from it 12 silicomanganese, our finished product, and have more 13 salable product. But it also works to extract from what 14 we call remelt (phonetic). We can process that like slag 15 and extract silicomanganese units that are otherwise not 16 salable because they’re contained in this remelt. The 17 payback on the slag processing plant was only a matter of 18 months, because we had an inventory, a remelt inventory 19 that was rich in silicomanganese. And if we could 20 extract that silicomanganese, we could pay for that plant 21 in a short number of months. 22 Q. At some point, if Felman --- if Felman 23 Production’s three furnaces that are utilized in the 24 production of silicomanganese are kept down or off, then 25 there will be no more slag; is that correct?

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1 A. That’s correct.

2 Q. Okay. So I guess --- and I guess that brings me 3 back to my question. I mean, a $2 million facility was

4 built in early 2013 and just a few short months later 5 employees are laid off, furnaces are shut down. So I

6 guess that leaves me to wonder how much inventory of 7 silicomanganese did Felman Production have on hand that

8 it has been utilizing in its slag producing --- in its 9 slag processing facility? 10 A. Do you mean how much slag did we have on hand or 11 remelt did we have on hand? 12 Q. Maybe I’m just misunderstanding the slag 13 processing process. 14 A. Yeah, the slag processing plant takes slag, 15 which is a waste product from our production of 16 silicomanganese. When we produce silicomanganese, we 17 produce the product, the finished product, 18 silicomanganese, and we produce the slag. The slag is 19 then further processed, because some of the 20 silicomanganese gets into the slag. So through further 21 processing, we can extract that silicomanganese from the 22 slag and have more salable product to sell. We had an 23 inventory of slag because we had stopped sending it off 24 site some number of months earlier. And we had an 25 inventory of remelt, which is when you produce product

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1 and it doesn’t come out to spec and you have to either

2 re-process it or process it through a facility like a 3 slag processing facility. We had those piles available

4 to us to begin to run through the slag processing plant. 5 The payback from just processing the inventory we had on

6 hand paid for the plant. Thereafter, continue production 7 of slag, it continues to produce returns for us.

8 Q. But other than producing slag from what you 9 described as remelt, I mean, you need to --- you need to 10 be in production of silicomanganese in order to obtain 11 slag; correct? And then from that slag that’s 12 produced, --- 13 A. Yes. 14 Q. --- you can extract more silicomanganese; 15 correct? 16 A. That’s correct. That was the intent of the slag 17 processing plant, not to buy slag. I mean, potentially 18 you could buy slag and process it, but that wasn’t our 19 intent. 20 Q. So I guess my question is, I mean, if the 21 furnaces remain off, --- 22 A. Uh-huh (yes). 23 Q. --- will the production --- will the processing 24 of slag eventually stop --- 25 A. Yes.

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1 Q. --- just by its very nature; is that correct?

2 A. Yes, it’s most likely that it would stop unless 3 we could find an economic way of sourcing slag.

4 Q. Okay. Have you up to date sourced slag? 5 A. No.

6 Q. Okay. So my question then, to go back to what I 7 asked earlier, how much inventory of silicomanganese does

8 Felman Production have that it is then using in its 9 processing center to produce slag? Is there like a 10 stockpile of silicomanganese that is --- that’s being 11 utilized in the slag processing center? 12 A. Silicomanganese is not used in the slag 13 processing. There was a stockpile of slag and remelt 14 that were used in the slag processing facility. To 15 answer your question how much silicomanganese, that’s our 16 finished product. We’ve depleted that. 17 Q. You have no stockpile whatsoever in inventory? 18 A. Well, there’s --- there is some material of 19 small size, but the lump material, the standard size 20 material has been depleted in the months following the 21 shutdown. 22 Q. Okay. With your current --- and I think I do 23 understand what you’re saying now, and I apologize for 24 getting that confused. With the current inventory of 25 slag that Felman Production has on hand, ---

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1 A. Uh-huh (yes).

2 Q. --- how much longer is Felman Production 3 expected to process that?

4 A. Not much longer. 5 Q. What do you mean by that?

6 A. A couple months. 7 Q. Of the silicomanganese that Felman Production

8 produces or was producing before the furnaces were shut 9 down, it's my understanding that 100 percent of that is 10 sold by Felman Production to its sister company, Felman 11 Trading; is that correct? 12 A. That is correct. 13 Q. And then Felman Trading in turn distributes --- 14 sells and distributes that product to steel producers, 15 steel manufacturers; is that correct? 16 A. That’s correct. 17 Q. Okay. And, of course, Felman Production and 18 Felman Trading are both wholly owned subsidiaries of 19 Georgian American Alloys; correct? 20 A. That’s correct. 21 Q. Okay. And similarly, the majority of the raw 22 materials that Felman Production needs in order to 23 produce silicomanganese are purchased from Felman 24 Trading; is that a fair characterization? 25 A. I guess you’ve had to --- when you say the

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1 majority, I think in my testimony I indicated that to

2 date about 54 percent of the raw materials were purchased 3 from third parties.

4 Q. Let me turn to that. 5 A. But a substantial amount of raw material is

6 purchased through Felman Trading. 7 Q. All right. Well, what I think you’re referring

8 to, correct me if I’m wrong, is what is on page four of 9 your Rebuttal testimony at line 12. That’s where the 54 10 percent is referenced. And that’s not what I understood 11 that 54 percent to represent. Because I’m asking you 12 about raw materials that Felman Production purchases from 13 Felman Trading. As I understand page four, line 12 of 14 your Rebuttal, the 54 percent that’s referenced there, 15 you stated that to date more than 54 percent of the raw 16 materials that Felman Trading has sold to Felman 17 Production have been sourced from unrelated third 18 parties. 19 A. Yes, you’re correct. 20 Q. So those are two different things. 21 A. You’re correct. 22 Q. Okay. And, of course, the converse of that 23 statement is that nearly half of the raw materials that 24 Felman Trading is selling to Felman --- was selling to 25 Felman Production were, in fact, sourced from related

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1 parties; correct?

2 A. That is correct. 3 Q. Who are some of those related parties, now that

4 we’re on this subject? Or can you name all of those 5 related parties? I don’t know how many we’re talking

6 about here. 7 A. There is a production out of Gabon which is

8 affiliated through the ultimate shareholders. And it’s 9 mostly that production. 10 Q. And what raw material is obtained from that 11 entity? 12 A. Manganese ore. 13 Q. Do you know the name of that entity? 14 A. It’s come through a number of different names. 15 Tilabera (phonetic) Trading, Manganese Trading. 16 Q. Okay. 17 A. The mine is controlled by Consolidated Minerals, 18 a public company in Australia, in which there’s interest 19 from our shareholders. 20 Q. Okay. So going back to my original question 21 then, or what I think was my original question, I was 22 asking you about the raw materials that Felman Production 23 purchases from Felman Trading. And as I understand it, 24 manganese ore and coke, both of which are used in the 25 production of silicomanganese, are purchased from Felman

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1 Trading; is that correct?

2 A. That’s correct. The rule is actually that 3 products which need to be imported are purchased through

4 Felman Trading, because they have expertise in logistics 5 and formalities.

6 Q. The coal that is used in silicomanganese 7 production is purchased directly by Felman Production; is

8 that correct? 9 A. That’s usually the case. 10 Q. Are there times when it’s purchased through 11 Felman Trading? 12 A. I think there was one time where there was a 13 trader looking to offload some coal. But the usual case 14 is that we buy domestic coal directly. Felman Production 15 would buy that directly. 16 Q. Okay. And I want to talk more about these 17 transactions by which Felman production both buys its raw 18 materials from Felman Trading and in turn sells to Felman 19 Trading the finished product, silicomanganese. And that 20 involves some confidential numbers so I’m going to try to 21 --- if you'll just bear with me, see if we can extract 22 this without too much trouble. 23 Okay. If you look at page four of your Direct 24 testimony, I believe. Okay. Looking at page four of 25 your Direct beginning at line three, that’s where you

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1 described this relationship between Felman Production and

2 Felman Trading relating to the purchase of raw materials 3 and the sell of silicomanganese. So you tell us there

4 that Felman Trading purchases silicomanganese from Felman 5 Production at a percentage of the freight on board New

6 Haven price, retains a percentage markup to meet Felman 7 Trading’s cost of marketing and logistics administration,

8 and then Felman Trading sells the silicomanganese at the 9 prevailing commodity price. 10 So one thing I want to understand about that, 11 when you first state that Felman Trading purchases 12 silicomanganese at a percentage of the freight on board 13 New Haven price, what do you mean by that? 14 A. The way this process works is that Felman 15 Trading is the direct contact with the ultimate consumer, 16 the steelmakers. They have contracts with those 17 steelmakers. Those contracts provide that the price is 18 set by reference to --- often provide that it is set by 19 reference to market publications like Ryan’s Notes . So 20 each month the price changes. 21 And what Felman Production --- or what Felman 22 Trading does is whatever the price that that ultimate 23 customer pays for that delivery, they will take their 24 commission off of that, they will take the cost of 25 delivery from New Haven, West Virginia to the customer,

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1 if that’s what the customer’s contract calls for, and the

2 remaining proceeds will be given to Felman Production as 3 their purchase, Felman’s Trading’s purchase price, Felman

4 Production’s sales price. So when all is said and done, 5 Felman Production bears the ups and downs of the market

6 that --- and they pay a selling commission, if you would, 7 to Felman Trading.

8 Q. So Felman Trading, on its end, is earning both a 9 commission from its sale to this entity that eventually 10 takes control of the silicomanganese, plus recovers its 11 cost for the transaction; is that --- is that what I 12 understood you to say? 13 A. Felman Trading doesn’t receive a commission from 14 the steel company. They receive the market price from 15 the steel company. They receive a commission from Felman 16 Production. And any costs to deliver are borne by Felman 17 Production. 18 Q. And so on line six where you state that Felman 19 Production retains a percentage markup to meet Felman 20 Trading's --- or rather, Felman Trading retains a 21 percentage markup to meet Felman Trading’s cost of 22 marketing and logistics administration, is that another 23 component or is that part of what you’ve already 24 described? 25 A. No, that is what I’ve already described.

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1 Q. Okay. So under this scenario, I mean, is it

2 fair to say that because Felman Production has these 3 transactions with its sister corporation, Felman Trading,

4 which in turn has transactions in produce --- in 5 purchasing raw materials from other related entities, do

6 the profits from all of these transactions go Georgian 7 American Alloys essentially? I mean, in other words,

8 where there are profits made on any of these transactions 9 it's to the benefit of Georgian American Alloys; is that 10 fair? 11 A. Felman Trading provides a service to Felman 12 Production. In one case, it sells its product and it 13 receives a commission. I might mention that the 14 commission that Felman Trading receives is about 75 15 percent of what it used to pay to a third party to 16 perform that service. That profit or that commission 17 then goes to pay for costs of providing that service and 18 a profit to Felman Trading and that is part of Georgian 19 American Alloys’ results, so that is correct. 20 Q. Okay. I mean, is there --- and I’m sorry if 21 this is a question that shows my lack of understanding of 22 this whole industry, but I mean, would it not be possible 23 for Felman Production to do for itself all of the things 24 that Felman Trading does for it? In other words, since 25 they’re sister companies and they --- same directors,

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1 same shareholders, why is --- why have this transaction

2 and then the process by which Felman Trading is earning a 3 commission essentially to the detriment of Felman

4 Production? Why not just have the same folks do the same 5 things for Felman Production in-house? Does that make

6 sense? 7 A. Yes. There’s economies of scale in providing

8 these services, procurement of sales, marketing. There’s 9 economies of scale. For Felman Trading, Felman 10 Production’s business is about 30 percent of its 11 business. So it represents others and calls on the same 12 customers. It has staffs of people who are involved in 13 logistics, who are involved in procurement, who are 14 involved in marketing, who are involved in PR. Those 15 people --- the cost of those people is more efficiently 16 spread over higher volumes. So Felman Trading sells the 17 products not of just Felman Production, but of Georgian 18 American Alloys’ other subsidiary in the United States, 19 which is CC Metals and Alloys, and our foreign 20 subsidiaries and affiliates into these markets, into the 21 U.S. market and Western Hemisphere. 22 Q. I mean, there’s a lot of interrelation going on 23 between these entities and these transactions and a lot 24 of buying raw materials from related entities, a lot of 25 selling.

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1 A. There are, but the basic premise is the producer

2 is the one who bears the ups and downs of the markets. 3 And the intermediary, like Felman Trading, is being paid

4 a fair price for a service. 5 Q. And that’s how --- that’s the manner by which

6 Georgian American Alloys chose to set up its corporate 7 structure; correct?

8 A. It actually was --- that was established before 9 Georgian American Alloys was in existence, but that ---. 10 Q. With Haftseek? 11 A. That has been the premise. 12 Q. Okay. And in that regard, for 2012 when tax 13 returns were filed, --- 14 A. Uh-huh (yes). 15 Q. --- they were filed jointly for Georgian 16 American Alloys and its subsidiaries; correct? 17 A. That’s correct, for --- 18 Q. So there’s ---. 19 A. --- the U.S. subsidiaries. 20 Q. So there’s not a tax return that we can look at 21 for Felman Production alone? 22 A. Not for 2012. 23 Q. Not for 2012, yes. 24 A. Felman Production is an LLC and is considered a 25 disregarded entity, like a partnership. It’s results

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1 blow up to the parent company’s tax returns.

2 Q. The tax returns for 2012 that has been produced 3 in this case as a confidential exhibit, it shows that

4 Felman Trading did, in fact, make a profit during 2012; 5 correct?

6 A. That’s correct. 7 Q. If Felman Production is allowed the special rate

8 that it has requested from the Commission, that special 9 rate is going to be to the benefit of not only Felman 10 Production but also Felman Trading and Georgian American 11 Alloys; is that fair, given the interrelatedness of the 12 parties and the transactions they enter into? 13 A. If Felman Production can continue to produce 14 product and sell it, then Felman Trading is going to earn 15 a commission from the sales of that product. If they do 16 not, then the volume of Felman Trading will go down, 17 unless it can find an alternative supplier of that 18 material. 19 Q. Let me ask it a different way. The common 20 shareholders --- I mean, Felman Production and Felman 21 Trading, they have common officers, common directors, 22 common shareholders; correct? 23 A. Yes. 24 Q. So those shareholders are going to benefit if 25 Felman Production is granted the special rate that it’s

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1 requested from the Commission; correct? I mean,

2 obviously they’re requesting a discount off of the annual 3 electricity rate that they otherwise would be paying. So

4 those shareholders are going to benefit from that 5 discount if it’s granted; correct?

6 A. As opposed to continuing to operate and not have 7 the special rate, correct.

8 Q. Okay. 9 A. As opposed to continuing to operate and lose the 10 type of money that it’s lost in the past, it's incorrect. 11 They’re actually going to lose less if they don’t 12 operate. With the special rate, they have the 13 opportunity to operate the plant at what we believe would 14 be a reasonable return and they would benefit from it. 15 Without the special rate, it’s uncertain that the plant 16 can continue to run, certainly sustainably and as markets 17 go up and down. 18 Q. But to the extent that Felman Production and 19 Felman Trading share the same officers, directors and 20 shareholders, --- 21 A. Uh-huh (yes). 22 Q. --- then when you look at those people in those 23 roles, those officers, directors and shareholders, the 24 shareholders in particular --- I mean, whether you’re 25 looking at them as a shareholder of Felman Production or

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1 a shareholder of Felman Trading, that person is going to

2 benefit if the special rate is approved by the 3 Commission, as opposed to paying, you know, what it would

4 have been paying otherwise; correct? 5 A. Yes, just as long as it continues to operate.

6 OFF RECORD DISCUSSION 7 BY ATTORNEY OSBORN:

8 Q. Mr. Nuss, I’m going to approach you to give you 9 two pages of documents that are part of the 2012 tax 10 return that was produced in this case, particularly pages 11 70 and 71. Yeah, and it’s a confidential --- both are 12 confidential, too. And they’ve --- it has been marked as 13 such on the document. 14 ATTORNEY OSBORN: 15 And I suppose it would make sense to 16 mark these collectively as CAD Cross --- are we on Four? 17 (CAD Cross Examination Exhibit Four 18 marked for identification.) 19 OFF RECORD DISCUSSION 20 CHAIRMAN: 21 Ms. Osborn, --- 22 ATTORNEY OSBORN: 23 Yes. 24 CHAIRMAN: 25 --- you didn’t give her a copy of that?

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1 You did not?

2 ATTORNEY OSBORN: 3 I did not, no.

4 BY ATTORNEY OSBORN: 5 Q. And Mr. Nuss, the two pages I’ve handed you that

6 have been marked confidential, pages --- identified as 70 7 and 71 at the bottom, I’ll represent to you that those

8 are two pages from the 2012 tax return filed by Georgian 9 American Alloys. And looking at the document that was 10 identified at the bottom of 71 --- 11 A. Uh-huh (yes). 12 Q. --- in the second column on that page, that 13 shows the taxable income attributable to Felman Trading 14 for 2012; correct, if you go down to the very bottom? 15 A. The column is identified as Felman Trading, yes. 16 Q. Do you have some question about that? You seem 17 uncertain of ---. 18 A. Yes. 19 Q. What is the --- what is the question or concern? 20 A. The question or concern is that level of taxable 21 of income is not representative of just the result of 22 Felman Trading. 23 Q. What else do you believe comprises that level of 24 taxable income? And if it would help you, --- 25 A. Yes.

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1 Q. --- Mr. Nuss, I have a copy of the entire 2012

2 tax return, if you want to review it. 3 CHAIRMAN:

4 I’ll tell you what --- 5 A. Yes, I’m sorry.

6 CHAIRMAN: 7 --- what we’ll do. Hold on. Let’s

8 take about a ten-minute break and let him look at that. 9 Then we’ll get back to the proceeding. That would make 10 it --- well, make a 12-minute break. 12:45 --- or 2:45, 11 excuse me. 12 SHORT BREAK TAKEN 13 CHAIRMAN: 14 All right. We’re back on the record in 15 Case Number 13-1325-E-PC. Ms. Osborn? 16 BY ATTORNEY OSBORN: 17 Q. Mr. Nuss, before we took a break, I believe you 18 were reviewing CAD Cross Four, which was two pages of the 19 Georgian American Alloys’ 2012 tax return, and we were 20 talking about --- find my notes. We were talking about 21 the pages identified as page 71 specifically and line 30 22 on that page, which is the taxable income line. And I 23 believe you stated before we took a break that you did 24 not believe the number that’s reflected there, taxable 25 income for Felman Trading is accurately attributed to

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1 Felman Trading alone. But could you please clarify what

2 your question or concern was? 3 A. That is correct. That number didn’t ring true

4 with me, and in fact, that number should be $11.1 million 5 lower, but it’s still a profit. Felman Trading is

6 profitable, but not to that extent. 7 Q. Okay. Can you explain the $11.1 million

8 difference than as it was filed in the tax return? 9 A. I can’t at this point explain what is 10 attributable to that difference. I can only tell you 11 that I spoke with the tax preparer and this is not the 12 information that is correct and that is the final books 13 and records of the company. So apparently at some 14 preliminary point, the number was taken into the tax 15 return and is incorrect. 16 Q. I mean, these documents were --- the tax return 17 was provided to us on Friday, last week; correct? 18 A. That’s correct. 19 Q. Who is it that prepares your --- prepares the 20 tax returns for Georgian American Alloys? 21 A. We use the accounting firm of Damian Landeiro. 22 Q. So basically as I understand your testimony, 23 between Friday and now, there’s, you realized, an 24 inaccuracy in the tax return. And this tax return has, 25 in fact, been filed with the IRS; is that correct?

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1 A. Yes, it has.

2 Q. And this tax return reflects an inaccuracy of 3 $11.1 million?

4 A. It reflects an inaccuracy in that number of 5 $11.1 million, but it has no impact on the tax liability

6 because of the fact that the company has tax loss 7 carryovers. So that number is incorrect and our

8 remaining tax loss carryover is incorrect. The tax 9 liability paid on the tax return is correct. 10 Q. Now, I believe you did --- in your Rebuttal 11 testimony, you’re rebutting --- you’ll recall that Ms. 12 White in her Direct testimony criticized the lack of 13 audited financial information having been produced by 14 Felman Production in this matter; correct? 15 A. Yes. 16 Q. And she was concerned that Felman Production has 17 come before the Commission to request an annual discount 18 of $9.5 million, yet its support for that discount is in 19 the form of, in many instances, unaudited financial 20 information; correct? 21 A. There were audits performed for 2006 through 22 2009. No audit was performed for ’10 and ’11, and audits 23 are being performed for ’12. 24 Q. Right, and I understand that. But I was asking 25 you if that’s your understanding of Ms. White’s

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1 criticism ---

2 A. Yes. 3 Q. --- with respect to financial data.

4 A. It is. 5 Q. And in your Rebuttal testimony, I believe you

6 --- let me see it here. Give me just a moment. 7 Well, first of all, with respect to what you

8 just testified to, that there are audited statements for 9 2006 through --- through what year? 10 A. ’09. 11 Q. 2009. I mean, what you’re asking for from the 12 Commission and what you have stated in your testimony is 13 none of us should be looking at the numbers from 2006 to 14 2009; correct? Because those are not really 15 representative --- representative of the financial status 16 of Felman Production today; is that a fair 17 characterization of your testimony? 18 A. They are not representative of the improved 19 operations of Felman Trading. That’s correct. 20 Q. Okay. So yes, there are audited financial --- 21 there is audited financial information for 2006 through 22 2009, but Felman Production believes that that shouldn’t 23 be considered in any event, and you don’t have audited 24 financial information for 2010, 2011 and 2012. And in 25 response to Ms. White’s criticism of that lack of audited

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1 financial information, one of your points was, and what

2 caused us to request the tax returns, you stated that the 3 accounting standards that were used have been

4 consistently applied, and the financial information 5 you’ve provided in this case is the same financial

6 information that was used in the company’s income tax 7 filing; correct?

8 A. That’s correct. 9 Q. Okay. So what we’re looking at here is a page 10 from that income tax filing that has an inaccuracy of 11 $11.1 million? 12 A. That’s correct, yes. 13 Q. Okay. 14 A. It has an error. 15 Q. Okay. I’ve got my stuff all disorganized. Bear 16 with me for just a moment, please. 17 OFF RECORD DISCUSSION 18 ATTORNEY OSBORN: 19 I apologize for the delay. I sort of 20 got off on a tangent there. I wasn’t really expecting 21 that. 22 BY ATTORNEY OSBORN: 23 Q. In response to Staff’s data request five, which 24 asked whether --- and I don’t --- I’m sort of going off 25 memory here. This is not a verbatim quote, but Staff had

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1 asked you whether Felman Trading ever sells any of the

2 silicomanganese that it purchases from Felman Production 3 at a discount. And your response I believe implied that

4 the answer was yes, because you stated, you know, it’s 5 typical, it’s customary when we’re selling in large

6 volume or to regular customers for discounts to be given. 7 Is that fair?

8 A. That’s correct. 9 Q. Okay. And as a follow-up to that, CAD asked in 10 its request 48 for you to identify those entities to 11 which discounts have been given. Referring back to your 12 response to Staff’s question wherein you indicated 13 discounts are given in certain instances, we wanted to 14 know from you who those discounts were given to. And is 15 it fair to say that your response to that was 16 essentially, we always obtain the highest market value 17 possible? You didn’t provide the name of any entity to 18 which discounts are provided and, in fact, said, we 19 always provide --- or we always obtain the highest price 20 available. Is that a fair characterization of your 21 testimony? 22 A. What I had said in that --- those series of 23 questions is that it’s usual that discounts are provided 24 to large customers for committing to long-term contracts 25 at referenced prices. It’s usual in the industry for

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1 this product to be sold at a discount to the referenced

2 price. And we do achieve the highest price, which is 3 really a negotiation of the lowest discount. But

4 discounts are a normal part of the business, and our 5 large customers which consume the majority of the product

6 receive discounts. 7 Q. Right. But when CAD asked you in request 48 to

8 identify who those customers were, you didn’t tell us the 9 names of any of those customers, and in fact --- and I 10 can --- I’ll ---. 11 A. I think we provided in response to a data 12 request copies of contracts with major customers. And 13 within those contracts were the discounts. 14 Q. Actually, your response to CAD request 48 15 wherein we had asked you to identify all customers to 16 whom Felman Trading has given a discount with respect to 17 the price of silicomanganese, you initially objected to 18 that. Felman Production initially objected to that and 19 didn’t --- and stated in conjunction with its objection 20 that nearly all long-term silicomanganese contracts 21 involve some discount off of the publicly reported index 22 price, and then you supplemented that response to say 23 that without waiving your objection, Felman Production 24 states that to its knowledge, Felman Trading always 25 obtains the highest price practicable for silicomanganese

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1 in light of prevailing market conditions and customer

2 circumstances. 3 So I mean, I’m not --- I guess I’m just not

4 certain I understand that answer. You didn’t provide the 5 names of any customers, but I can’t tell if by that

6 response you’re indicating yes, there are discounts 7 given, or no, there are not discounts given.

8 A. I think we indicated that discounts are given to 9 large customers for long-term contracts and large 10 quantities. And those are the lion’s share of our 11 business. And I think I --- we’re saying there that 12 discounts are very prevalent as a way of competing in 13 this --- in this business. 14 Q. But is there a reason you didn’t provide the 15 names of any of those entities to which --- 16 A. I think ---. 17 Q. --- you do provide a discount? 18 A. I think we had provided the major customer 19 contracts previously. 20 Q. Well, in those contracts, is there a way for us 21 to discern what the discount is? 22 A. Yes. Yes, it’s laid out specifically in those 23 contracts. 24 Q. Okay. Earlier this morning you provided 25 Sur-rebuttal testimony with respect to CAD’s

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1 understanding, based on your earlier testimony, that

2 Felman Production was paying $50 per ton for a coal 3 delivery charge. And I want to talk to you about that.

4 If you --- let’s see. 5 In Ms. White’s supplemental Direct on page

6 three, she states that she had attempted to locate the 7 account within the trial balance summary that had been

8 produced by Felman Production, that she had attempted to 9 locate the account with the coal cost totaling a 10 confidential sum. And she also states that she was 11 unable to find an --- or she states she was unable to 12 find an expense account in the trial balance summary 13 reflective of that amount. She goes on to state, nor 14 could I find an account that reflects a coal delivery 15 expense of a certain confidential amount. 16 I mean, are you --- the Sur-rebuttal that you 17 provided this morning I don’t believe addressed those 18 points of Ms. White’s supplemental Direct testimony. I 19 mean, as you sit here today, are you able to tell us 20 where within the trial balance summary that Felman 21 Production has provided those numbers can be found? 22 A. I’m able to tell you that these amounts were 23 purchased and were coded to a general ledger account 24 that’s commingled with other purchases. So there is not 25 in the general ledger an account just for coal, and there

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1 is not in the general ledger an account for freight on

2 coal. When we buy coal on a delivered basis, that total 3 cost gets charged to that account. When we buy it on a

4 at the coal mine basis, the cost of the coal, plus 5 separately the cost of the freight would get charged into

6 that account. 7 But there are other products like --- well,

8 today we have a separate account, but in prior years coke 9 would be charged to that account. We use a carbon-based 10 paste that is used in production as a consumable would be 11 charged into that account. So there’s not an account 12 dedicated just to coal. 13 Q. So if you look at the trial balance summary for 14 2009 and 2012, I mean, you cannot point me to where I can 15 find those numbers, whether those numbers themselves --- 16 A. You’d have to ---. 17 Q. --- or embedded within some other number? 18 A. Yes, I could show you where they are embedded 19 within other numbers. 20 Q. Okay. Do you have a copy of Ms. White’s 21 supplemental Direct with you? 22 A. Yes. 23 Q. Okay. So if you’ll turn to that trial balance 24 summary --- is it ---? 25 OFF RECORD DISCUSSION

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1 ATTORNEY OSBORN:

2 Okay. So it’ll be Exhibit Four to Ms. 3 White’s supplemental Direct.

4 CHAIRMAN: 5 Where are we, guys? Is there a

6 question pending or are you getting ready to ask one, 7 or ---?

8 ATTORNEY OSBORN: 9 I believe there’s a question pending. 10 I believe Mr. Nuss was going to review the trial balance 11 summary and tell me where we can find, whether standing 12 alone or embedded within another number, those numbers 13 that have been --- those confidential numbers that were 14 identified on page three of Ms. White’s supplemental 15 Direct. At line ---. 16 A. Okay. 17 ATTORNEY OSBORN: 18 At lines four and six. 19 A. On Exhibit Four, SD-4, for the year ending 20 12/31/11, there is an account 50130, titled coke. 21 BY ATTORNEY OSBORN: 22 Q. Okay. I see that. 23 A. Okay. And ---. 24 Q. And just for the record, that’s line nine; 25 correct?

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1 A. Line nine. And in that year, both coke and coal

2 are contained within that account. 3 Q. And are you now looking for the second number?

4 A. For previous years. 5 Q. Well, the number for coal delivery expense set

6 forth on line six of Ms. --- of page three of Ms. White’s 7 supplemental Direct.

8 A. The delivery charge alone? The delivery charge 9 would be in that account, in that same account, because 10 sometimes the coal would have been purchased on a 11 delivery basis, the price paid to the supplier, including 12 delivery. And sometimes there would be an invoice for 13 the coal and a separate invoice for the trucking. 14 Q. Okay. So ---. 15 A. They would both go to the same account. 16 Q. Okay. So let me just make sure I understand. 17 The number --- the confidential number found on line 18 four, page three of Ms. White’s supplemental Direct, 19 together with the confidential number found on line six 20 of page three of Ms. White’s supplemental Direct, are 21 both contained within line nine of Ms. White’s Exhibit 22 Four to her supplemental Direct? Is that accurate? 23 A. Could you repeat that? 24 Q. I don’t know. 25 A. Sorry.

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1 Q. I just want to be sure I’m clear.

2 A. Yeah. 3 Q. Looking at page three of Ms. White’s

4 supplemental Direct, line four, she tells us there’s a 5 confidential number that is represented by Felman to be

6 the coal cost, and she could not find that in the trail 7 balance sheet. And the on line six, she tells us that

8 there is a confidential number that’s represented --- 9 A. Yes. 10 Q. --- by Felman to be the coal delivery expense. 11 A. Correct. 12 Q. So those numbers combined --- 13 A. Yes. 14 Q. --- you’re telling us are basically embedded 15 within the numbers we find there associated with coke on 16 the trial balance summary? 17 A. Correct. 18 Q. Okay. Looking on down the trial balance summary 19 to line 49, delivery charges, --- 20 A. Uh-huh (yes). 21 Q. --- what delivery charges are you talking about 22 there? 23 A. Those delivery charges basically relate to 24 expenses associated with sending product to an outside 25 processor and then having it returned to us. We’d have

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1 to pay the transportation each way.

2 Q. What product do you send to an outside 3 processor?

4 A. We were sending slag to --- 5 Q. Slag.

6 A. --- an outside processor. 7 Q. Okay.

8 A. Yeah. 9 Q. Anything besides slag or that’s --- those are 10 delivery charges for slag processing transportation? 11 A. That’s the bulk of it. 12 Q. Okay. In your Direct testimony at page 11 --- 13 let me turn there. You talk about the --- you describe 14 the target gross margin that Felman Production has 15 developed in the course of requesting this special rate 16 from the Commission. And you describe it as having been 17 set at a level, which based on historical experience, 18 will result in Felman Production recovering its expenses 19 plus a confidential percentage return on invested 20 capital; correct? 21 A. That’s correct. 22 Q. Okay. Now, is it your understanding that a 23 special rate that is allowed by the Commission and which 24 is designed to provide a return on investment, or 25 invested capital, is consistent with the Commission’s

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1 order in Century ?

2 A. It is my understanding that for a company to be 3 viable, which is a requirement, it has --- it can’t

4 continue to sustain losses. So there has to be some 5 level of return in order to be a viable operating entity.

6 Q. And I appreciate that, but I guess my question’s 7 a little different. And I’m asking whether it’s your

8 understanding that based on the Commission’s order in

9 Century , the Commission --- that it’s consistent with 10 that order that a certain percentage return on investment 11 is basically part of the rate design that’s proposed by 12 the company. 13 ATTORNEY KELSH: 14 I’m going to object to that question in 15 that this testimony doesn’t make any reference whatsoever 16 to the Century order. This witness is not an attorney. 17 I don’t think this line of questioning is within the 18 scope of his Direct testimony. 19 ATTORNEY OSBORN: 20 And I guess my response to that would 21 be that Mr. Nuss is the CFO, and I mean, his testimony is 22 the testimony that describes to us the rate design, and 23 while I appreciate that he’s not an attorney and I’m not 24 asking for a legal opinion, as CFO and as the person who 25 for Felman Production designed this rate mechanism that

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1 he’s requesting the Commission approve, I’m wondering

2 whether he considered in doing so whether what he’s 3 proposing is consistent with the Century order, to his

4 understanding. 5 CHAIRMAN:

6 I think that’s a legitimate question 7 for Cross Examination. Cross Examination is a lot of fun

8 when you’re doing it, but it’s not all that much fun just 9 to sit and listen to it endlessly. I would ask that you 10 speed it up a little bit.

11 ATTORNEY OSBORN: 12 Move things along? I will certainly 13 try that. 14 CHAIRMAN: 15 Answer the question, please. 16 A. I’m not familiar in the Century case whether 17 what was proposed by the Commission provided Century with 18 a profit or not. 19 BY ATTORNEY OSBORN: 20 Q. Okay. Do you know whether what was approved by 21 the Commission in Century contemplated or approved a 22 recovery of Century’s expenses as part of the special 23 rate? 24 A. I’m not familiar in detail with what the 25 proposal that Century received from the Commission

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1 covered. What I’m familiar with is that it wasn’t

2 sufficient return for Century to restart its operations. 3 So I have to imagine that it didn’t provide sufficient

4 return. 5 Q. Okay. I want to talk just a little bit about

6 the bank that is part of --- 7 A. Uh-huh (yes).

8 Q. --- the rate, the special rate proposal by 9 Felman. As I understand it, the special rate that you 10 have designed and requested would allow for a bank that’s 11 going to carry over unused discounts from year to year 12 during the entirety of the ten-year period of the special 13 rate; is that correct? 14 A. That is correct. 15 Q. Okay. And despite the proposed existence of 16 that bank, it’s Felman Production’s position that it’s 17 nonetheless always going to be paying its variable cost 18 for electricity; correct? 19 A. It’s Felman’s position that on a contract to 20 date basis, it will always be paying its full variable 21 cost. 22 Q. And explain to me how that’s different from what 23 I asked. Do you mean that over the life --- 24 A. Because in order ---. 25 Q. --- of the special rate ---?

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1 A. In order for us to carry over a discount and use

2 it in a subsequent period, we would have had to have paid 3 fixed costs in the previous period. So on a date --- on

4 a contract to date basis, we would be using fixed costs 5 that we had paid if the market was such that it produced

6 that result. 7 Q. With a bank in place, isn’t it true that in any

8 given year, there might be an occasion for Felman 9 Production to pay none of its fixed costs and also less 10 than the entirety of its variable costs, if any of its 11 variable costs, under certain scenarios? Isn’t that 12 possible? 13 A. It’s correct that in a particular year, that 14 Felman would not be paying any of its fixed costs or all 15 of its variable costs. But on a contract to date basis, 16 it would be paying all of its variable costs. And I know 17 that this is a particularly sensitive issue to a number 18 of interested parties here. And Felman has considered it 19 and has considered a compromise to address the issue of 20 the carryover where we would be willing to propose that 21 in any particular year we would not use more than one 22 year’s worth of carryover, plus whatever the market 23 calculates for the current year. So it wouldn’t be an 24 uncapped carryover, if you will. But if there were fixed 25 costs paid in previous years, they would still exist as

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1 available to carryover to subsequent years, but they

2 wouldn’t be used in the current year. 3 Q. So understanding what you just said, I don’t

4 believe any of that --- you know, as far as what Felman 5 Production is now proposing as sort of an alternative,

6 that doesn’t appear anywhere in your testimony; correct? 7 A. No, it doesn’t. It came out of the objections

8 that were raised and our considering if there is a way to 9 address those objections. 10 Q. I mean, you were asked earlier when we first 11 began, you know, whether your testimony that’s been 12 admitted was accurate, needed to be changed in any way, 13 and you made certain changes to it. That wasn’t a change 14 that you made at the outset of this hearing, though; 15 correct? This is the first time we’re hearing about 16 this. 17 A. Yes, that’s correct. 18 Q. Okay. 19 A. I mean, I stand by the proposal that we made. 20 I’m just offering up a way to address a concern that has 21 been raised, maybe. 22 ATTORNEY OSBORN: 23 And Mr. Chairman and Commissioners, at 24 this point, CAD would move to strike that testimony by 25 Mr. Nuss with respect to an alternative rate design

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1 regarding the bank. We’ve not had a chance to respond to

2 that in rebuttal. None of the parties to this case have. 3 It’s coming up now during the middle of a hearing, and I

4 believe that alternative, as far as his testimony goes, 5 should be stricken from the record and we would move that

6 it be so stricken. 7 CHAIRMAN:

8 We’re not going to do that.

9 ATTORNEY OSBORN: 10 Thank you. 11 CHAIRMAN: 12 We frequently receive, during the 13 conduct of hearings, alternative proposals, and 14 particularly in cases under this statute, given the fact 15 that there’s such an array of sort of soft and mushy 16 standards by which we’re to do this, we’re delighted if 17 people will make proposals that might move the process 18 along. But you can feel free to address it in 19 sur-rebuttal or additional testimony if you care to as we 20 move forward. 21 ATTORNEY OSBORN: 22 I understand. Thank you. 23 BY ATTORNEY OSBORN: 24 Q. Not too many more questions for you, Mr. Nuss, I 25 assure you. I do want to talk about one aspect of the

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1 rate design, which is that the $9.5 million in fixed

2 costs that we’ve been discussing and that number appears 3 throughout testimony and data responses in this case,

4 isn’t it true that that $9.5 million is not a fixed 5 amount? Because in other words, if during the course of

6 this ten-year special rate period APCo comes before the 7 Commission to request a change in rates and let’s say its

8 rates go up or increase, Felman Production’s fixed cost 9 would likewise increase. Is that your understanding of 10 how that would work? 11 A. My understanding is that as a result of a base 12 case decision, that the rates could change, including the 13 fixed cost component. 14 Q. So if that occurs, there is the possibility that 15 the $9.5 million in fixed costs and the discount that 16 corresponds with that that you’re requesting, would 17 actually go up; correct? 18 A. It could increase or decrease. 19 Q. Okay. And no matter --- under your proposal, 20 under Felman Production’s proposal, it’s always going to 21 be entitled to a discount for the full amount of its 22 fixed costs each year, no matter what those fixed costs 23 may be; correct? 24 A. That would be the maximum limit. 25 Q. Okay. Now, you’ve --- in your testimony, you

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1 have talked about the fact that even if the Commission

2 were to approve the special rate that’s been requested, 3 if market conditions were to deteriorate beyond a certain

4 point, and I’m quoting you now, it would be imprudent to 5 keep the New Haven plant open. And that’s at --- that’s

6 on page eight of your Direct testimony at line nine. 7 So I’m wondering what that certain point is that

8 you’re referring to in your testimony. In other words, 9 can you explain to us and explain to the Commission at 10 what point, even with the special rate, Felman’s going to 11 shut its doors? 12 A. Felman Production and its shareholders have 13 continued to support production through market movements, 14 have lost tens of millions of dollars and have shown 15 their commitment to the industry and to this plant by 16 continuing to operate through terrible market conditions, 17 particularly following 2008 into 2009 when we had a 18 tremendous decline in the general economy. What I was 19 saying there is that it’s not out of the realm of 20 possibility that we can come to market conditions that 21 are so poor that it’s just not prudent to incur very 22 substantial losses and that there would be periods where 23 we could --- we might have to to be prudent management to 24 curtail operations or reduce --- you know, reduce or 25 completely curtail operations for periods of time. We

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1 don’t expect that. The historical prices and costs would

2 lead us to believe that that is not going to be the case. 3 But I just --- in response to the question is it

4 possible, it is possible. 5 Q. And part of the reason it’s possible is because

6 of what you yourself have described as the volatility of 7 the market for this product and the cost of the raw

8 materials that go into making this product; correct? 9 A. That’s correct, because of the volatility of the 10 product and the cyclicalities of the industries that we 11 serve. 12 Q. Okay. In the Petition that Felman Production 13 filed and in the testimony that you’ve submitted and that 14 others submitted, are you aware of any reference to or 15 production of unfulfilled contracts that as a result of 16 Felman Production’s furnaces being inoperable now for 17 several months, no silicomanganese having been produced? 18 Have you told us about any contracts that have gone 19 unfulfilled as a result of that shutdown in production? 20 A. I don’t believe we have told you that because I 21 don’t believe we’ve had that situation. 22 Q. Okay. I want to ask you about something else 23 briefly. In Staff’s data request number 23, Felman was 24 asked whether it or any affiliate had been subject to any 25 adverse judgments or paid any penalties or settlement in

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1 any Court or administrative body since 2006. Do you

2 recall that request? 3 A. Yes.

4 Q. And in response, Felman provided a list of I 5 believe five cases, including a case from the United

6 States District Court for the Southern District of West 7 Virginia, Case Number 309-CV-00481, which is the Felman

8 Production Industrial Risk Insurers case. 9 A. Uh-huh (yes). 10 Q. Are you familiar with that case? 11 A. I am. That case --- the company was involved in 12 that case mostly before I joined the company, but I am 13 somewhat familiar with it. 14 Q. Okay. And what I wanted to ask you about is in 15 response ---. 16 CHAIRMAN: 17 Are you going to give that out to him 18 or show it to him or ---? 19 ATTORNEY OSBORN: 20 The response --- the request itself? I 21 can’t ---. 22 CHAIRMAN: 23 Well, you’re asking him questions of 24 it. 25 ATTORNEY OSBORN:

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1 I am, and I can make an exhibit if the

2 Commission would like. 3 CHAIRMAN:

4 Well, I don’t --- it’s up to you, but 5 at least let the witness see it if you’re asking him

6 questions from it. 7 ATTORNEY OSBORN:

8 And I have no reason to make it an 9 exhibit ---

10 CHAIRMAN: 11 All right. 12 ATTORNEY OSBORN: 13 --- if that pleases the Commission. 14 BY ATTORNEY OSBORN: 15 Q. But looking at Felman Production’s response to 16 Staff’s request number 23, Felman indicates that the New 17 Haven plant’s typically involved in numerous litigation 18 matters, and goes on to say that since 2009, Felman has 19 entered into confidential settlement agreements in the 20 following cases, and then lists those five cases. So the 21 first question I want to ask you is with the case that is 22 referred to, the Felman Production versus Industrial Risk 23 Insurers , am I correct in understanding then that in that 24 case Felman Production paid a settlement amount to some 25 other party in that case?

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1 A. Actually ---.

2 ATTORNEY KELSH: 3 I’ll object to that question. I mean,

4 this --- the case that --- the answer indicates that the 5 settlement agreements are confidential. I think she’s

6 inquiring into materials that are confidential in those 7 settlement agreements.

8 ATTORNEY OSBORN: 9 And I’m not. I don’t want to --- if 10 the answer to that question is yes, I’m not going to ask 11 the amount or the terms of that settlement. What I’m 12 trying to understand is in answering the question as it 13 has, saying that Felman has entered into confidential 14 settlement agreement for the following cases, whether 15 that means Felman is the entity who paid the settlement 16 amount, as to --- as opposed to being paid some amount in 17 settlement. Because as I read the question, Staff was 18 only asking about those cases in which Felman has paid an 19 amount in settlement, because Staff asked whether Felman 20 Production has been subject to any adverse judgment or 21 paid any penalties or settlement. So I just want to 22 clarify and make sure I understand it correctly that by 23 virtue of your response, that means Felman paid a 24 settlement sum in that case. 25 CHAIRMAN:

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1 All right. Hold on. Just --- you all

2 right with that? 3 ATTORNEY KELSH:

4 That’s confidential. 5 CHAIRMAN:

6 Hmm? 7 ATTORNEY KELSH:

8 The request calls for the disclosure of 9 confidential information under those settlement 10 agreements. That’s ---.

11 CHAIRMAN: 12 Including whether they paid anything? 13 ATTORNEY KELSH: 14 Correct. 15 ATTORNEY OSBORN: 16 There’s no --- when Felman Production 17 responded to this request, it did not make an objection 18 to it. It did not state that in telling Staff and the 19 other parties to this case whether it had ever paid a sum 20 in settlement was a confidential matter. It answered the 21 question and I’m just trying to understand what that 22 answer means. It’s just --- I think I know what it 23 means, but you know, I don’t want to assume that that’s 24 what it means, because I could be mistaken. So I mean, I 25 would like to ---.

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1 CHAIRMAN:

2 Read the question --- read the question 3 again.

4 ATTORNEY OSBORN: 5 Staff’s request?

6 CHAIRMAN: 7 Yes.

8 ATTORNEY OSBORN: 9 Staff asked, has Felman Production or 10 any affiliate been subject to any adverse judgments or 11 paid any penalties or settlement ---. 12 CHAIRMAN: 13 Stop right there. Now, if you answer 14 that by naming a lawsuit, haven’t you said that that’s 15 exactly what you’ve done? 16 ATTORNEY OSBORN: 17 That’s my understanding. 18 CHAIRMAN: 19 And they’ve done that? They’ve named 20 the lawsuits. 21 ATTORNEY OSBORN: 22 They stated, since 2009, Felman has 23 entered into confidential settlement agreements in the 24 following cases. 25 CHAIRMAN:

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1 Seems to me if that’s the answer, then

2 --- to the question that was asked, then it presumes that 3 they paid something.

4 ATTORNEY OSBORN: 5 That would be my presumption as well.

6 ATTORNEY KELSH: 7 Mr. Powell is general counsel for

8 Felman Production. Would it be permissible to allow him 9 to speak at this time?

10 CHAIRMAN: 11 Sure. Welcome to West Virginia, Mr. 12 Powell. 13 ATTORNEY POWELL: 14 Thank you very much. Good to be back. 15 CHAIRMAN: 16 We have a loose system as you can see. 17 ATTORNEY POWELL: 18 No, it’s ---. 19 CHAIRMAN: 20 You can testify, you can ---. 21 ATTORNEY POWELL: 22 The question asked for adverse 23 judgments, and there was an adverse --- a partial adverse 24 judgment in that case. There also is a confidential 25 settlement agreement, but the question --- the request

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1 was for adverse judgment. And so that’s why it’s listed

2 there. 3 CHAIRMAN:

4 Okay. 5 ATTORNEY POWELL:

6 The terms of the settlement agreement 7 are confidential.

8 ATTORNEY OSBORN: 9 But that --- and my response to that 10 --- I guess it doesn’t make it any clearer for me because 11 immediately before listing these five cases, Felman says 12 not Felman was subject to an adverse judgment in case 13 so-and-so, but says, Felman has entered into confidential 14 settlement agreements in the following cases, and then 15 lists those cases. So I mean, there’s really two 16 separate questions that Staff is asking. One, have you 17 been subject to any adverse judgments; two, have you paid 18 any penalties or settlements? Felman doesn’t say 19 anything in its response about adverse judgments. It 20 simply says Felman has entered into confidential 21 settlement agreements in the following cases. So I’m 22 just trying to understand what that response means. 23 CHAIRMAN: 24 Mr. Powell, anything further? 25 ATTORNEY POWELL:

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1 Well, my --- I think the response is

2 that it’s listed below because there was an adverse 3 judgment.

4 CHAIRMAN: 5 And not that there necessarily was a

6 payment; is that what you’re saying? Or you’re not 7 saying that, you’re not ---

8 ATTORNEY POWELL: 9 No, no, they ---.

10 CHAIRMAN: 11 --- committing that one way or the 12 other? 13 ATTORNEY POWELL: 14 Right. Well, there is a confidential 15 settlement agreement that involves payments. It's kind 16 of complicated. So it’s not --- there’s not an easy 17 answer for that either. 18 CHAIRMAN: 19 All right. We’re going to sustain the 20 --- we’ll sustain the objection. You could have pursued 21 that earlier and I’m not sure that it’s all that relevant 22 or material at this time anyway. 23 ATTORNEY OSBORN: 24 Okay. 25 BY ATTORNEY OSBORN:

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1 Q. And following up with that, Mr. Nuss, in that

2 case, the adverse judgment that was rendered against 3 Felman, was that dismissal of --- was that the dismissal

4 by Federal Judge John Chambers of a $38 million loss of 5 profit claim made by Felman against its insurance

6 company? 7 A. It was a dismissal of a loss of profits claim, a

8 large one. I don’t recall the number. 9 Q. Okay. And if I represent to you that it was $38 10 million per the pleadings, would you have any reason to 11 disagree with that? 12 A. No. 13 Q. Okay. And I understand that this case existed 14 in large part before you came on board, but do you agree 15 that that case --- that case was filed by Felman 16 Production as a result of lost business profits that it 17 claimed to have incurred when one of its furnaces was 18 shut down for a period of time due to a transformer 19 failure? 20 A. That’s my understanding. 21 Q. Okay. And it brought a claim under its 22 insurance policy to recoup those purported losses; 23 correct? 24 A. Correct. 25 Q. And when the insurance company would not pay

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1 those losses, Felman proceeded to file suit, including

2 bad faith claims and whatnot; is that your understanding? 3 A. Yes.

4 Q. Okay. And Judge Chambers dismissed the entirety 5 of that $38 million claim on the basis that Felman had

6 offered no proof in that case that there were unfulfilled 7 contracts that it could have fulfilled and could have

8 earned money on had its furnace been in operation and it 9 had actually produced that silicomanganese; is that your 10 understanding, if you know? 11 A. I do not know. 12 Q. Okay. In addition to that adverse judgment in 13 that case, are you aware of the fact that Felman was 14 subjected to sanctions by the Federal Court in that case 15 for discovery violations? Do you have any knowledge of 16 that? 17 A. No, I do not. 18 ATTORNEY OSBORN: 19 If you’ll give me one moment to confer, 20 I may be finished. That’s all I have for the witness. 21 CHAIRMAN: 22 Thank you, ma’am. Mr. Williamson? 23 ATTORNEY WILLIAMSON: 24 Yes, sir. 25 CROSS EXAMINATION

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1 BY ATTORNEY WILLIAMSON:

2 Q. Well, I have a few questions, because in the 3 words of Brendon Sullivan of Washington, D.C., I am not a

4 potted plant. I am here for a reason. 5 You are not a lawyer; correct?

6 A. That’s correct. 7 Q. You are a CPA?

8 A. That’s correct. 9 Q. And you’re CFO? I think I’ve heard that --- 10 A. Yes. 11 Q. --- as well, and I’ve read that. 12 ATTORNEY WILLIAMSON: 13 I do have a Cross exhibit. It’s not 14 going to take long. This would be WVEUG Cross Exhibit 15 Number One, subject to providing it to Counsel. 16 OFF RECORD DISCUSSION 17 CHAIRMAN: 18 All right. We’re having marked for 19 identification as WVEUG Cross Examination Exhibit One, a 20 question and response to request number eight, nine --- 21 eight and nine. 22 (WVEUG Cross Examination Exhibit One 23 marked for identification.) 24 ATTORNEY WILLIAMSON: 25 And I might as well mention this,

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1 because it just occurred to me, I don’t know as the CAD

2 had moved its Cross exhibits into evidence. 3 CHAIRMAN:

4 They have not. 5 ATTORNEY KELSH:

6 I’m going to object to the entry into 7 evidence of CAD Cross Examination Exhibit Number Three,

8 the ex parte application of the United States District 9 Court, Southern District of Florida on the Victor Pinchuk 10 matter. This is not related to this proceeding, it is a 11 contested matter, it is half of the story in that 12 contested matter. If CAD is allowed to refer to this in 13 briefs, it’s going to put us at a disadvantage in terms 14 of being able to respond to this within the record of 15 this matter. 16 CHAIRMAN: 17 You want to respond? 18 ATTORNEY ROBERTS: 19 Sure. I’ve been quiet for a long time. 20 This exhibit is clearly relevant to the case before us. 21 Felman is asking for a special rate based on the statute 22 that demonstrates, first, that it’s in need of a special 23 rate, and second, that it’s economically viable if it 24 gets a special rate. Whether it’s in need of a special 25 rate can depend entirely on the facts of the case.

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1 And the facts of the Felman case is

2 that Felman is one of several subsidiaries and affiliates 3 of a company that makes whether its standalone financials

4 are independently worthy of a special rate questionable. 5 It buys all of its raw materials from an affiliate, it

6 sells all of its product to an affiliate and it has --- 7 and the Felman companies have been accused in this case

8 of unfair dealings and --- what is the specific language 9 that --- just give me a second. Just a moment.

10 CHAIRMAN: 11 We’re arguing over the exhibit that 12 relates to the United States District Court of 13 Arbitration; right? 14 ATTORNEY KELSH: 15 Correct. 16 CHAIRMAN: 17 Okay. 18 ATTORNEY ROBERTS: 19 Yes. And, you know, the charge is that 20 --- that funds and assets have been illegally diverted, 21 ferroalloy assets and profits have been illegally 22 diverted and there’s been self-dealing among all of these 23 affiliates. That goes directly to whether this affiliate 24 is entitled to any kind of special rate treatment. For 25 all we know, this affiliate, who has operated with

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1 substantial losses over many years, is operating at

2 substantial losses, even though its affiliates are, as 3 we’ve seen from the tax returns, having substantial

4 profits. 5 It’s the overall operation of the

6 parent company that is probative of whether this 7 individual company needs a special rate. And part of

8 that is whether there’s been self-dealing --- an illegal 9 self-dealing. And that’s why this is relevant and should 10 be admissible.

11 CHAIRMAN: 12 Okay. We’re going to sustain the 13 objection to CAD Cross Three. Your own argument is that 14 it’s allegations only. I don’t know that there’s been 15 any showing of what the results were or that anybody was 16 necessarily guilty of any misconduct, or that the 17 arbitrator found that to be the case. So just on the 18 basis of bare allegations in an application, I don’t 19 think is proof of what you’re asserting. You do not 20 object to Two and Four? 21 ATTORNEY KELSH: 22 Do not. 23 CHAIRMAN: 24 All right. Two and Four will be 25 admitted. And we’re sustaining the objection to Three.

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1 ATTORNEY OSBORN:

2 And I presume we had a Cross One. I’m 3 not sure what that was, but ---.

4 CHAIRMAN: 5 I think it was admitted.

6 ATTORNEY OSBORN: 7 Okay. All right.

8 CHAIRMAN: 9 I had --- at least my paper shows it 10 was admitted.

11 ATTORNEY OSBORN: 12 Okay. Thank you. 13 CHAIRMAN: 14 Are you finished? 15 ATTORNEY WILLIAMSON: 16 No, I’m not finished. 17 CHAIRMAN: 18 All right. Just thought I’d take a 19 fire. 20 ATTORNEY WILLIAMSON: 21 Very wishful thinking. 22 CHAIRMAN: 23 Well, you raised it. 24 ATTORNEY WILLIAMSON: 25 I just did ---.

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1 CHAIRMAN:

2 It was awful nice. 3 ATTORNEY WILLIAMSON:

4 It occurred to me and then I figured I 5 should have just kept my mouth shut and let the chips

6 fall where they may. But I’m all about the orderly 7 processing of justice.

8 CHAIRMAN: 9 You are indeed.

10 ATTORNEY WILLIAMSON: 11 We wanted to make that happen. 12 BY ATTORNEY WILLIAMSON: 13 Q. All right. Mr. Nuss, you had --- you were 14 responsible for preparing this discovery response; 15 correct? 16 A. Yes, that’s correct. 17 Q. At least that’s what it says; --- 18 A. Uh-huh (yes). 19 Q. --- correct? And in your testimony, your Direct 20 testimony, you indicate that you’re CFO for Georgian 21 American Alloys and then you reference the various 22 affiliated companies; correct? And that was at page one 23 of your Direct testimony, line 23. 24 A. Correct. 25 Q. And the various affiliated companies that are on

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1 this document, CC Metals and Alloys, Felman Production,

2 Felman Trading, are those all of the various entities to 3 which you are alluding?

4 A. Yes. Excuse me, yeah ---. 5 Q. Are you CFO for these three entities or are

6 there others beyond ---? 7 A. No, I am CFO for these ---

8 Q. And ---. 9 A. --- three domestic companies. 10 Q. I’m sorry, I talked over you there. With 11 respect to Georgian American Alloys, you have no 12 relationship with respect to them, other than the 13 relationship as the CFO to Georgian American Alloys? 14 A. That’s correct. 15 Q. And then if we look at the boxes depicting the 16 leadership of CC Metals and Felman Production, it 17 identifies Georgian American Alloys in both instances as 18 the sole member. What does that mean? 19 A. Those companies are organized as limited 20 liability corporations. They’re treated as a partnership 21 for tax purposes, so a sole member is a sole shareholder. 22 Q. So when we looked at that tax return and it had 23 a column for Georgian American Alloys and a column for 24 Felman Trading, that was a reflection of that construct; 25 correct?

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1 A. That’s correct.

2 Q. Where is Felman Trading located for purposes of 3 doing business?

4 A. In Miami, Florida. 5 Q. How many employees do they have? How many

6 employees do they have? 7 A. Approximately 28.

8 Q. Your Rebuttal testimony, pages six and seven, 9 starting roughly at line 21 and carrying over to line 10 four, I believe --- and you can confirm this for me. I 11 believe you’re discussing the prospect or the potential 12 for intra --- intra-company competition as between Felman 13 Production and Georgian American Alloys; correct? 14 A. Yes, for capital. Competition for capital, yes. 15 Q. For capital. And would a factor --- does 16 Georgian American Alloys sell silicomanganese in North 17 America? 18 A. Georgian American Alloys? 19 Q. Yeah. 20 A. The silicomanganese is sold through its 21 subsidiary, Felman Trading. 22 Q. Uh-huh (yes), and is it sold in ? 23 A. Yes, it is sold in North America. 24 Q. And so there’s a true potential then for 25 competition as between Felman Production and Georgian

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1 American Alloys; correct?

2 A. Not following. 3 Q. Well, they compete against one another in some

4 sense; correct? 5 A. No. Georgian American Alloys is a holding

6 company. It doesn’t have a sales function. It’s a 7 holding company that owns two production plants in the

8 United States and one production plant in the Republic of 9 Georgia. And those products of all three of those 10 production plants are sold in the Western Hemisphere 11 through Felman Trading, a trading company, a sales and 12 marketing company. 13 Q. And so the disadvantage of which you speak on 14 page seven, starting at line two, when you say that 15 there’s a significant disadvantage in competing for 16 investment dollars versus --- and I think that’s a typo, 17 expanding capacity in Georgia, you’re referring to the 18 production entity that is in the Country of Georgia; 19 correct? 20 A. That’s correct. And shown on this chart is 21 Georgia Manganese, LLC. 22 Q. Right. I understand. All right. Thank you. 23 At the Petition, page six --- and you can reference it if 24 you like. I think it’ll be self-evident. And in your 25 Direct testimony, you briefly discuss the negotiations

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1 between Felman and Appalachian Power Company. Do you

2 recall --- 3 A. Yes.

4 Q. --- your testimony in that regard? Who was 5 negotiating on behalf of Felman? Who was part of that

6 negotiation team? 7 A. Myself, John Konrady and representatives from

8 Bowles Rice were with us. Robert Powell was with us. 9 Q. Was Mr. Fayne part of those negotiations? 10 A. Yes. 11 Q. How many meetings were convened for purposes of 12 negotiation? 13 A. The initial meetings were for the purpose of 14 describing, informing about the company and about the 15 statute and about our concept to pursue a special rate. 16 They were then --- there were visits to the plant, there 17 were --- a follow-up meeting. There weren’t that many 18 meetings. 19 Q. How many --- you said there’s an introductory 20 meeting and then --- 21 A. Yeah. 22 Q. --- there may have been some other visits? 23 A. Right. 24 Q. Was there a negotiation session of sorts at any 25 particular time?

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1 A. We shared with Appalachian Power what our

2 concept was and solicited their feedback to join us and 3 support us or not, and it was clear from the discussions

4 that they were not interested in joining us. 5 Q. You did not trade proposals, as it were, or

6 anything of that nature? 7 A. We shared our proposal.

8 Q. Right, and they didn’t respond with an 9 alternative, is what I’m gleaning; is that correct? 10 A. That’s correct. 11 Q. Who designed your special rate? Who framed that 12 particular proposal? 13 A. Myself, the assistance of Henry Fayne, our 14 consultant, and John Konrady, our plant manager. 15 Q. Just bear --- I’m trying to skip over a little 16 bit of material here. I thought you might appreciate 17 that. 18 And you’re familiar with the Petition that was 19 filed on behalf of Felman, I assume; correct? As the --- 20 essentially you’re the main witness, so you’re familiar 21 with that Petition; correct? 22 A. Yes. 23 Q. At page four of that Petition, there’s 24 discussion about Felman’s demand. Do you happen to have 25 the Petition?

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1 A. I don’t have a copy of the Petition.

2 Q. I’ll just read you the opening sentence. 3 A. Yeah.

4 Q. That’s probably the most efficient thing. It 5 says, Felman Production presently has a contract demand

6 with APCo of up to 110 megawatts of electricity annually, 7 with an average demand above 50 megawatts, and then

8 there’s some citations. And then it says, the proposed 9 special rate has a contract demand of up to 150 10 megawatts. Does that make sense? What I have read to 11 you, does that --- 12 A. Yes. 13 Q. --- sound accurate? 14 A. Yes, it does. 15 Q. And you also --- you’ve had a discussion today 16 with Ms. Osborn, and perhaps there was some other 17 discussion, about the maximum fixed costs --- the 18 maximum --- 19 A. Fixed costs. 20 Q. --- fixed costs contribution that could be made 21 under the proposed special rate. And actually, I think 22 it was updated by Mr. Fayne in a discovery response, but 23 at this point it’s about $9.65 million. I think you 24 weren’t sure; you had heard that number before. But 25 would you accept that?

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1 A. Yes.

2 Q. Do you have a sense, without disclosing 3 specifically, the particular amount of capacity that is

4 reflected in that fixed cost calculation? 5 A. I would assume the capacity is in line with what

6 we have been using over recent years. 7 Q. With respect to a fixed capacity or

8 interruptible capacity? 9 A. Interruptible capacity, but what we’ve actually 10 used, our demand I would imagine. 11 Q. Perhaps I should address this --- those 12 questions to Mr. Fayne. Do you think that would be an 13 appropriate ---? 14 A. I think that would probably be helpful. 15 ATTORNEY WILLIAMSON: 16 Would that be okay with respect to 17 Counsel? 18 ATTORNEY KELSH: 19 Yes. 20 ATTORNEY WILLIAMSON: 21 All right. I’ll do that. But I’m not 22 done yet. 23 CHAIRMAN: 24 We can always hope. 25 BY ATTORNEY WILLIAMSON:

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1 Q. There’s also been a little bit of discussion ---

2 and if you turn to your Exhibit BN-3, there’s a footnote 3 on the third substantive page. And there may be other

4 references to it, but this is just one that was handy, to 5 a limitation on the premium, the amount that might

6 benefit other ratepayers. There’s a limitation of a 7 million dollars with respect to that. Why did you and

8 Mr. Fayne, in designing this special rate, limit that 9 premium to $1 million? 10 A. Well, in order for us to pay that premium, we 11 would have had to pay all fixed costs for all periods. 12 And we selected a dollar amount premium above paying full 13 tariff, and we selected a million dollars. Why did we 14 select a million dollars or why did we cap it? Because 15 we’re a company that has already invested nearly $100 16 million in sustaining this operation, and we think if 17 times are good and we pay the full tariff on the full 18 contract basis, that there should be a limit to paying 19 above that, and we should have an opportunity to recoup 20 some the losses that we’ve sustained over the years. 21 ATTORNEY WILLIAMSON: 22 I’m going to identify another cross 23 exhibit. It’ll be WVEUG Cross Exhibit Number Two. 24 OFF RECORD DISCUSSION 25 CHAIRMAN:

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1 All right. We’ve had marked for

2 identification as WVEUG Cross Examination Exhibit Two a 3 question and response to SWVA 2-2, relating to the

4 asymmetry between the proposed discount and the proposed 5 additional premium.

6 (WVEUG Cross Examination Exhibit Two 7 marked for identification.)

8 BY ATTORNEY WILLIAMSON: 9 Q. And this is a response that you prepared to 10 discovery; correct? Or it was prepared under your 11 direction? 12 A. Yes. 13 Q. It’s a slightly more complicated engagement of 14 the issue in that it’s comparing the fact that the 15 discount can be 9.5 and 9.65 million dollars on an annual 16 basis, and that is not symmetrical, one could argue, to 17 the premium being a million dollars. And in this 18 response, you indicated that at least in part, as I 19 understand the response, the $1 million cap was based on 20 the Century Aluminum special contract that the Commission 21 had approved back in 2006. Not to be confused with the 22 special rate proposal that has been subject of this 23 proceeding that we’re here for. 24 Would you explain your response here in light of 25 the answer that you gave to me? You did not indicate in

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1 that response that it was based on the Century contract

2 that had been approved. 3 A. Well, the basis of having a discount and a

4 premium, the basis of paying a higher rate when the 5 market conditions were good and a lower rate when the

6 market conditions were poor, was based on the Century 7 special contract proposal. The dollar amount of the cap,

8 we came up with and made a proposal. 9 Q. I understand. Did you review the Century 10 special contract that had been approved by the 11 Commission? Or was that left to Mr. Fayne? 12 A. No, I didn’t review the written special 13 contract. I was --- it was discussed with me what the 14 terms of that contract were. 15 Q. Can you recall if those terms including a return 16 on investment component? 17 A. It did not refer to a specific return on 18 investment. 19 Q. And can you recall if those terms included some 20 minimum contribution to fixed costs? 21 A. I don’t believe that it required a minimum 22 contribution to fixed costs. 23 Q. You don’t believe that or you don’t recall that? 24 A. I don’t recall. 25 Q. In your Direct testimony, page 12, lines 11 and

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1 12 ---.

2 A. I’m sorry, what page? 3 Q. Page 12, lines 11 and 12.

4 A. Okay. 5 Q. You talk about the proposed return that has been

6 designed or included in the special rate designed by you 7 and Mr. Fayne. And you indicate that it is as low as you

8 could justify it. I assume that was sort of an 9 introspective assessment that you made in terms of that 10 being as low as you could justify? 11 A. Yes. 12 Q. And you talked a little further down on lines 14 13 and 16 --- you compare that proposed return to returns on 14 equity for utilities in Commission cases. Do you recall 15 that testimony? 16 A. Yes. 17 Q. Have you ever testified before a Public Service 18 Commission or Public Utility Commission? 19 A. No, I have not. 20 Q. Have you ever testified as --- well, I assume 21 then you’ve never testified as to a utility’s return on 22 equity or rate of return? 23 A. That is correct, I have not. 24 Q. Have you ever engaged in or supervised 25 preparation of an analysis that would address rate of

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1 return or return on equity, such as the risk premium

2 analysis or a capital asset pricing model analysis? 3 A. In the context of a utility rate case?

4 Q. Yes, sir. 5 A. No, I have not.

6 Q. Did you do a comparable type of study with 7 respect to the return that you’re proposing to be

8 embedded in the special rate in this case? 9 A. No. 10 Q. Your Counsel earlier in one of the discussions 11 with the Chairman noted that Felman is a competitive 12 business and that APCo is a regulated utility. Would you 13 accept that there’s a difference in setting a rate of 14 return or return on equity for a regulated utility 15 providing monopoly services and judging an appropriate 16 return for a private enterprise in a competitive 17 business? 18 A. Yes, there are differences for what are expected 19 of different businesses in different industries. 20 Q. Would --- I’m sorry. Please complete your 21 answer. 22 A. I think, you know, the indication on that is how 23 different businesses are valued and what shareholders 24 expect to have as returns for different levels of risk. 25 And this is a business that is volatile and that serves

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1 an industry that is cyclical, and in my experience in

2 working within this industry, investors look for a rate 3 of return substantially in excess of what we proposed.

4 Q. Are you suggesting that the Commission should be 5 engaging in a rate of return analysis for Felman in this

6 proceeding? 7 A. No. I’m merely suggesting that a modest return

8 is what makes a company viable in the long run and that 9 we’ve proposed a modest return. 10 Q. And you said something in response to Ms. Osborn 11 along those lines. I want to make sure I understood what 12 you said. I might not agree with it, but I want to make 13 sure I understood it. 14 A. Uh-huh (yes). 15 Q. I think you said a special rate must include a 16 return component. Is that your opinion? 17 A. I don’t know if I said a special rate, but the 18 viability of a company has to include some level of 19 return on investment. If it does not, then the company 20 does not continue to sustain its operations and has no 21 opportunity to grow and will eventually wither and die. 22 Q. You received some questions about the future, 23 what the market might bring. And you testified --- it’s 24 in your written testimony. You testified today that 25 future operations will depend on market conditions.

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1 ATTORNEY WILLIAMSON:

2 And this is the last time I do this, I 3 swear. I have a third Cross Examination exhibit, WVEUG

4 Cross Exhibit Number Three, that I would like to have 5 identified.

6 ATTORNEY KELSH: 7 While you’re doing that, I’d like to

8 ask if Mr. Powell could be excused. He has a plane to 9 catch.

10 CHAIRMAN: 11 Yes. 12 ATTORNEY POWELL: 13 Thank you. 14 CHAIRMAN: 15 What if there’s more litigation to 16 this, Counselor? What will we do? 17 ATTORNEY POWELL: 18 Call me. 19 OFF RECORD DISCUSSION 20 CHAIRMAN: 21 We’ve had marked as WVUEG Exhibit 22 Number Three the request and response number 28. 23 (WVEUG Cross Examination Exhibit Three 24 marked for identification.) 25 BY ATTORNEY WILLIAMSON:

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1 Q. Okay. Mr. Nuss, you prepared or this response

2 was prepared at your direction; correct? 3 A. That’s correct.

4 Q. And the question says what I’ve just alluded to, 5 and that’s what may happen depending on future market

6 conditions. And actually the term I’m more focusing on 7 --- it’s an open-ended question that’s going to violate

8 every lawyer rule. But could you tell me --- in the 9 second line you reference that there are many variables 10 pertinent to those markets. Can you just recite, if you 11 can, what some of those many variables may be? 12 A. Well, when you deal with a business and 13 commodities, both purchasing them and raw materials that 14 are affected by global supply and demand, there are 15 currency effects, there are trade restrictions that could 16 impose effects. There's inflation. There’s labor 17 disruptions. I mean, there’s a number of risks involved 18 and a number of variables. 19 Q. At page 17 of your Direct testimony, --- 20 A. Uh-huh (yes). 21 Q. --- lines 16 to 18, basically what I would view 22 as sort of a practical assessment, you reserve the right 23 to shut down if markets are so bad. But the actual --- 24 the term that you use calls --- question says if the 25 price of silicomanganese deteriorates far more than we

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1 expect. Now, when I read that, Mr. Nuss, it means that

2 there is an expectation that it’s going to deteriorate 3 some. How far do you think it will deteriorate?

4 A. I don’t have an expectation of a specific price. 5 I have an expectation that the price of silicomanganese

6 over time will go through periods where it will increase 7 and will go through periods where it’ll decrease, that it

8 will be volatile. And I have that expectation because 9 that has been the history. 10 Q. So you expect it to deteriorate a little, but it 11 could also go up? 12 A. It could deteriorate a little, it could 13 deteriorate a lot, it could increase a little and it 14 could increase a lot. 15 Q. But your expectation is that it’s --- your 16 words, your expectation is it’s not going to deteriorate 17 to such a degree that you would have to shut down? 18 A. That’s correct. 19 Q. All right. And just briefly I want to turn to 20 your Rebuttal testimony. And although your Counsel has 21 ably mentioned that you’re not a lawyer, you are the 22 principal witness for Felman; correct? 23 A. That’s correct. 24 Q. And, in fact, Mr. Fayne wisely threw you under 25 the bus; I mean refer legislative questions to you. And

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1 his testimony indicates that Witness Barry Nuss

2 demonstrates that you qualify based on the criteria 3 defined in the legislation. So I think you’re open to a

4 couple questions on that. 5 And, in fact, at page 5, line 17 of your

6 Rebuttal, you make an assessment of CAD’s position as it 7 relates to the statutory burden. Have you reviewed the

8 applicable statute? 9 A. Yes, I have. 10 Q. And then at page five, a little farther down, 11 line 20, you refer and place it in quotes to the term 12 reasonable evidence. And I think those two words do 13 appear in the statute. Then on line 22 you indicate, in 14 your opinion and your testimony, that Felman has provided 15 compelling evidence. How would you define the term 16 compelling evidence as you used it here? Understanding 17 you’re not a lawyer, but when you use that term, 18 compelling evidence, what do you mean by that? 19 A. I think the fact that the plant’s currently shut 20 down and the vast majority of our employees have been 21 laid off is compelling evidence as to the viability of 22 the plant in the current market without assistance. 23 Q. And so that’s a factual definition, not a legal 24 one; correct? 25 A. I’m not a lawyer. That’s correct.

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1 Q. And just one other thing before I ask some

2 general questions. And maybe it’s in your Direct. Just 3 a minute, hold on one second. I’ll ignore that, since I

4 can’t find it. But it was really an academic question. 5 I do have a couple questions, since you’re the

6 principal witness for the company. I just want to 7 understand and I want to make sure that it is clear on

8 the record. What would Felman do if the Commission 9 issues an order that modifies the special rate that you 10 have proposed in this case? 11 A. We’d have to understand the extent of that 12 modification. 13 Q. But you’re not --- so do I take your answer to 14 mean that you’re not presenting a take it or leave it 15 proposition? 16 A. No, we’re not --- we’re not presenting a take it 17 or leave it proposition. We would have to study what is 18 offered and see if it works. 19 Q. And would Felman accept a modified special rate 20 if it eliminated the return on investment component? 21 A. We would consider a proposal that reduced the 22 return on investment proposal. As I said, I think for a 23 company to be viable in the longer term, it must have a 24 return on investment. 25 Q. All right. But you would not accept elimination

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1 of that return on investment component?

2 A. That would be --- we would have to take that 3 under consideration as to whether it’s worth continuing

4 to operate, continuing to take the risks of this business 5 that go beyond the special rate for a target. That’s I

6 think what you’re asking me. 7 Q. Well, we’re about to get into an argument, so

8 I’ll just let that go. 9 A. Okay. Fair enough. 10 Q. We can save that for the brief. Would Felman 11 accept a special rate if the accumulated discount to 12 carry forward treatment were eliminated? 13 A. I think if it were eliminated, it would be very 14 difficult to accept a proposal. As I mentioned earlier, 15 if it were modified, I think we could live with it. 16 Q. Would Felman accept a special rate as modified 17 by the Commission if it increased the premium amount, 18 which is proposed to be $1 million? 19 A. We would take it under consideration. 20 Q. Would Felman accept a special rate if the 21 Commission modified the special rate to include a minimum 22 contribution to fixed costs on an annual basis? 23 A. We would take it under consideration. 24 Q. All right. Thank you. 25 ATTORNEY WILLIAMSON:

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1 I have no further questions. I would

2 move the admission of the WVEUG Cross Examination 3 Exhibits One through Three.

4 CHAIRMAN: 5 Any objection to the admission of One

6 through Three? 7 ATTORNEY KELSH:

8 No objection.

9 CHAIRMAN: 10 All right. They’ll be admitted. Mr. 11 Porth? 12 CROSS EXAMINATION 13 BY ATTORNEY PORTH: 14 Q. Good afternoon, Mr. Nuss. 15 A. Good afternoon. 16 Q. My name is William Porth and I represent 17 Appalachian Power Company. Let me start our colloquy by 18 saying that I don’t believe I’m going to present any 19 Cross Examination exhibits to you. 20 Let me start with a couple of questions arising 21 out of some of the Cross Examination that you’ve already 22 responded to. Mr. Williamson asked you some questions, 23 and as I recall your response, they related to the 24 million-dollar premium. You indicated that that would 25 come into play after Felman Production had already paid

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1 the full tariff rate. Now, in saying that, did you mean

2 to refer to the full tariff rate or the full special 3 contract rate with the time of day and interruptibility

4 features? 5 A. I was referring to our special contract, the TOD

6 rate. 7 Q. I just wanted to clarify that.

8 A. Thank you. 9 Q. In response to some questioning from Ms. Osborn, 10 specifically dealing with CAD Confidential Cross 11 Examination Exhibit Number Four, which is where you had 12 identified the approximate million --- $11 million error 13 on the consolidated tax return for Georgian American and 14 affiliates. As you sit here today, do you think that 15 Georgian American and its affiliates will have to file an 16 amended tax return? 17 A. No, I conferred with KPMG, our tax consultants, 18 and they tell me there is no need to file an amended tax 19 return because the correct amount of tax was paid, but 20 that we will need to adjust the amount reported on our 21 tax return. 22 Q. All righty. Now, if you’ll turn to page two of 23 your Direct testimony, it seemed to me that in recounting 24 your business background, you had a missing year there. 25 Could you tell me what you were doing professionally in

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1 the calendar year of 2010?

2 A. I was not employed in calendar year ’10, the 3 year 2010.

4 Q. Now, did your employment with Georgian American 5 Alloys begin on the day that that corporation was formed?

6 A. No, it did not. 7 Q. When did it begin?

8 A. It began on January 1st, 2011. 9 Q. Okay. So you were employed by a corporation 10 before it existed? 11 A. Well, no, I was at first employed by Optima 12 Industrial Management. 13 Q. All right. 14 A. It was sort of a predecessor to Georgian 15 American Alloys. 16 Q. Does Optima Industrial Management have any 17 relationship to an entity you testified about earlier 18 called Optima Group? 19 A. Optima Industrial Management was tasked with 20 providing management services to the Felman companies, 21 Felman Trading, Felman Production, and the owner of 22 Optima Industrial Management are one of the two owners, 23 individual owners in Optima Group and APSI (phonetic), 24 Mordechai Korf, for instance. 25 Q. Okay. Before commencing your employment with

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1 Optima Industrial Management, did you have any connection

2 of any kind with any of the Georgian American companies, 3 any of their owners or principals, any of their

4 predecessors or affiliates? 5 A. No, I did not.

6 Q. Could you just tell me briefly what CC Metals 7 and Alloys does?

8 A. CC Metals and Alloys produces a ferroalloy 9 called ferrosilicon and derivatives of ferrosilicon, 10 which are used by the steel and foundry industry. 11 Q. And can you tell me what Georgian Manganese 12 does? 13 A. Georgian Manganese produces silicomanganese, the 14 same as Felman Production, but also operates a mine which 15 produces manganese ore, which is used at Georgian 16 Manganese to produce silicomanganese. 17 Q. Okay. Does the family of Georgian American 18 companies have any other mines beside that mine you’ve 19 just referred to? 20 A. Not the family of Georgian American Alloys. 21 There are no other mining operations within Georgian 22 American Alloys. 23 Q. Okay. The way you phrased that, though, let 24 me --- 25 A. Uh-huh (yes).

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1 Q. --- try to expand my question a little bit. Are

2 there entities owned by the folks who own Georgian 3 American and related companies that have additional

4 manganese mines? 5 A. Yes, the ultimate owners of Georgian American

6 Alloys, there are four individuals. Two of those 7 individuals have interests in metal producing and metal

8 mining companies in the Ukraine and Romania. And in the 9 Ukraine there are mining facilities. 10 Q. And then finally, could you explain briefly what 11 --- and I probably won’t pronounce this correct --- 12 Vartsikhe 2005, LLC, does? 13 A. That’s the correct pronunciation, Vartsikhe. 14 Q. Oh, okay. 15 A. Vartsikhe is a separate subsidiary in Georgia, 16 which operates hydroelectric production plants. And its 17 power is used mostly by Georgia Manganese. 18 Q. Okay. So you like the electric price you get in 19 Georgia very much, I take it. At page three of your 20 Direct testimony, lines 10 and 11, you indicate that in 21 January 2006, Felman Production acquired the assets of 22 what’s now the Felman plant in Mason County out of 23 bankruptcy; correct? 24 A. That’s correct. 25 Q. Have you read APCo Witness Ferguson’s testimony

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1 in this case?

2 A. Yes, I have. 3 Q. Okay. He testified at page three of his Direct

4 testimony, and I trust these are not confidential numbers 5 since they were in his testimony without any redaction,

6 that Boris Bannai had purchased the --- what’s now the 7 Felman plant, in 2001 for $2 million, and that Felman

8 Production paid $20 million for it in 2006. Do you know 9 if those numbers are correct? 10 A. I don’t have direct knowledge of what Boris 11 Bannai paid for the facility, but the $20 million is 12 correct. 13 Q. Okay. If you’ll assume for the sake of argument 14 or as a hypothetical that Boris Bannai did pay $2 15 million, --- 16 A. Uh-huh (yes). 17 Q. --- could you explain what caused the value of 18 the Felman plant to skyrocket so over a few years? 19 A. Well, Boris Bannai did operate a business there 20 and there were --- there was working capital, there was 21 some inventory that was built up and taken over. 22 Q. From your testimony, I take it the plant was in, 23 quote, poor shape when --- 24 A. That’s correct. 25 Q. --- Felman Production acquired it.

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1 A. Yes, for the way we wanted to operate it.

2 Q. All right. And so do you believe that there was 3 $18 million worth of --- I forget all the things you

4 mentioned, but the store production ---? 5 A. I believe that there was value perceived in

6 buying this plant, which has a replacement cost of over 7 $100 million, for $20 million and making investments in

8 it to bring it up to reliable operational status. I 9 don’t know the conditions under which Boris bought the 10 plant for $2 million. 11 Q. Would it be fair to say then that the purchase 12 price was influenced to a considerable extent by the 13 purchasers’ expectations of what they could do with the 14 plant in the future? 15 A. Yes. 16 Q. Do you have an opinion as to what the Felman 17 plant is worth today? 18 A. The plant, just the assets, not the 19 business; --- 20 Q. Correct. 21 A. --- right? Yes, I do. 22 Q. Could you state it? 23 A. It’s approximately $15 million plus working 24 capital. 25 CHAIRMAN:

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1 I’m sorry, 50 or 15?

2 A. One, five. 3 BY ATTORNEY PORTH:

4 Q. Now, also at page three of your Direct, lines 12 5 to 13, you indicated that Felman Production’s

6 shareholder, which I think you’ve explained is Georgian 7 American, has invested more than $97 million in Felman

8 Production. Could you break down for me how and where 9 that $97 million was invested? 10 A. Yes, first let me correct. The shareholders who 11 invested $97 million over the years in Felman Production 12 were not Georgian American Alloys. They came into 13 existence in 2012 due to a corporate re-organization. So 14 the historical investors through Haftseek put money into 15 the plant. Approximately $50 million was used to upgrade 16 the equipment to make it reliable, to replace and sustain 17 the productive capacity of the plant, and additional 18 monies went to fund the operating losses that were 19 incurred over the years and working capital requirements 20 to operate the business. 21 Q. Okay. So was that $50 million that was invested 22 in property, plant and equipment, was that invested prior 23 to the creation of Georgian American? 24 A. Yes. 25 Q. Okay. And then are Georgian American’s

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1 investments in the Felman Plant summed up in the

2 remainder of your answer to question Q-8 on lines 14 to 3 17? It’s also on page three of ---.

4 A. I’m sorry, could you repeat --- if you ---? 5 Q. Sure.

6 A. Could you repeat where I should be looking? 7 Q. Page three, lines 14 through 17, you indicate

8 that during the Georgian American years, there was $3.7 9 million invested in capital improvements --- 10 A. Yeah. 11 Q. --- and then the first half of 2013 $1 million. 12 A. Okay. 13 Q. Are those the extent of the capital investments? 14 A. No, those are the investments that were made by 15 Felman Production in its productive plant. 16 Q. Okay. 17 A. Georgian American Alloys was the parent company 18 of those companies for most of that time. The actual 19 legal ownership of Felman Production coming under 20 Georgian American Alloys occurred on March 1st of 2012. 21 Q. Okay. But those two items are the extent of the 22 capital investments in the Felman plant since the 23 creation of Georgian American? 24 A. Those are the capital investments made in the 25 plant during 2012 and 2013.

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1 Q. Okay. That’s fine.

2 A. Half of 2013. 3 Q. You have already indicated in response to some

4 questioning that the first consideration to a special 5 rate for Felman was in 2011; correct?

6 A. Yes. 7 Q. Okay. Could you tell me who made the decision

8 that Felman would seek a special rate? 9 A. Mordechai Korf, our CEO. 10 Q. Okay. And could you tell me when that decision 11 was made? 12 A. Not precisely, but in 2012. 13 Q. I think you’ve already responded, I think to Mr. 14 Williamson, that it was you in conjunction with Mr. Fayne 15 and Mr. Konrady who determined the structure and elements 16 of the special rate. Can you tell me when that structure 17 and elements --- the determination as to the structure 18 and elements was made? 19 A. Well, that was an ongoing process. There were a 20 number of iterations of it, and then validations of 21 assumptions that were being used in it. So that happened 22 --- it started I would guess in 2011 and continued into 23 2013. I mean, we were still adjusting the proposal in 24 the months before we filed the Petition. 25 Q. Okay. Let me ask you a few questions about the

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1 dealings between Felman Production and Felman Trading.

2 You’ve explained some of that to us already. And I think 3 you’ve already told us that Felman Production sells all

4 of its production of silicomanganese to Felman Trading; 5 correct?

6 A. That’s correct. 7 Q. The material that goes to Armstrong World

8 Industries --- 9 A. Uh-huh (yes). 10 Q. --- does that go directly from Felman Production 11 to Armstrong? 12 A. It has, but that’s changing. But it has. 13 Q. Okay. And what will the changed arrangement be? 14 A. It will go through Felman Trading. The value of 15 the slag that is sold to Armstrong is pretty de minimis. 16 The real value in that project is extracting the 17 silicomanganese before we sell the slag. 18 Q. Okay. Given that the relationship already 19 exists without a commission, is there any particular 20 reason why the decision was made to bring Felman Trading 21 into that part of the picture? 22 A. Only because it’s our general policy that all 23 sales and marketing should be through Felman Trading. 24 And it’s just an exception to the rule. 25 Q. And I think you’ve explained that substantial

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1 amount, but not all, of Felman Production’s raw materials

2 are purchased from Felman Trading; correct? 3 A. That’s correct.

4 Q. Now, that would certainly include the manganese 5 ore; correct?

6 A. Yes. 7 Q. And the coke?

8 A. Coke is generally imported, yes. 9 Q. Okay. I assume it does not include the quartz 10 river gravel? 11 A. That’s correct. 12 Q. That’s purchased directly by Felman Production? 13 A. Right. 14 Q. And the coal I think you’ve indicated is 15 purchased directly, as a rule? 16 A. That’s correct. 17 Q. Okay. 18 A. Those are domestic. 19 Q. Are there other significant raw materials other 20 than those things I’ve just mentioned? 21 A. There is iron scrap. 22 Q. Okay. Is that typically local or imported? 23 A. Yes, it’s local. 24 Q. Is it ever imported? 25 A. No.

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1 Q. Okay.

2 A. Generally not. There are a lot of parts, 3 maintenance parts and such, that are purchased directly

4 by Felman. 5 Q. Would you regard those as raw materials?

6 A. No. 7 Q. Okay. Do you know, does Felman Trading acquire

8 raw materials on the spot market or through longer term 9 contracts or through a combination of those? 10 A. Nearly exclusively on the spot market. 11 Q. Is that even the case with regard to the 46 12 percent that comes from affiliated interests? 13 A. Yes. 14 Q. Okay. You say more than once in your Rebuttal 15 testimony, to give you an example, I’ll refer you to page 16 15 of your Rebuttal, lines 11 to 12, that Felman 17 Production is essentially a converter purchasing raw 18 materials at market value and selling the silicomanganese 19 at market value; correct? 20 A. That’s correct. 21 Q. Now, given the arrangements between Felman 22 Production and Felman Trading, would it be more accurate 23 to say that Felman Production purchases a significant 24 amount of its raw materials at an above-market --- at 25 above market value and sells all of its silicomanganese

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1 at a below-market value? The difference, of course,

2 being the commission paid to Felman Trading. 3 A. No, I don’t think that would be a correct

4 characterization. The reason being, before Felman 5 Trading was the selling agent for Felman Production,

6 there was another company that sold on behalf of Felman 7 Production, and they charged a commission, a commission

8 in excess of what Felman Trading, so ---. 9 Q. But I would --- did they take title to the 10 product? 11 A. Yes. 12 Q. Did they? Okay. 13 A. Yes. 14 Q. So they were more than just your agent? They 15 were your sole purchaser? 16 A. No, they operated the same way. The way the 17 sales are operated generally are you find the customer, 18 you do the contract with the customer and you purchase 19 from Felman Production and deliveries are made to that 20 customer. And the pricing that’s involved in that is the 21 customer pays for that month of delivery. 22 Q. Okay. I took it from your testimony that you 23 --- that Felman Production actually sold its output to 24 Felman Trading; is that not correct? 25 A. Well, title transfers to Felman Trading ---

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1 Q. Okay.

2 A. --- at the plant in West Virginia. And Felman 3 Trading has the responsibility to deliver it to the

4 customer. 5 Q. And ---.

6 A. And many customers contract on a delivery basis, 7 so title turns to the customer at the customer’s steel

8 plant. 9 Q. And is that the way it worked legally when there 10 was a selling entity other than --- 11 A. Yes. 12 Q. --- Felman Trading in the picture? 13 A. It worked the same way. 14 Q. Would you turn to page five of your Direct, 15 lines 14 to 16? Let me read you a sentence. Quote, if 16 we can obtain the special rate to address our costs of 17 electricity, Georgian American believes the long-term 18 outlook for Felman Production is positive. Is that 19 correct? 20 A. Yes, that’s correct. 21 Q. Do you foresee that some sort of special rate 22 will always have to remain in place for the long-term 23 outlook to be positive? 24 A. The special rate needs to be in place for those 25 times when the market conditions are such that Felman

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1 cannot produce that product and deliver to customers at

2 the market value. So I believe that needs to be in place 3 for the term of the contract, because I expect prices

4 will go up and will go down. 5 Q. And presumably that will continue after the ten

6 years of the special rate you propose? 7 A. Yes.

8 Q. So do you foresee any circumstance in which 9 Felman Production can continue to exist and turn a profit 10 in its industry without some form of special rate; 11 perhaps not precisely the special rate you’re proposing 12 today? 13 A. Uh-huh (yes). There would have to be some 14 structural changes in the industry. And I can perceive 15 that, but I have no assurance of that. 16 Q. Well, since I don’t know what those would be, 17 let’s leave them aside for the moment. 18 A. Okay. 19 Q. Let’s assume the industry continues without 20 structural changes. 21 A. Well, for instance, if Georgian American Alloys 22 were to invest in an ore, in a mine, and were able to 23 deliver ore to Felman Production at a more cost effective 24 price, then potentially the special rate would not be 25 needed, because Felman would be an integrated producer of

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1 silicomanganese and would be able to weather the low cost

2 environment --- low price environments. 3 Q. Okay. And that mine could be located anywhere

4 in the world that there’s manganese? 5 A. Well, there are only manganese available in the

6 specifications that are required in certain places in the 7 world, but yes.

8 Q. And I take it there’s none in the United States? 9 A. There’s no commercial deposits of manganese in 10 the United States. 11 Q. Let me direct your attention to a couple of 12 comments you make in your Rebuttal testimony that are 13 similar. One is at page three of your Rebuttal, line 14 seven. You say, quote, without the special rate, Felman 15 Production will remain shuttered, unquote; correct? 16 A. That’s correct. 17 Q. And then at page six, lines five through seven, 18 you were asked the question, will the New Haven plant 19 resume silicomanganese production without the special 20 rate, and you say no; correct? 21 A. Correct. 22 Q. Okay. Now, if you look at the bottom of page 23 seven of your Direct testimony starting at line 22 and 24 running over to page eight, you say, quote, if the 25 silicomanganese market improves before the Commission

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1 issues a final order in this proceeding, Felman

2 Production may resume production of silicomanganese, en 3 quote. Could you reconcile those very emphatic

4 unexceptionable statements in your Rebuttal with the 5 statement I’ve just quoted from your Direct?

6 A. Yes. When I was responding will the New Haven 7 plant resume silicomanganese production without the

8 special rate, I was responding in the context of the 9 current market. So obviously, if the price skyrocketed, 10 there would be a basis to restart. The question is would 11 it be sustainable? We’ve seen prices, as I’ve said 12 before, go up and go down. And we could operate in the 13 market when conditions, when prices are high. We could 14 cover costs plus some we have, and --- but the question 15 is can we sustain operations? And if we can’t sustain 16 operations when prices are low, then we need to shut 17 down. And if we shut down operations periodically 18 because of troughs in prices, we cannot sustain the 19 business model. 20 Q. So for the word improves that you used at the 21 bottom of page seven, should I really read skyrockets? 22 A. Well, that’s a matter of the price --- the price 23 of silicomanganese, the public quoted price of 24 silicomanganese over extended past years, like six or 25 seven years, is in the area of $1,100, $1,200 per ton.

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1 Prices today are under $1,000. If the price were to move

2 up five cents, would that make a difference? It would 3 definitely make a difference. Five cents a pound at

4 least. 5 Q. Okay. If you’ll turn to page 11 of your Direct

6 now, starting with the question at line 18. You make the 7 point in your answer that Felman’s proposed rate does not

8 guarantee Felman a profit; correct? 9 A. Uh-huh (yes). 10 Q. Would you agree with this statement, that the 11 proposed special rate goes a long ways toward assuring a 12 profit for Felman Production? 13 A. Yes. 14 Q. Then at page 17 of your Direct testimony, and 15 this is the same answer that I think you had a question 16 or two from Mr. Williamson about, it’s the longest answer 17 to question A33. If I were to bottom line your entire 18 answer there, would I be correct in concluding that there 19 is no guarantee that Felman will remain in operation for 20 the ten-year term of the proposed special rate? 21 A. There is no guarantee. 22 Q. Now, just a few more questions, all dealing with 23 your Rebuttal. If you’ll turn to page nine --- I think 24 then --- I think the question on page nine you’ve already 25 addressed. Let me skip to page 16, if you would. Lines

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1 19 to 21 you say, quote, based on historical performance

2 and an outlook of industry fundamentals, we expect 3 margins to improve, which with the special rate, will

4 make the continued operation of the New Haven facility 5 economically viable over the long term, unquote. Now,

6 can you explain specifically what it is you find in the 7 history and the outlook that supports your expectation

8 that profit margins will improve? 9 A. In the history is the range of silicomanganese 10 prices that we’ve experienced over the years. And in --- 11 as well as the improvements that’s been made in Felman 12 Production to bring its plant up to reliable operating 13 rates, reducing costs and expenses. And the outlook, the 14 industry fundamental outlooks, the outlook is the fact 15 that silicomanganese is a necessary ingredient in 16 steelmaking, and the United States has a very significant 17 steelmaking industry and I expect that to continue. 18 Q. In terms of the history of Felman Production, 19 have you not indicated that during the vast majority of 20 its operation, it’s operated at a loss? 21 A. Yes, that’s correct. 22 CHAIRMAN: 23 It’s always operated at a loss? 24 A. No, there’s been --- year 2009 it was 25 profitable.

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1 BY ATTORNEY PORTH:

2 Q. And I think this is my very last question 3 relating to page 18 of your Rebuttal. Lines four through

4 six you say, quote, it would be ignorant to believe that 5 even at the special rate, there will never be a period in

6 which market conditions mandate prudent managers to 7 temporarily reduce or shut down operations, unquote. I

8 read that correctly? 9 A. You read that correctly. 10 Q. Okay. Now, is the converse also possible, that 11 market conditions may improve sufficiently, that Felman 12 Production will be economically viable without the 13 proposed special rate? 14 A. Yes, and that would be our hope. 15 Q. Be my hope, too. 16 A. Yes. 17 Q. I thank you very much. 18 ATTORNEY PORTH: 19 That’s all I have. 20 OFF RECORD DISCUSSION 21 CHAIRMAN: 22 We’re on a short break. 23 SHORT BREAK TAKEN 24 CHAIRMAN: 25 Mr. Gould, do you have any questions?

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1 All right. Staff?

2 ATTORNEY LITTLE: 3 Yes, there’s one aspect that

4 unfortunately hasn’t been covered by any of the other 5 parties, and Staff would like to inquire.

6 CROSS EXAMINATION 7 BY ATTORNEY LITTLE:

8 Q. Mr. Nuss, you --- I want to discuss with you the 9 market for silicomanganese. And before I get into that, 10 the one thing I want to clear up, what product exactly 11 does Felman Production produce? Is it silicomanganese or 12 ferrosilicomanganese? 13 A. Those are two names for the same --- 14 Q. Same? 15 A. --- product. 16 Q. Okay. And your plant can produce either --- it 17 doesn’t matter? 18 A. That’s just two names for the same product. 19 Q. Okay. 20 A. Silicomanganese contains iron, so it’s sometimes 21 referred to as ferrosilicomanganese. 22 Q. So the consumers of your product are primarily 23 steel mills in the United States? 24 A. That’s correct. 25 Q. But the steel mills, are they commonly --- that

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1 use your product or silicomanganese, are they commonly

2 referred to as mini-mills? 3 A. Well, there are two types of steel mills. Mini-

4 mills, which tend to melt iron scrap to make steel 5 products, and integrated steel mills, which start with an

6 iron ore and blast furnaces and produce steel products 7 from that. And silicomanganese is preferred for a type

8 of steel, which are called long products, and these are 9 generally made by mini-mills. 10 Q. You said long products. Do you --- can you give 11 us an idea of what long products are? 12 A. Girders, rebar, as opposed to sheets or sheet 13 product things. 14 Q. Girders, rebars, stuff that’s primarily used in 15 building? 16 A. Like you build buildings with and bridges 17 and ---. 18 Q. Commercial construction? 19 A. Yes. 20 Q. So fair to say that your product is used in a 21 smaller segment of the steel industry than the steel 22 industry as a whole? 23 A. Well, actually in the United States, the 24 development of the mini-mill has become the predominant 25 production.

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1 Q. But that production of the mini-mill is still

2 primarily the long form steel? When you say you operate 3 in the steel industry, you’re --- in the steel market,

4 you’re not --- the steel market is not --- when you say 5 steel market, it’s not the entire steel market. It’s

6 primarily for commercial ---? 7 Q. Different steelmakers have different preferences

8 for how they add manganese to their steel. Manganese is 9 a necessary ingredient. But it can be added through 10 different methods. There’s a product called 11 ferromanganese, which contains about 75, 78 percent 12 manganese balance iron. There’s manganese metal, which 13 is almost pure manganese. There’s silicomanganese, which 14 is about 65 percent manganese. So there’s different 15 steel mills, different metalurges, depending on the 16 products that they produce and the downstream 17 characteristics. 18 Q. But what you’re --- Felman Production 19 produces --- 20 A. Yeah. 21 Q. --- the silicomanganese ---? 22 A. We produce silicomanganese --- 23 Q. Silicomanganese. 24 A. --- we sell to both integrated and mini-mills, 25 but we tend to be ---

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1 Q. But it’s not ---.

2 A. --- more suited towards the mini-mill. 3 Q. Who produce long steel, which is a smaller

4 segment of the steel market? 5 A. It’s a segment of ---.

6 Q. A segment? 7 A. Yeah.

8 Q. So you’re primarily selling to producers that 9 produce in that smaller segment of the steel market? 10 A. I just don’t have the facts about that. I mean, 11 some of our major customers are the largest steel- 12 producing companies in the county, even in the world. 13 Q. If the domestic automotive industry were to pick 14 up production and call for more steel in production of 15 car parts, would your --- would demand for your product 16 increase correspondingly? 17 A. Yes, automotive products would drive demand. 18 Q. Okay. Now, just now you mentioned a bunch --- a 19 number of other products that some steel mills call for, 20 ferromanganese I believe was one that --- how does that 21 affect the price of your product, the silicomanganese? 22 Is that ---? 23 A. The first --- foremost, the steel mill decides 24 what’s the best product to use, depending on the products 25 that they’re producing, including their downstream

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1 operations. And then they look for least costs. So you

2 can --- they can add ferromanganese and ferrosilicon to 3 their process in order to get those elements, silicon and

4 manganese, into their product. Or they can add 5 silicomanganese, which is a combination, sort of a

6 designer alloy. So there is a competition and a least 7 cost calculation that is done from one technique to

8 another, but the foremost consideration is what they need 9 to do to control their production and their operation and 10 their products. 11 Q. So you’re not only competing with other 12 producers --- I guess the other producer would be Eramet, 13 who produces silicomaganese, you’re also competing with 14 other producers of these other substitutes that you just 15 mentioned? So you’re competing ---? 16 A. Eramet’s primary product is ferromanganese. 17 Q. Ferromanganese. 18 A. But they also produce silicomanganese. 19 Q. And is it correct that your plant is no longer 20 producing silicomanganese at this time? 21 A. That’s correct. 22 Q. Has Eramet or any other domestic producer 23 increased its production to meet that --- to make up that 24 loss of your --- whatever percentage of the market that 25 your product filled?

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1 A. No. It’s my understanding that Eramet has

2 reduced operations because of the market conditions. 3 Q. And since you’re not producing silicomanganese

4 anymore, what you just said, the price of silico --- has 5 the price of silicomanganese declined?

6 A. Since we filed the Petition, the price of 7 silicomanganese has trended up slightly.

8 Q. But nobody has stepped in to fulfill your loss 9 of production as far as you know? 10 A. I imagine that imported materials have filled 11 some demand of the market. We have continued to meet all 12 of our obligations to our customers, but we haven’t been 13 aggressive in taking new business while we’re shut down. 14 So we’ve met obligations that we have, but we’ve 15 basically let new business pass. 16 ATTORNEY LITTLE: 17 One moment, please, Your Honor. 18 BY ATTORNEY LITTLE: 19 Q. Mr. Nuss, can you tell us if Georgia Manganese 20 has either increased production or increased its imports 21 in the United States or both, since you’ve --- since 22 Felman Production has stopped producing silicomanganese? 23 A. No, it has not increased its imports beyond the 24 plan that was established long before we shut down the 25 facility. What we make in Georgia is a different grade

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1 of silicomanganese.

2 Q. Yes. 3 A. It’s called a high grade. It’s a 72 percent

4 contained product. And we have a contract with a very 5 large steel company to supply their needs and that’s what

6 we supply. 7 Q. Would Georgia Manganese be able to supply some

8 of Felman Production’s other customers with this higher 9 grade if Felman Production cannot restart? 10 A. Georgia Manganese has the ability to produce a 11 65 percent grade, so they could expand capacity and 12 produce standard grade. They have produced a standard 13 grade in the past. It’s more advantageous for them to 14 produce the high grade, so we --- our plan has been to 15 dedicate their production to this high grade and for 16 Felman Production to produce the standard grade. 17 ATTORNEY LITTLE: 18 That’s all the questions I have, Your 19 Honor. 20 COMMISSIONER PALMER: 21 Good afternoon. 22 A. Good afternoon. 23 COMMISSIONER PALMER: 24 I believe most of my questions have 25 been answered, but in a follow-up to the CAD Cross

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1 Examination, they asked you --- I believe you testified

2 that Felman requested Dr. Christiadi’s economic impact 3 report for a proceeding before the EPA; is that correct?

4 A. Discussions with the EPA about establishing 5 regulations, future regulations.

6 COMMISSIONER PALMER: 7 Was there a specific EPA regulation

8 that you were there to address in those discussions? 9 A. It centered around air emissions, particle 10 emissions.

11 COMMISSIONER PALMER: 12 Were those concerns addressed by the 13 EPA at some point to Felman’s satisfaction? 14 A. That is ongoing. The EPA still has it under 15 consideration and has not issued their final rules. 16 COMMISSIONER PALMER: 17 We talking about CSAPR or MATS or one 18 of those? 19 A. NESHAP. 20 COMMISSIONER PALMER: 21 Okay. 22 A. Yeah. 23 COMMISSIONER PALMER: 24 Are potential EPA --- say, burdensome 25 EPA regulations accounted for in the special rate

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1 mechanism that you propose in any way, or are they simply

2 a part of the market conditions that you’ve referred to 3 throughout your testimony? Or is there a --- is there

4 anywhere in the model in the special rate that takes 5 account of if costs go up due to EPA regulations that are

6 burdensome? 7 A. We have historically had expenses related to

8 complying with air emissions. I mean, we operate bag 9 houses. We have to deal with solid waste production. If 10 we would expect --- in our calculations and in our cost 11 estimates, we expect to continue to have those types of 12 substantial expenses. If the regulations are more 13 stringent and require more costs, then that could have an 14 impact. But we’ve been engaged in discussions with the 15 EPA to come to a rational set of regulations that protect 16 the environment, that protect our workers and that 17 protect the businesses. And we’re engaged in that with 18 Eramet, with a competitor. 19 COMMISSIONER PALMER: 20 So then hypothetically, if the EPA --- 21 if some type of additional EPA regulations are imposed 22 and they have corresponding cost increases that go along 23 with them, and if Felman was operating under the special 24 contract as proposed by the company, who would pick up 25 those increased costs, if they ---?

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1 A. The company.

2 COMMISSIONER PALMER: 3 The company would?

4 A. The company would. 5 COMMISSIONER PALMER:

6 And then that would impact the 7 decisions on whether to, what, maybe open up the third

8 furnace or expand the plant, which we saw in some of the 9 testimony and was discussed briefly? Is that where that 10 would come into play? 11 A. Those would be considerations, that’s correct. 12 COMMISSIONER PALMER: 13 Or close the plant, I guess, if they 14 were so burdensome, even with the special contract. If 15 they were that expensive, then that would be a factor in 16 that determination as well? 17 A. Yes. 18 COMMISSIONER PALMER: 19 Okay. Thank you. I just want to touch 20 back on --- Staff was asking some questions about steel 21 production. And I can’t find exactly where, but in my 22 notes I show that I believe it's your testimony that 23 indicated that silicomanganese demand is tied to steel 24 production and that steel production is projected to 25 increase modestly. Is that appropriate?

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1 A. Yes.

2 COMMISSIONER PALMER: 3 Is it still your understanding here

4 today that steel production is projected to increase 5 modestly, and if so, on what do you base that opinion?

6 A. Steel production is generally tied to general 7 economic conditions. We’re in a period of recovery.

8 There is economic growth. You’d expect that that would 9 reflect in automobile production and construction. 10 Construction is an area that for quite some time, those 11 who make predictions have predicted it’s improving. And 12 it hasn’t improved that much, but they’re still 13 predicting it’s going to improve. So I just --- I 14 believe we’re in a period where there is modest 15 improvement in the economy. 16 COMMISSIONER PALMER: 17 Okay. You can turn to your testimony 18 if you’d like. I don’t know that you need to. But on 19 page nine, line 17 of your Direct testimony, you state 20 that Felman Production is proposing a special rate based 21 on publicly reported prices of silico --- or I’ll let you 22 get there. Sorry. 23 A. Yeah, go ahead. 24 COMMISSIONER PALMER: 25 Line 17. Felman is proposing a special

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1 rate based on publicly reported prices of silicomanganese

2 and the major input materials that we use to make 3 silicomanganese. How would these market prices be

4 determined that you’re referring to? 5 A. These market indexes are published by

6 independent sources, who survey the market on a daily 7 basis and publish a couple times a week what they believe

8 the free market, arm’s length price is in the spot 9 market. That translates into the price that business is 10 transacted on, because where there are long-term 11 contracts, they refer to these indexes. So the spot 12 market tends to drive the index and the index drives the 13 contract business. So the whole market sort of feeds on 14 these various indexes. 15 COMMISSIONER PALMER: 16 And is that true for not just the price 17 of silicomanganese, but also the input materials? 18 A. It’s true for manganese ore, where the major --- 19 the index that’s been suggested to be used is based on 20 where the major purchaser of manganese ore in the world 21 is, which is China. 22 COMMISSIONER PALMER: 23 And I believe you testified earlier 24 that that comes from Georgia, the manganese ore? 25 A. No, the manganese ore that we use at Felman

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1 Production comes from Australia and South Africa and

2 Gabon. 3 COMMISSIONER PALMER:

4 Okay. Why not use the actual margin 5 between the market price of silicomanganese and the

6 market price of the major raw materials that you’re using 7 to make the product?

8 A. For two reasons. First, we think it adds 9 complexity and because an index price, a third party 10 independent source of the market is easy to refer to and 11 to calculate with. And it also avoids the complication 12 of the Commission having to be involved in decisions as 13 to whether management is managing properly. Did we pay 14 the right price, did we buy too much, did we buy too 15 early, did we buy too late? All of which can have 16 impacts on the financial results of the business. By 17 looking to an independent source, we thought that was a 18 more fair way of assessing the margin. 19 COMMISSIONER PALMER: 20 I agree there may be a more simple or 21 easy way; not sure I agree that it’s more fair. I’m just 22 trying to understand. It’s just the ease of functioning 23 under the special rate that you thought that ---? 24 A. Yes. 25 COMMISSIONER PALMER:

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1 You came down, you looked at all the

2 options and you thought that made the best sense? 3 A. Yes.

4 COMMISSIONER PALMER: 5 Okay. Thank you. I have no further

6 questions. 7 COMMISSIONER MCKINNEY:

8 No questions.

9 CHAIRMAN: 10 What do you think our job is in this 11 whole --- what is it you want us to do? I mean, you’ve 12 got rabid opposition to what you’re suggesting, and you 13 say that --- your testimony says that without the special 14 rate, you won’t do anything. And yet, I heard you 15 respond to WVEUG and you seemed to say that you were open 16 to suggestions, which would seem to me to be that it 17 should say without a special rate. You’re not --- I take 18 it that there is some flexibility in your position? 19 A. That’s correct. 20 CHAIRMAN: 21 All right. Now, let me ask the 22 question again. What is it you want us to do about it? 23 I mean ---. 24 A. We want you to assess the proposal that we’ve 25 made ---

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1 CHAIRMAN:

2 Uh-huh (yes). 3 A. --- in accordance with the statute and to help

4 us preserve the jobs and the economic contribution that 5 Felman Production makes to West Virginia.

6 CHAIRMAN: 7 Okay. Well, that sounds easy enough.

8 Did the various options that were discussed about the 9 premium, the amount of the discount, all of that, were 10 they all discussed with --- and I don’t mean to be 11 breaching confidentiality or attorney/client, but were 12 they discussed with APCo during the meeting or was this 13 --- I thought you said this was our proposal. Were any 14 counterproposals made or did you discuss with APCo 15 whether there might be some flexibility here? 16 A. We discussed our proposal as we had crafted it. 17 CHAIRMAN: 18 Okay. 19 A. With APCo. We did engage in settlement 20 discussions and ---. 21 CHAIRMAN: 22 Well, we don’t --- unless you want to 23 just ---. 24 A. Yeah, I won’t go in --- I won’t go into it, but 25 that’s ---.

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1 CHAIRMAN:

2 Well, you’re free to go ahead if you 3 want.

4 A. Yeah. Well, I guess to answer your question, 5 there were modifications that were discussed, but they

6 didn’t result in a successful discussion. 7 CHAIRMAN:

8 Looking at what’s going on in the --- 9 well, you’ve talked about that we’re having a slow 10 recovery. If we’re having a slow recovery, why aren’t 11 you doing better? 12 A. Well, I think our business is dependent on the 13 supply and demand of the products that we deal in and 14 those specific dynamics. We’re doing better than we were 15 doing in July, because the price is a bit better. We’re 16 not producing, but if we were producing, we’d be that 17 much better, you know. 18 CHAIRMAN: 19 There’s a little story about buying 20 from the butcher that says he wants $5 a pound and the 21 guy says, well, the guy down the street’s selling --- 22 when he had, it was selling at $8. Well, he said, when I 23 don’t have it I sell it at $6. Essentially you’re --- 24 it’s a slow market for you right now. 25 A. The biggest issue is the price, not the tonnage

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1 that’s being consumed. But yes, the price is depressed

2 right now. 3 CHAIRMAN:

4 I was curious going through this, all 5 this yellow marking drove me nuts. But in any event, why

6 was the rate of return number chosen and why is that 7 confidential? I mean, if we could eliminate that, we’d

8 have half the pages in here that wouldn’t even be marked 9 confidential. Why was that confidential? It wasn’t --- 10 as near as I could tell, it wasn’t based on anything in 11 particular other than you all just --- I like that number 12 and it was a number lower than what utilities had. 13 A. We’re a privately held company and our 14 profitability is confidential. And if our profitability 15 were known by our competitors, that could given them a 16 competitive advantage --- 17 CHAIRMAN:

18 That’s not a profitability number. 19 A. --- if it’s known by ---. 20 CHAIRMAN: 21 That’s a number that you were willing 22 to accept for purposes of this --- for calculation of 23 this tariff, as I understand it. I mean, that’s --- you 24 don’t want that to be your --- are you suggesting if that 25 number got out, everybody would know what you’re willing

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1 to earn?

2 A. I’m suggesting that they would infer that from 3 that number.

4 CHAIRMAN: 5 Really? Well, I’m not going to --- I

6 guess of all of them, that one irritated me the most, 7 because I couldn’t figure out what the significance of

8 disclosing that number was in the context of what we were 9 discussing, but ---. 10 A. Uh-huh (yes).

11 CHAIRMAN: 12 Page number nine, answer to question 13 18, you were talking about whether Felman Production 14 reviewed this proposal with APCo and you said, yes, we 15 had numerous cordial and productive discussions. And I 16 wrote, not productive to the point of agreeing. I always 17 like to send Mr. Ferguson out of the room at the end of 18 the day with a charge, but I can’t even think of one to 19 give him. You've been asked almost everything. Are you 20 here tomorrow? 21 A. Yes, I am. 22 CHAIRMAN: 23 Okay. You have any inclination to come 24 back in the morning and put another proposal on the 25 table? That’s a serious question. I don’t know if you

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1 all had a chance to talk or not, but I mean, you’ve got

2 tremendous opposition and you’ve shown some flexibility. 3 I’m just wondering if you want to do that. You know what

4 our job is. Our job is to try to come up with something, 5 and I’m just wondering if that’s anything you have an

6 interest in doing. 7 A. Yes, I believe it is.

8 CHAIRMAN: 9 All right. Well, we’ll see you --- how 10 about --- we’ve got a full day tomorrow until late in the 11 day, and then about --- until about 2:00 the day after 12 that. And I’d prefer not to do that. Well, I was 13 sitting here --- you don’t have to look at Mr. Porth. 14 He’s about to --- he needs a couple slugs of Nyquil and a 15 good night’s sleep. And he’s not a well man, so I think 16 what we’ll do is rather than continue with another 17 witness, we’ll go ahead and adjourn for the evening. I’m 18 a first lighter. I mean, I --- 8:00, that’s a serious 19 proposal. I don’t know if anybody would want to make it 20 later than that. We give it 8:00, we might finish up 21 tomorrow, but I don’t know. Anybody that cannot make 22 8:00? That’s the spirit. All right. We’ll see you at 23 8:00 tomorrow morning. 24 * * * * * * * * 25 HEARING CONCLUDED AT 5:30 P.M.

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1 CERTIFICATE

2 3 I hereby certify, as the stenographic reporter,

4 that the foregoing proceedings were taken 5 stenographically by me, and thereafter reduced to

6 typewriting by me or under my direction; and that this 7 transcript is a true and accurate record to the best of

8 my ability. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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