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BEFORE THE PUBLIC SERVICE COMMISSION OF WYOMING

IN THE MATTER OF THE APPLICATION OF POWDER RIVER ENERGY CORPORATION COMPANY FOR A GENERAL RATE INCREASE OF $6,977,846 PER ANNUM (A 3.9 1% OVERALL ThJCREASE) IN ITS RETAIL ELECTRIC SERVICE RATES

) ) ) ) ) )

DOCKET NO. 100 14-145-CR-13 RECORD NO. 13644

PRE-FILED DIRECT TESTIMONY OF Anthony J. Ornelas On Behalf of the Office of Consumer Advocate

Testimony Filed: January 22, 2014 Hearing Begins: March 10, 2014


1

Q.

PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.

2

A.

My name is Anthony J. Ornelas and my business address is 2515 Warren Avenue, Suite 304, Cheyenne, Wyoming 82002.

3 4 5

Q.

WHAT IS YOUR OCCUPATION?

6

A.

I am currently employed as a Rate Analyst for the Wyoming Office of Consumer

7

Advocate (OCA), an independent division of the Wyoming Public Service

8

Commission. In this position I analyze the requests of regulated utilities and provide

9

recommendations to the Commission relative to various utility matters, including rates

10

of return, revenue requirements, and other assignments as requested by OCA

11

management.

12 13

Q.

WHAT IS YOUR EDUCATIONAL AND PROFESSIONAL BACKGROUND?

14

A.

I received a Bachelor of Science degree from the University of Wyoming in 2003 with

15

an emphasis of study in finance and real estate.

16 17

I was employed for three years by Wells Fargo Bank, N.A. as an Assistant Vice

18

President

19

variety of commercial credit products.

20

employed by the State of Wyoming in a variety of agencies including the Wyoming

21

Department of Audit, performing excise tax audits on oil and gas extraction

22

companies; the Wyoming Department of Transportation, performing condemnation

23

appraisals; and the Wyoming Department of Revenue, as the principal appraiser

24

assigned to the development of cost of capital and unitary valuations of Wyoming

25

utility companies including natural gas & liquid pipelines, gas disuihulion companies.

26

municipal utilities, investor owned electric distribution utilities, G&T cooperative and

27

rural electric distribution cooperatives.

—

Business Relationship Manager with a focus on credit underwriting for a For seven years thereafter I have been.

28 29

In May of 2013 I was hire by the OCA as a Rate Analyst, and am a graduate of the

30

Regulatory Studies Program offered through Michigan State University

31

Public Utilities.

Direct Testimony of Anthony J. Ornelas

—

54t1

Institute of

Docket No. I 0014-145-CR-13


I

Q.

WHO DO YOU REPRESENT IN THIS PROCEEDING?

2

A.

As a member of the OCA it is my responsibility to represent the long-run public

3

interest of Wyoming citizens, and of all classes of utility customers in this public

4

utility matter, pursuant to W.S.

5

represented the interests of the subject company, any individual, or any individual class

6

of customers over another.

§ 37-2-401. At no time during my analysis have I

7 8

Q.

WHAT IS THE PURPOSE OF YOUR TESTIMONY?

9

A.

The purpose of my testimony is to provide comments, concerns, and recommendations

10

of the OCA on the revenue requirements and proposed increase to retail electric rates

11

included in Powder River Energy Corporation’s (PRECorp.) application.

12 13

Q.

PLEASE DESCRIBE THE SCOPE OF WORK INCLUDED IN YOUR REVIEW

14

OF THE PROPOSED REVENUE REQUIRMENT AND RATE INCREASE IN

15

THIS PROCEEDING?

16

A.

During my review of this filing I conducted a regulatory audit of the application and

17

the Cost of Service Study (COSS) contained within this filing, received a general

18

overview of the cooperative’s operations, and reviewed a variety of internal and

19

external documents in order to better understand the historical, present, arid future

20

opportunities and risks associated with the cooperative and its service territory.

21 22

The regulatory audit was conducted at the offices of PRECorp. in Sundance,

23

Wyoming. Duri3lg the course of this visit I was able to speak with members of the

24

executive staff; supporting staff from various departments including finance, human

25

resources. operations & maintenance, and information technology.

26

Rebecca Payne of Guernsey, Engineers, Architects and Consultants, and David Raatz

27

of Basin Electric Power Cooperative were available via telephone during my visit.

Additionally.

28 29

The subject of the discussions included, but were not limited to: formulas and

30

calculations included in the COSS; the projected revenues and expenses, investments

31

in classified plant; the appropriateness of the compensation practices; recently

Direct Testimony of Anthony J. Omelas

Docket No. 10014-145-CR-I 3


I

completed investments in the information technology capability of the company

2

referred to as the Srnai Grid Project, the necessity and/or desirability of a change in

3 4

the operating and maintenance policies of the cooperative: the near-term outlook of Basin Electric’s power supply/demand and anticipated power costs; and the suspension

5

of capital credit retirements paid to its members and the impact of those retirements

6

(cash payments) on the company’s financial ratio requirements imposed by its lenders.

7 8

Subsequent discussions were held with company representatives, and requests for

9

additional and amended information including revenue and expense projections were

10

made.

11

additional information received in order to understand the details of the revenue

12

requirements proposed in the application.

Extensive hours were spend reviewing the application, the COSS, and

13 14

Q.

15 16

DO YOU FEEL THAT YOUR ANLYSIS HAS TOUCHED UPON, AND FULLY EXAMINED, ALL ASPECTS OF THE COOPERATIVE’S RATE REQUEST.

A.

Certainly Not. The scope of work outlined above did not include an exhaustive review

17

of each and every aspect of the cooperative’s operations, nor did it encompass a full

18

financial audit. Instead the review included a general assessment of the filing and the

19

overall facets of the cooperative’s operations which impacted the revenue request in

20

this proceeding. Greater emphasis was given to aspects which caused concern based

21

on my initial review of the application or information discussed during the audit. As

22

an example. I reviewed the plant investments which are anticipated to be completed

23

and included in the rate base as part of this filing. This review included the nature of

24

the plant and a determination of being used and useful and rudenUy incurred. My

25

review did not include a detailed analysis of any RFP’s issued in conjunction with the

26

construction of this plant or the procurement procedures of the individual work orders.

27

Additionally, the annual and accumulated depreciation expense were reviewed for

28

accuracy and compliance within a range of depreciation rates prescribed by The

29

Department of Agriculture’s

30

However, a full depreciation study was not conducted in order to verify or specify the

31

exact deprecation percentages selected from within the prescribed ranges provided. Direct Testimony of Anthony J. Ornelas

-

Rural Utility Service Deprecation Bulletin (183-1).

Docket N’. 1OOl4-145-CR1 3


Based on the level of review and analysis conducted, I am confident that the 2

recommendation of the OCA in this proceeding are reasonable and adequately

3

supported by the testimony and evidence contained herein.

4 5

Q.

ARE YOU SPONSORING ANY EXHIBITS WITH YOUR TESTIMONY?

6

A.

Yes, several exhibits will he included in support of my testimony. These exhibits have

7

been designed to closely resemble the cooperative’s COSS in order to present a side-

8

by-side comparison of the competing revenue requirements proposed. I will explain

9

each of these schedules and how they entered into my analysis throughout the

10

remainder of my testimony.

11

sponsored.

The following is a list of the exhibits that will be

12 13

201.1:

Comparative Income Statement & Revenue Requirement

14

201.2:

Rate Base Summary & Calculated Rate of Return

15

201.3:

RateBaseDetail

16

201.4:

Calculation of Cash Working Capital

17

201.5:

Adjusted Revenue Projections

18

201.6:

Adjusted Customer Count by Rate Class

19

201.7:

Adjusted kWh Sold by Rate Class

20

201.8:

Adjusted Purchased Power Costs

21

201.9:

Adjusted Operating Expenses

22

201.10:

Adjusted Payroll Expensed

23

201.11:

Adjusted Benefits Expensed

24

201.12:

AdjusLed Payroll Tax & Workers Compensation Expensed

25

201.13:

Adjusted “Other Deductions”

26 27

Q.

PLEASE PROVIDE AN OVERVIEW OF THE COOPERATIVE’S

28

APPLICATION INCLUDING THE KEY ISSUE(S) PRECIPITATING THE

29

REQUESTED RATE INCREASE, AND THE INTENDED OBJECTIVES OF

30

THIS FILING?

Direct Testimony of Anthey J. OrneJas

Docket No. 10014-t15-CR-13


1

A.

On September 3. 2013 Powder River Energy Corporation filed an application to

2

increase its base electric rates by $6,977,846 or 3.91%. A COSS study was completed

3

by Guernsey Engineering and was submitted in support of the requested rate increase.

4

This study is predicated on afIttuie test year which represented actual operating results

5

for the twelve months ending Dec. 31, 2012 (test year), adjusted for projected changes

6

to revenues and expenses for the following twelve months ending Dec. 31, 2013

7

(adjusted test year). -

8 9 10

The application touches upon tbur of five issues which have been identified as the basis for the requested rate increase including:

11 12

1) A decline in sales driven by a deterioration in demand by the largest customer

13

classes including Large Power Transmission

14

Methane Classes.

(Coal) and the combined Coal Bed

15 16

2) A desire to reestablish the base cost of power included in the Cost of Power

17

Adjustment (COPA) factor to reflect increases in the fixed demand and variable

18

energy cost components of the wholesale power costs.

19 20

3) An increase in labor costs attributed to a cost of living adjustment (COLA).

21 22

4) An increase in the amount of labor expensed annually due to the implementation of

23

a “New System Operations and Maintenance Plan” which represents a fundamental

24

change in t1e cooperativ&s maintenance policy.

25 26

5) Additionally, an additional issue was identified during the regulatory audit that is

27

not specifically addressed in the application; the continued suspension of capital

28

credit retirements (cash payments), payable to PREC0rp. from its membership in

29

associated cooperatives, most notably Basin Electric Power Cooperative.

30

Direct Testimony of Anthony J. Ornelas

Docket No. 10014-145-CR-13


1

Several criteria were specified in this filing including a desire to maintain a desired

2

level of equity capital, make principal and interest payment on existing debt, retire

3

capital credits, maintain an adequate level of cash reserves, and to satisfy all required

4

lending covenants.

5 6

Q.

7 8

DOES THE OCA TAKE ISSUE WITH ANY OF THE CRITERIA DEFINED IN THE COOPERATIVE’S FILING?

A.

No. The OCA supports the primary criteria set forth in the application including a

9

revenue level which supports a level of operating margins that satisfies the required

10

lending covenants and also provides the possibility of continuing a deferred revenue

11

program and/or the retirement of capital credit back to its members.

12 13

The OCA also supported the re-basing of the COPA. Since the establishment of the

14

rate rider, Docket 10014-1 18-CR1O, there have been several increases to the

15

cooperatives wholesale power costs which includes both demand and energy cost

16

components. By reestablishing the base rates used in the COPA mechanism, the base

17

cost of power included in the tariff rates will reflect the current wholesale cost of

18

power.

19 20

Q.

PLEASE EXPLAIN HOW THE SUSPENSION OF RETIRED CAPITAL

21

CREDITS IMPACT THE REQUEST TO INCREASE RETAIL ELECTRIC

22

RATES IN THIS FILING?

23

A.

Cooperatives do not earn profits and pay dividends in the sense that other investor-

24

owned utilities do. Instead, any margins, or revenues remaining after all expenses have

25

been paid, are allocated back to the individual members based their proportional share

26

of usage in a given year. The allocation of capital credits is completed annually,

27

however, these credits (a form of investor equity) can be retained by the cooperative or

28

may be returned (retired) back to the members in the form of cash payments.

29 30

‘When an electrical distribution cooperative receives capital credit retirements from

31

their associated membership in another cooperative, such as their power supplier, these Direct Testimony of Anthony .T. Qreas

Docket No. 10011- 45-CR-13 —6—


1

payments are included as non-operating revenues on their income statement and are

2

available to pay annual operating and non-operating expenses including interest

3

principal payment on existing debt.

4 5

One of the lending covenants which is required to be satisfied as a criteria of this filing

6

is the Rural Utility Service (RUS)

7

ratio indicates how easily a company can pay interest on outstanding debt. The

8

formula for this ratio is:

Time Interest Earned Ratio, or RUS OTIER. This

9 10

(Operating Margins

+

Cash Retirements

+

Tnt. Exp. On LT Debt) / (Tnt. Exp. On LT Debt)

11 12

You can see from the equation above that if capital credit (cash) retirements are

13

suspended or not paid, the result is a reduction in the amount of cash available to

14

satisfy the annual interest expense. Another lending covenant which is required to be

15

satisfied as a criteria of this filing is the RUS

16

RUS ODSC. This ratio indicates the amount of annual cash flow available to meet the

17

annual interest and principal payments on debt (debt service). The formula for this

18

ratio is:

-

Operating Debt Serve Coverage, or

19 20 21

(Operating Margins

+

Depreciation Exp.

+

(Principle Payments

Cash Retirements

+

+

Tnt. Exp. On LT Debt) I

mt. Exp. On LT Debt)

22 23

Again, you can see from the equation above that if capital credits (cash) retirements are

24

suspended or not paid, the result is a reduction in the amount of cash available to

25

satisfy the annual debt service. Failure to satisfy theses minimum lending

26

requirements could result in the lender imposing corrective actions on a mortgagor,

27

which in this filing represents PREC0rp.’

28 29

From 2007 through 2009 Basin Electric had annually retired approximately $2.75 hack

30

to PRECorp. Because of pollution control upgrades to existing generation facilities Direct Testimony of Michael Easley, Docket 10014-145-CR-13. Pg 5, Ln 106-112. Direct Testimouv of Anthony J. Omelas

Docket No. 10014-145-CR- 13 —7--


I

and the recent construction of its newest coal-fired generation plant (Dry-Forks

2

Station, Completed in 2011), Basin Electric’s portion of equity capital has fallen to less

3

than 20% of their overall capital structure. This has triggered a default in their lending

4

covenants and forced the suspension of capital credit retirements until the minimum

5

equity levels are reach. The result is a lower amount of non-operating revenue that is

6

available to satisfy the payment of principal and interest, and a deterioration of these

7

financial ratios. At this time the best estimate of capital credit retirements being

8

reinstated is around 2017.

9

10

Q.

DURING YOUR REVIEW OF THE APPLICATION AND (COSS), DID YOU

11

IDENTIFY

12

REVENUE REQUIRMENT IN THIS FILING?

13

A.

ANY

ISSUES WITH

THE

COOPERATIVE’S

PROPOSED

Yes. From a broad perspective the use of a forecasted test year during a period of

14

economic uncertainty in customer demand, rising operating costs, and a transitional

15

shift in previously established operation and maintenance procedures raised concerns.

16

The use of future or adjusted test year brings into question the ability to project with

17

reasonable accuracy, prospective changes in revenue and expense levels, and to

18

explain and support the necessity of the changes being implemented to the

19

maintenance policy.

20 21

As a recent report issued by the National Regulatory Research Institute (NRRI)

22

enumerates. there are a number of issues associated with the use of a future test year

23

including what its research identified as the m.ost serious contributor to risk,

24

information asymmetry. Information asymmetry creates an environment where some

25

relevant information is known to some, but

26

difficulties accessing the reasonableness of projections and may provide opportunities

27

2 to bias forecasts.

not

all parties involved, which can create

28

2

Costello. K. (2013). Future Test Years: Evidence from State Utility Commissions. National Regiiatoiy Reearcli Iititute, pp 1. Direct Testimony of Anthony J. Ornelas

Docket No. 10014-145-CR-13 —8—


1

Therefore, the cooperative was asked to provide updated revenue and power cost

2

figures which I am offering for use in lieu of the original pro forma projections

3

included in the application and COSS.

4 5

Also, the necessity of the changes to the cooperative’s maintenance policy were not

6

adequately supported through the direct testimony or quantitative evidence provided.

7

This has presented a bit of quandary during the review of this filing since the OCA has

8

traditionally regarded an increased focus on safety and system integrity as a positive

9

and prudent objective: yet finds the lack of analysis and supporting evidence troubling

10

in light of the large increases to labor expenses associated with this change. Based on

11

my review of supplemental documentation and data requests, as well as conversations

12

with management, there is a basis for the shift from capital expansion to capital

13

maintenance.

14

associated with the new maintenance plan are being offered at this time. However, the

15

OCA supports this increase in expenses only at the levels which have been prescribed

16

in the cooperative’s original application. The OCA cautions against any future rate

17

recovery stemming from increases to maintenance expenses which are not clearly

18

shown to be caused by general market inflation, or are accompanied by a detailed

19

cost/benefit analysis that clearly defines the necessity of request.

Therefore, no adjustment to the proposed increase in expenses

20 21

In addition, a subsequent data request raised an issue of potential savings that may

22

have been excluded from consideration in this filing. A multi-year project known as

23

the Project Pride (Powder River Innovation in Distributing Electricity)

24

Project was recently completed.

25

telecommunication capabilities including an extended microwave network for remote

26

communications, and Supervisory Control and Data Acquisiion (SCADA) which

27

allows for remote monitoring and control capabilities. A portion of this project was

28

funded through a grant received by the U.S. Department of Energy in conjunction with

29

federal stimulus money and the U.S. Smart Grid Program. In. order to receive this

30

grant the cooperative had to prepare a plan which specified the many aspects of the

31

project including anticipated savings in operating and maintenance expenses.

Smart Grid

This project greatly enhanced the cooperatives

Direct Testirnon’ of Anthony J. Ornelas

Docket No. 1Oi4- 145CR-I 3 —9--

The


1

following is an excerpt from the SMARTGRID.GOV website which identifies at least

2

a single savings which was purported but not recognized in this filing.

3 4

“By eliminating some previously leased fiber optics network with the installation of a

5

new microwave network, the compan’, is saving $36,000 annually.” 3

6 7

Through follow-up with the cooperative, the basis of this exact figure, and other

8

estimated savings that were initially including in this project plan could not be

9

detennined or verified.

The mention of these potential savings in the operating

10

expenses are worth noting, especially because additional interest expense and an

11

depreciation expense associated with the Smart Grid Project have been included in this

12

filing.

13 14

Finally, I am offering a limited number of more traditional adjustments to the operating

15

expenses including an increase in the COLA based on known and measurable

16

differences due to the timing of this filing: the removal of civic donations from “other”

17

operating expenses included in the income statement, and the amortization of the

18

anticipated rate case expense over a three year period. Additionally, I have made two

19

adjustments to the rate base used to determine the overall rate of return. The first

20

adjustment removed the Constniction Work in Progress (CWIP) since these amounts

21

are traditionally excluded until such time as they are classified as plant in service.

22

Secondly, the amount of Cash-Working-Capital included in the rate base was increased

23

due to an increase in. labor costs associated with the cost of living adjustment. The

24

adjustments to the rate base resulting in an overall reduction, however they had not

25

material impact on the determined revenuer requirement in this proceeding.

26 27

Q.

PLEASE EXPLAIN WHY THE COMPUTATION OF THE RATE BASE HAS

28

NO MATRIAL IMPACT ON THE REVENUE REQUIREMENT IN THIS

29

PROCEEDING.

SmartGrid.Gov Providing Grid Flexibility in Wyoming and Montana, available at www.srnarigrid.gov/case_study/iievs!providing_grid_flexibility_wyorning_andmontana —

Direct Testimony of Anthony J. Omelas

Docket No. 10014-145-CR-13 —10—


1

A.

Unlike an Investor Owned Utility (IOU) which typically utilize a “Cost of Service”

2

methodology in rate making, cooperatives typically rely on a “Debt Service” or

3

“TIER” methodology in their rate proceedings.

4 5

The distinctions between the two are perhaps best defined in a manual published by

6

The Deloitte Center for Energy Solutions which states the following.

7 8

“While each permit the recovery of operating expenses and taxes, they differ in

9

the techniques by which they measure a utilities revenue needs beyond these

10

elements (i.e., their required return on and of capital).

“.

11 12

“The cost of service method equates the revenue requirement with the total of

13

operating expenses, depreciation, taxes, and a rate of return allowance on the

14

utilities investment in the rate base.

15

revenue requirement to the total of operating expenses (other than

16

depreciation), and the amount necessary to meet debt service

.

.

.

“The debt service method equates

requirements”.

17 18

“The TIER method is a variation of the debt sen ice method under which the 1

19

revenue requirement equals operating expense and some multiple of interest on

20

long term debt.” 4

21 22

For the purposes of this proceeding the TIER method was applied in the

23

development of the revenue requirement, and the resulting rate of return.

24

Although a rate of return will be included as a key ratio statistic its primary purpose

25

will be the comparison of individual class returns to that of the cooperative as a whole

26

in the cost allocation portion of this proceeding. Therefore, the indicated rate of return

27

in this filing cannot adequately be judged against other, non-cooperative filings, as a

28

measure of reasonableness.

29

Regulated Utilities Manual (2012).

A service for regulated utilities. Deloitte Center for Energy Solutions, at 8-9

Direct Testimony of Anthony I. Ornelas

Docket No. 10014-145-CR-i 3 —

11


I

Q.

PLEASE SUMMURIZE THE OVERALL REVENUE REQUIRMENT SUPPORTED BY THE OCA IN THIS PROCEEDING.

2 3 4

A.

Based on my review of this filing along with subsequent analysis of data requests and

5

other pertinent information assessed, the OCA is recommending an overall rate

6

increase of $4,211,036 or 2.21%. This level of revenue increase satisfies all of the

7

criteria established in the cooperative’s original filing, and is felt to more accurately

8

reflect the opportunities and risks currently faced by the cooperative.

9

10

Exhibit 201.1 is a comparative income statement which summarizes all of the

11

adjustments made resulting in my conclusion of the revenue requirement and the

12

overall rate increase. It provides a comparison view of the differences between the

13

opposing revenue recommendations required to satisfy the criteria set for. I would

14

note that at the bottom of this schedule the level of financial ratio coverage being

15

proposed between the OCA and PRECorp. are identical based on our individual

16

estimates of revenues and expenses, and assuming the approval of our respective rate

17

increase.

18 19

Exhibits 201.2 201.4 indicated the recommended adjustments to rate base including

20

the removal of CWIP ($1,446,974) and an increase in Cash Working Capital from

21

$163,758 to $179,222. At the bottom of schedule 201.2 the estimated rate of return is

22

calculated based on our respective estimates of operating returns. The OCA is

23

projecting a return of 3.28’ in comparison to a return of 3.309k included in

2$

PRECorp’s filing.

-

25

26

Q.

IN THE ADJUSTED TEST YEAR.

27 28

PLEASE DESCRIBE THE ADJUSTMENT MADE TO REVENUES INCUDED

A.

The base revenues included in the adjusted test year were amended to reflect eleven

29

months of actual sales and one month of projected sales (December) for the twelve

30

month period ending December 31, 2013. This resulted in an increase to base revenues

31

above what was originally included in PRECorp.’s pro forma COSS. As a result, there

i)irect Testimony of Anthony J. Omelas

Docket No, 10014-1 45-CR-I 3 —

12


1

was a corresponding increase to the Cost of Power Adjustment (COPA) revenues, as

2

well as an increase to the Purchased Power Expense. Exhibits 201.5

3

results of these adjustments.

201.8 detail the

4 5

Q.

REVENUES SUBMITTED IN THE COOPERATIVE’S COSS?

6 7

WHY DOES THE OCA ASSERT THE NEED TO ADJUST THE BASE

A.

As part of the regulatory audit, a review of the projected pro forma revenues was made

8

in comparison to actual year-to-date revenues. At that time it became apparent a

9

significant divergence was occurring between the pro forma projections and the actual

10

operating results being experience throughout 2013.

11 12

Based on this review I felt the severity of the decline in demand and sales of energy

13

had been over stated; and that the evidence provided in the cooperative’s testimony did

14

not accurately reflect the overall operating environment within their service territory.

15

PREC0rp.’s service territory includes a critical natural resources basin known as the

16

Powder River Basin (PRB) which contains rich deposits of coal, coal bed methane

17

natural gas, oil, uranium, and other precious metals. The significance of these deposits

18

provides immense opportunities to serve the electrical demand required in the

19

extraction of these resources, and continues to define the opportunities and risks

20

throughout the service territory.

21 22

The PRB Coal Industry began to expand rapidly beginning in the 1970’s, and

23

escalating in the 1990’s due in part to the expansion of the Clean Air Act Amendments

24

which lowered the S02 emissions limits prompting many electric utilities to substitute

25

higher-sulfur coal with low-sulfur coal mined in the PRB. From 1990 to 2008, the

26

production of PRB coal nearly tripled from approximately 164 mt to over 446 mt at its

27

5 peak.

28

University of Wyoming Wyoming State Geological Survey, Coal Production and Mining, available at http://www. wss.uwvoedu/Research/Lnerv/coai/Production—Minini.aspx —

Direct Testimony of Anthony J. Ornelas

Docket No, 10014-145-CR-13 —

13


I

Since 2008, due to a decline in the overall economy and a continued push for more

2

stringent environmental regulations on coal fired power plants in the U.S., the sale of

3

electricity to the cooperative’s Large Power Transmission

4

downward. However, the trajectory

5

included in the cooperative’s adjustments to base revenues, and is projected to

6

stabilize.

LPT (Coal) began to trend

of this decline has not reached the severity

7

8

Mr. Easley’s testimony represents the following regarding the year-to-date sales data

9

as of July 2013. “The LPT class that represents our coal mine members was projected

10

to be down 9.6% versus an actual decline of 1.6% year to date.” 6

11 12

In the early 2000’s the Wyoming CBM Industry began a similar rapid expansion.

13

From 2001 to 2008 Wyoming CBM production levels more than quadrupled from

14

133/hcf to over 573/bcf at its peak in 2008. During this period the kWh’s sold to the

15

combined CBM classes consisting of General Service CBM (GS-CBM), Large Power

16

CBM (LP-CBM), Large Power Transmission CBM (LPT-CBM), and Large Power

17

Compression CBM (LPC-CBM); increased nearly five-fold.

18 Wyoming CBM Production vs. Combined CBM kWh’s Sold

19

20 21

700

1,230

600

1,000

22 800

ii,,. 4J3

600

24

320

25

200

26

100

422 200

0

0 2000 2031 2002 2003 2004 2035 2006 2007 2008 2009 2010 2011 2012

28

Wyoning Coabed Methare Productioi Bton Cuba Feet)

CornMned C8r’ Whs 5od )Mtfions

6

Direct Testimony, Michael Easley Docket No. 1001 4-145-CR-13. Pg. 10, Ln. 216 —218. Independent Statistics & Analysis of U.S. Energy Information Administration, available at. http://www.eiaov/dnav/n&/hRt/rn’r 2S\vv 2.htm —

Direct Testimony of Anthony J. Omel as

Docket No. 10014-145-CR-I 3 —

14


I

However, since 2008 there has been a precipitous decline in this industry for a

2

multitude of reasons including a general economic weakness,

3

low cost of natural gas (CBM) due to abundant new discoveries in shale formations

4

across the U.S. Unlike the downward trend in coal, the decline of the CBM industry is

5

not anticipated to wean in the near-term and may continue to put pressure on the

6 7 8

cooperative’s sales.

9

Group (CREG) provided the following comments with regard to the outlook of natural

10

maturing

wells, and the

Due to the declining trend in production, the Wyoming Consensus Revenue Estimating

gas production and specifically CBM.

11 12

“Given these production trends for Wyoming natural gas, forecasts have been reversed

13

from projections of year-over-year production growth, to stable production forecasted

14

in January 2013, to the current expectation of uleclines in production, especial/v in the

15

near-term

16

in 2016, and 1% 2017. Declining production in most of Wyoming’s primary natural

17

gas basins and a significant decline in the coal bed methane production is currently

18

not being offset by new production “•8

forecasted production will decline another 4% in 2014, 3% in 2015, 2%

19 20

Although the CBM decline appears more likely to continue over the next several years,

21

the severity of the decline was again overstated in the initial projections. Mr. Easley’s

22

testimony represents that, “The combined CBM rate classes are down l6.8% against a

23

projected decrease of 24.4%” (as of July). 9

24 25

An (over/under) projection of this magnitude, for a group of customer classes that

26

represents over 71% of the total annual kWh’s sales, skews the reality of the operating

27

environment that should be considered in this proceeding. ° 1

28

Wyoming State Government Revenue Forecast Fiscal Year 2014— Fiscal Year 201$. available at, htrp://eadiv.smte.wv.us/crc/GruenCRL( i ()t I 3.pdf Direct Testimony, Michael Easley—Docket No. 10014-145-CR-13. Pg. 10. La. 215— 216. 10 Powder River Energy Corp. Rate Analysis and Cost of Service Study, AugusT 2013. Schedule F-2.0 —

Docket No. 10014-145-CR-13

Direct Testimopv of Anthony J. Ornelas —

15


1

2012 KWKS SOLD BY CUSTCME1 CLASS

2 Black Hills

4

Lighting

5

Irrigation Seasonal

6

General Service

7

Residential

8

Large Power •

9

Combined CBM LPT-Coal

10

IPT -Coal 44%

Combined CBM 28%

11

Additionally, there has been renewed opportunities in the production of oil in

12

Wyoming, and in particular the Powder River Basin. There is also potential for

13

renewed uranium and precious metals production within the service territory, however

14

the impacts of such are less discernable at present. The testimony provided failed to

15

enumerate the growth opportunities currently be experienced, and which have begun to

16

offset declines from the Coal and CBM Industry.

17 18

The Wyoming Consensus Revenue Estimate Group (CREG) indicates that oil

19

production has exceeded the group’s original estimates in 8 out of the last 9 years. and

20

called for increased production in 2013, which as of October were 6% above 2012

21

levels, and foresees continued positive trends with increases of 6% 2014, 4% 201 5,

22 23 24

and3%-2016.” Local articles provide some reference to the current prospects of the continued

25

increases in oil drilling and production within the PRB. One article recently published

26

in the Buffalo Bulletin states,

-

-

27

11 State Government Revenue Forecast Fiscal Year 2014 Wyoniing htip:/Ieadiv.stutc.wvus/crcc/(irccnCREG Oct 1 3.pdf —

r)irectTestimory of Anthony .J. Ornelas

Fiscal Year 2015, available at,

Docket. No. 10014-145-CR13 —

16


1

“Two years into a high-stakes quest for oil in the Powder River Basin, production is

2

growing; Johnson county’s 2013 oil production is 164 percent of 2012’s, and the year

3

2 isn’t over.”

4 5

Another article published in the Casper Star Tribune states, “State data confirms the

6

(PRB) Boom. According to W’voming OGCC, oil from the PRB accounts for neari 1/3

7

of the state’s production from the beginning of the year through Friday (‘Aug

8

2013). In that time Campbell County produced 5.5 million barrels or 19.4 percent

9

3 the state’s oil production.”

9111, of

10 11

Q.

DURING YOUR REVIEW OF THIS FILING?

12 13

WERE ANY OTHER OPPORTUNITIES FOR GROWTH IDENTIFIED

A.

Yes, one additional opportunity for growth was identified. PRECorp. has begun to

14

engage in a cooperative outreach program in an attempt to realize aspects of their

15

strategic vision including the diversification of load mix, and expansion of economies

16

of scale to realize efficiencies which may be gained.

17 18

Through the cooperative outreach PRECorp. has begun working with several electric

19

cooperatives in Montana whose power supplier, Southern Montana Electric Generation

20

and Transmission Cooperative (Southern), filed for Chapter 11 bankruptcy and

21

reorganization in 2011. PRECorp. is exploring the possibility of diversifying its load

22

mix by becoming a “paper” wholesale provider to these cooperatives. This would

23

allow PRECorp. to acquire the necessary power from their wholesale supplier (Basin),

24

and resale this power to the Montana cooperatives. This would also open up the

25

potential for the consolidation of other services as well including billing and other

26

customer service functions.

27 28

It is should be stated, that this opportunity remains uncertain. In order to replace their

29

existing power provider the courts would need to allow the conversion of Southern’s 12

Kay. “Wyoming Oil Production Continues to Increase.” Buffalo Bulletin 13 June 2013 Hancock. “State Data: Powder river Basin Is Wyoming Biggest Oil Producer.: Casper Star Tribune 12 August 2013. 13

Docket No. 100l4-145-CR-13

Direct Testimony of Anthony J. Ornelas —

17


1

bankruptcy filing from Chapter 11 to Chapter 7 which would facilitate the liquidation

2

of its assets. All four member cooperatives have called for the liquidation of assets

3

instead of the reorganization of the power provider. However, this idea continues to

4

face opposition in court from Southern’s creditors whom prefer a reorganization plan

5

4 Although the fate of the bankruptcy proceeding and the to pay off existing debt.:

6

realization of this growth opportunity remains unclear some initial steps have been

7

taken including:

8 9

-

The approval of the cooperative outreach strategy to develop relationships with the

10

four distribution cooperatives current served by Southern including a collaboration

11

to reduce duplication, optimize resources and provide economies of scale in areas

12

where support service may be utilized;

13

-

The approval of an interim power supply agreement with Basin Electric to provide

14

power to Fergus and Mid-Yellowstone cooperatives entering into a power supply

15

contract through PRECorp. and Upper Missouri G&T; and

16

-

The approval to extend Fergus (Class C) membership into PRECorp. with the

17

understanding of resolve by Fergus to obtain a long-term power supply from

18

PRECorp.

19 been factored

20

The likelihood of this opportunity remains uncertain at this time and

21

into the amended base revenues. I did feel however that it was important to include in

22

my testimony as this proceeding attempts to identify operational opportunities, as well

23

as the challenges, that may present themselves in the near future.

24 25

Q.

PLEASE DESCRIBE THE ADJUSTMENTS MADE TO THE OPERATING EXPENSES INCLUDED IN PRECORP.’S ADJUSTED TEST YEAR.

26 27 28

A.

In addition to the purchased power costs adjustment that corresponds to, and results

29

from, an adjustment to the revenue projections, two adjustments to the operating

30

expenses were made. ‘

Johnson. “Southern’s Co-Op Members Urge Liquidation.” Bi11ins Gazette 3 January 2014. Docket No. 10014-145-CR-13

Direct Testimony of Anthony J. Ornelas —

18


1

The first adjustment is an increase in the COLA from 2% to 3%. During the

2

development of the COSS it was anticipated that a 2% COLA would he recommended

3

and approved by PRECorp.’s Board of Directors.

4

Directors approved a 3% COLA based on the recommendations of the Human

5

Resources Department. Therefore an adjustment to reflect the actual increase in wages

6

from 2% to 3% was made to reflect the known and measurable increase in expense.

7

This adjustment resulted in an increase to the adjusted test year’s operating expenses of

8

$123,713. This amount is allocated throughout multiple expense accounts including

9

Transmission O&M, Distribution O&M, Consumer Accounting, Customer Service,

10

and Admin. & General. Exhibit 201.9 is a summary all the adjustments made to the

11

operating expenses, and Exhibits 201.10 thru 201.12 details the impact of the increased

12

COLA to payroll, benefits, and the payroll taxes and workers comp.

Since that time, the Board of

13 14

The second adjustment is the amortization of the expected rate case expense of

15

$40,143. A three year period was selected because no time frame was specified in the

16

filing indicating the expected period that any rate changes would remain in effect. A

17

three year period was felt to be a reasonable period to recover these cost and reflects

18

the typical length between rate cases filed for this utility (05’, 07, 10’ & 13’). This

19

adjustment resulted in a decrease to operating expenses of $26,876. This decrease is

20

reflected in Exhibit 201.9, Account # 928, Regulatory Commission.

21 22

Q.

COMPENSATION LEVELS?

23 24

DID THE OCA REVIEW THE APPROPRIATNESS OF PRECORP.’S

A.

Yes.

As part of the regulatory audit the compensation levels of the PRECorp.’s

25

employees were reviewed in order to determine if they were irudent and

26

commensurate with other cooperatives.

27 28

During the audit I had the opportunity to meet with Brian Mills, the Human Resource

29

Officer for PREC0rp. Mr. Mill explained that the compensation levels for PRECorp.

30

are modeled after the National Rural Electric Cooperative Association (NRECA) wage

31

and salary proam known as ‘Compensate”. This program provides comparative data Direct Testimony oS .&nthony J. Ornelas

Docket No. 10014-145-CR-I 3

19

-


1

from over 350 cooperatives which is compiled around internal equities among similar

2

job classifications and external competitiveness among cooperatives.

3

recruit and retain qualified personnel, the Board of Directors has elected to set

4

compensation levels at the

th 75

In order to

percentile of the NRECA compensation proam.

5 6

As part a regular review of its compensation package, the plan is annually updated

7

with current data for comparison to national and regional averages. Every

8

year a compensation audit is conducted with the assistance of a NRECA consultant.

9

Based on the results of these updates the Human Resources department annually

10

reports to the Board of Directors and makes recommendations regarding the current

11

compensation level.

th 5

or

th 6

12 13

An audit of the compensation packages was completed in 2013 with the results

14

indicating that a COLA in the range of 2-5% was wananted in order to maintain the

15

percentile target which has been established by the board. Based on this review

16

the OCA believes that the 3% COLA included in the adjustment reflects prudent cost

17

management by the cooperative, while providing the need to retain competitive

18

compensation levels that are sufficient to attract and retain qualified personal.

19 20

Q.

INCLUDED IN THE INCOME STATEMENT OF THE COSS.

21 22

PLEASE DESCRIBE THE AMENDMENTS TO “OTHER DEDUCTIONS”

A.

“Other Deductions” of $224,365 were included in the COSS Income Statement as an

23

above the line, non-operating expense, impacting the adjusted operating margins and

24

the requested rate increase. Included in these deductions were scholarships and several

25

civic donations with the source of funding coming from unclaimed capital credits and

26

general operating funds.

27 28

While the OCA recognizes PREC0rp’s commitment to being a good corporate citizen,

29

it does not believe these scholarships and civic donations represent a necessary

30

provision of service that should be recovered through rates charged to customers.

31

Although a portion of these funds come from unclaimed capital credits, it is felt that

Direct Testimony of Anthony J. Om&as

Docket No. 10014-145-CR-13 —

20


I

these funds should also be reverted hack to the cooperative as equity donations for the

2

benefit of all remaining customers.

3

totaling $110,475, have been removed. This adjustment resulted in a decrease to “other

4

deduction” on the income statement of $110,475.

5

Exhibit 201.13.

Therefore these scholarships and donations,

These amounts are reflected in

6 7

Q.

THE OCA DID NOT OFFER ANY ADJUSTMENTS TO THE INCREASE IN ASSOCIATED

THE

OPERATING

9

OPERATIONS MAINTENANCE PLAN. WHAT INFORMATION DID YOU

NEW

SYSTEM

REVIEW THAT PROVIDED THE BASIS FOR THIS DECISION?

10 11

EXPENSE

WITH

8

A.

As I briefly touched upon earlier in my testimony the new maintenance policy

12

represents a fundamental shift in the cooperative’s prior practices which touches upon

13

almost every faucet of the operations. This begins with the written plan itself (Exhibit

14

MP-2) that establishes specific annual maintenance goals, defines how routine

15

inspection and critical maintenance is to be prioritized, and specifies how

16

maintenances practices should be conducted and recorded.

17 18

Due to the fact that this plan represent such a large shift in the focus of the cooperative

19

from. capital expansion to capital maintenance there was very little historical data that

20

could be used to gauge the reasonableness or prudence of the associated costs of this

21

implementation. Therefore my determination to accept the proposed increases was

22

based on anecdotal evidence which suggests that improvements in the maintenance

23

policies are warranted.

24 25

My initial considerations are based on salient facts of the cooperative which

26

distirguishes its operations from other rural electric cooperatives (REC). Through the

27

merger of (Johnson & Tn-County Electric) PRECorp. was formed creating the largest

28

REC in Wyoming and one of the largest REC throughout the U.S. The service

29

territory covers over 17,000 square miles of largely rugged and rural terrain which

30

represents a land mass then Hawaii, Connecticut, and Rhode Island combined.

31

Substations and other distribution plant can be located over an hour away from Direct Testimony of Anthony J. Ornelas

Docket No. tOOi4 -145-CR- [3 21


I

company headquarters and are often subjected to inclement weather throughout the

2

year. In addition, necessity to serve the demand of the CBM industry over the past

3

decade has led to the addition of a significant amount of plant which stretches across a

4

larger portion of the service territory. As Mr. Pommarane noted in his testimony the

5

electric plant has doubled in the last decade from approximately $172 million to $340

6

million exclusive of plant paid for with Contributions In Aid of Construction (CIAC).

7 8

According to the Key Ratio Trend Analysis (KRTA) which is annually conducted by

9

National Rural Utilities Cooperative Finance Corporation (CFC), PRECorp is ranked

10

as the largest distribution cooperative in Wyoming measured by the average total

11

consumers served, total kWh sold, total utility plant, and total miles of distribution

12

lines. With the exception of average consumers served (due to rural characteristics of

13

the service area), PRECorp is ranked in the top 6% out of approximately 815 reporting

14

REC’s throughout the entire United States in these metrics.

15

16

PRECorp

US Median

Rank

kWh Sold

2,821,093

288,425

Top 2%

Utility Plant

339.549

71.816

Top 6%

Miles of Line

11,297

2,601

Top 1%

2012 CFC —KRTA: Total (kWh) Sold (1000’s): Total Utility Plant (1.000’s); Total Miles of Line -

17 18

Distinguishing the size of the cooperative provides an understanding for the need of

19

recent upgrades to the operating technologies that were completed over the past few

20

years though the Smart Grid Project. It also puts into perspective the cooperative’s

21

desire to update its maintenance policy to improve efficiencies, increase system

22

integrity, and prolong the life of existing assets.

23 24

Subsequent to these facts, my determination included a review of the federal

25

compliance policies that are applied to the system operations and maintenance as

26

defined by Federal Codes of Regulation, issued by the United States Department of

27

Agriculture, Rural Utility Services, under 7 CFR Part 1730. These regulations impose

Direct Testimon’ of Anthon 1. Ornelas

f)oket Nc. .[0014-115-CR-13 —

22


I

a variety of specific criteria that cooperatives must comply with in order to qualify for

2

lending. There were two sections in particular that was notable for the purposes of this

3

filing.

4 5

Section 1730.22

6

document its security, operations and maintenance policies, practices, and procedures

7

to determine if they are appropriate and being following. Records of inspections and

8

tests are to be compiled and reviews to analyze and identify any trends which could

9

indicate deterioration in the physical or cyber condition of the effectiveness of the

10

Specifies that each borrower shall periodically analyze and

system.

11 12

Based on conversations with management the manner in which inspections and testing

13

were conducted prior to the new plan varied in their scope and quality, as well as the

14

usefulness of the data storage in identification of trends and planning for corrective

15

action.

16 17

The new maintence plan outlines a uniform and systematic, inspection and testing

18

policy. When utilized in conjunctions with the technology capabilities associated with

19

the Smart Grid Project, this data is able to immediately be recorded, reviewed, and

20

categorized to help identify the plant location, condition, vintage, and a variety of other

21

variables which will assist in future analysis and identification of deterioration trends,

22

and assist in the planning of proactive corrective actions.

23 24

Section 1730.24

25

maintenance practices of each borrower will be completed (Form 300 Evaluation) by a

26

representative of the RUS to ensure compliance and identify any corrective actions that

27

may be required.

Specifies that a periodic review / audit of the operation and.

28 29

A copy of PRECorp. ‘s most recent audit (2009) was reviewed. Although no

30

unsatisfactory ratings were given, there were several areas rated as acceptable with

31

recommendations given for improvement. Areas where recommendations for Direct Testimony of Anthony J. Ornelas

Docket No. 10014-145-CR- 13 —

23


I

improvement were given included, but were not limited to: Substations (Transmission

2

& Distribution)

3

Records; and Distribution Lines

4

Pole Maintenance, and Work Order Procedures.

Safety, Code Compliance, Physical Conditions, and Inspection —

Inspection Program and Records, Right of Way &

5 6

Based on these and other determinants reviewed as part of my analysis, it is my

7

opinion that the new plan once fully implemented will provide a significantly

8

improved level of inspections, maintenance, tracking, and planning of maintenance

9

that will benefit all of the member of the cooperative. Therefore, I did not find cause

10

to recommend any adjustments at this time, but would reiterate the OCA’s caution of

11

allowing for the future cost recovery of significant future expenses without some level

12

of cost/benefit analysis being completed.

13 14

Q.

ARE THERE ANY FUTHER ADJUSTEDMENTS BEING RECOMMENDED

15

BY THE OCA WITH RESPECT TO THE REVENUE REQUIRMENT AND

16

LEVEL OF RATE INCREASE TO RETAIL ELECTRIC RATES?

17

A.

No, not at this time.

Q.

DO YOU BELIEVE THAT THE RECOMMENDATIONS MADE

18 19

THROUGHOUT YOUR TESTIMONY ARE IN THE PUBLIC LNTEREST?

20 21

A.

Yes.

I believe that the recommendations put forth in my testimony balance the

22

financial requirements of the utility and the interests of the rate payers (members). I

23

have studied the costs and facts in this proceeding to the extent possible, and

24

established a revenue requirement that includes no more than is necessary to achieve

25

financial stability while satisfying all of the criteria established in their filing.

26 27

I ask that the Commission find the OCA’s recommendations to be in the public

28

interest.

29 30

Q.

DOES THAT COMPLETE YOUR PREFILED DIRECT TESTIMONY?

31

A.

Yes, it does.

Direct Testimony of Anthony J. Ornelas

Docket No. 10014-145-CR-13 —

24


___________

________

_____

PRECUrp. w/ Rate Increase

38,629,542 (31,676,486)

183,539,712

Rate Change

144,910,170 31,676,486

PREC0rp. Application

OCA Adjustments

COMPARATWE INCOME STATEMENT & REVENUE REQUIRMENT

______ ______ ______ ___________ ___________ ___________

PRECorp. Adjustmetns

OCA Recommended

Rate Chance

38,724,919 -34,538.673

Exhibit 201.1

OCA

wI Rate Increase

193,259,190 0 0 1,904,908 195,164,098 154,534,271 34,538,673 0 1,880,118 190,953,063

150,146,772 1,072,506 9,344,942 3,741,736 2,859,351 84,796

140,414,850 1,071,098 9,286,889 3,723,160 2,842,313 84,600

6,141,660

140,414,850 1,071,098 9,286,889 3,723,160 2,842,313 84,600

28,040

2,140,098

28,040

2,140,098

4,211,036

4,211,036

24,790 4,211,036

(6,164.304) 6,332,297 700,000 65,475 933,468

6,143,226

1,904,908 185,444,620

150,146,772 1,072,506 9,344,942 3,741,736 2,859,351 84,796

24,790 6,977,846

6,143,226

1,880,118 178,466,774

5,317,995 (142,630) 407,261 343,423 316,880 3,642

6,141,660

13,572,289 1,416,376 178,553,236

(15,788,405) 3,470,109 700,000 65,475 (11,552,821)

478,321

3,446 476,755 13,572,289 1,416,376 178,553,236

Total

Tax

Admin & General Depreciation

CustomerService 5,664,905 (2,060,043) 932,000 (4,231,910)

160,698,575 28,206,376 (700,000) 1,814,643 190,019,594

Dec.31,2012 Test Year

Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

Operating Revenues Base Revenue COPA Deferred Revenue

Other Total

(2.060,043)

13,572,289 1,416,375 188,381,993

13,572,289 1,416,375 188,381,993 0 6,782,106

(86,462)

(4,413,927) (144,038) 349,208 324,847 299,842

5,596,847

2,571,070

15,632,332 484,376 182,785,146 (7,320.911)

144,828,777 1,215,136 8,937,681 3,398,313 2,542.471 81,154

(4,663,378)

7,234,448

(386,887)

5,909,403 108,778 224,365 6,242,546

6,977,846

Return

(386,887)

Operating Expenses Purchased Power Transmiasion 0&M Distribution-Opt Distribution-Maint. ConsumerAcet.

(386,887)

5,909,403 108,778 113,890 6,132,071

6,296,290 108,778 224,365 6,629,433

28,040

2,140,098

931,999

6,891,384

(110.475) (497,362)

(3.561,001)

Interest Exp. & Other Ded. Interest on L-T Debt Interest-Other Other Deductions Total (6,329,009)

28,040

6,316,539 88,028 8,572,705

2,140,098

0

4,211,036

9,222,739

2,140,098 28.040 6,316,539 88,028 8,572,705

650,034

5,909,403 108,778 113,890 6,132,071 (4,166,016)

0

5,909,403 108,778 224,365 6,242,546

0

648,837

(6,934,024)

Operating Margins Non-Operating Margins Interest Income

Other Margins

6,977,846

6,316,539 88,028 8,572,705 6,316,539 88,028 8,572,705

G&T Capital Credits Other Capital Credits

0

2,243,696

5,011,704

6,316,539 88,028 8,572,705

(6,934,025)

(4,166,016)

Total 9,177,720

9,221,542

Net Margins

220,661 29,700 5,267,269

220,661 29,700 5,267,269 220,661 29,700 5,267,269 220,661 29,700 5,267,269

220,661 29,700 5,267,269 (688,999)

-0.07

1.11 2.56 1.49 1.15 2.57 1.82

4,211,036 4,211,036 2.21%

0.40 1.85 0.78 0.44 2.19 1.45 1.11 2.56 1.49 1.15 2.57 1.82

6,979,043 6,977,846 3.91%

t.38 0.31 -0.03 1.94 1.20

220,661 29,700 5,956,268

1.10 2.46 1.45 1.14 2.54 1.86

Other Pmts Tn-State Cash Retirements Other Cash Retinnents Principal Payments Ratios

OperatingTlER

Financial

Net ‘TiER NetTIERw/oCapCr

RUS OTIER RIJS DSC RUSODSC

Desired OTIER Recommened Rate Increase % Rate Increase

6,977,846

605,015

Lii

1


Rate Chanee

WI Rate Increase

6,553,963 (8,000.937) 0 0 0

OCA Adiustments

RATE BASE SUMMARY & CALCULATED RATE OF RETURN

0

338,101,770 1.446,974 339,548,744 (139,223,635) 200,325,109

PREC0rp.

0

PREC0rp. Application

338,101,770 1,446,974 339,548,744 (139,223,635) 200,325,109

PRECorp. Adjustmetns

6,553,963 (6,553,963) 0 0 0

OCA Recommended

Rate Chanee

0

0

W/

Exhibit 201.2

OCA Rate Increase

338,101,770 0 338,101,770 (139,223,635) 198,878,135 0 10,059,912 2,139,420 2,909.180 (6,175,850) (1,119,713) 0 206,691,084

331,547,807 8,000,937 339,548,744 (139,223,635) 200,325,109

0 0 0 0 0 0 0

1.24%

179,222

338,101,770 0 338,101,770 (139,223,635) 198,878,135 0 10.059,912 2,139,420 2,909,180 (6,175,850) (1.119,713) 0 206,691,084

195,164,098 188,381,993 6,782,106

10,059,912 2,139,420 2,893,716 (6,175,850) (1,119.713) 0 208,122,594

4,211,036 0 4,211,036

0 0 0 0 0 0 0

190,953,063 188,381,993 2,571,070

10,059,912 2,139,420 2,893,716 (6,175,850) (1,119.713) 0 208,122,594

185,444,620 178,553,236 6,891,384 331%

3.28%

6,977,846 0 6,977,846

-0.04%

178,466,774 178,553,236 (86.462)

0 0 163,758 0 0 0 163,758

3.48%

190,019,594 182,785,146 7,234.448

10,059,912 2,139,420 2,729,958 (6.175,850) (1,119,713) 0 207,958,836

Dec. 31, 2012 Test Year

Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

Plant in Service CWIP Total UtilityPlant Accumulated Depreciation Net Utility Plant Materials & Supplies Prepayments Cash Working Capital Consumer Prepayment ConsumerDeposits Customer Construction Advances Total Rate Base

Operating Revenues Operating Expenses Return Rate of Return

1


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

OCA

Recommended

OCA

RATE BASE DETAIL

Adjustments

62,280,557 245,321,292 30,681,803 (181,881) 338,101,771

PRECorp.

0

Application

62,280,557 245,321,292 30,681,803 (181,881) 338,101,771

PRECorp.

6,553,964

90,197,515

30,090,506

2,738,995

16,876,095

10,059,912 2,139,420 2,909,180 (6,175,850) (1,119,713) 0 7,812,949

30,090,506 90,197,515 16,876,095 2,738,995 (679,476) 139,223,635

179.222

206,691,085

(679,476) 139,223,635 10,059,912 2,139,420 2,893,716 (6,175,850) (1,119,713) 0 7,797,485

179,222

0

Adjustmetns

62,210,127 240,780,351 28,739,210 (181,881) 331,547,807

0

Dec. 31, 2012 Test Year Plant in Service Transmission Plant Distribution Plant General Plant OtherPlant Total Plant In Service

30,090,506 90,197,515 16,876,095 2,738,995 (679.476) 139,223,635

163,758

206,675,621

70,430 4,540,941 1,942,593 0

Accumulated Depreciation Transmission Plant Distribution Plant General Plant Other Plant (Ainmortization) Retirement of Plant Total Plant In Service

10,059,912 2,139,420 2,729,958 (6,175,850) (1,119,713) 0 7,633,727

6,717,722

179,222

Materials & Supplies Prepayments Cash Working Capital Consumer Prepayment Consumer Deposits Customer Construction Advances Total Other Additions / Reductions 199,957,899

163,758

Total Rate Base

1

Exhibit 201.3


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012 CALCULATION CASH WORKING CAPITAL OCA

1,072,507

OCA Recommended

9,344,942

Adjustments (142,629)

3,741,736

PRECorp. 1,071,098

343,423

407,261

Application

(144,038)

3,723,160

9,286,889

PREC0rp.

1,215,136 349,208

Dec. 31, 2012

8,937,681 324,847

Adjustmetns

3,398,313

Test Year

Distribution Operations -

-

Distribution Maintenance

6,170,103

84,796

23,273,434

2,859,350 505,198

3,642 6,141,660

1,433,774

316,879

23,149,720

2,842,313

476,755

299,842

1,310,060

2,909,179

2,542,471 5,664,905

179,222

84,600

21,839,660

2,893,715

3,446

(12.5%)

163,758

81,154

-

Administrative & General Total Operating & Maintence Expense 45/360 Days

2,729,958

Consumer Accounting Customer Service & Sales

Transmission

1

Exhibit 201.4


Residential Customers Customers>200 Amps Total kWh COPA Revenues Total Revenue

Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Dec. 31, 2012

2.

Residential Time of Day Customers Customers>200Amps Sept-May On Peak kWh -

Off Peak kWh kWh June August COPA Revenue Total Revenue 3.

Residential Heat Rate Customers Customers > 200 Amps Total kWh Heat Credit (Oct. Apr.) COPA Revenue Total Revenue -

4.

Seasonal Annual Customers AnnualCust>200Amps Total kWh COPA Revenue Total Revenues

ADJUSTED REVENUE PROJECTIONS

Exhibit 201.5

PRECorp. Adj. Test Year Billing Units 22.50 27.50 0.05352 0.010824

Existing Rates

31,050 4,950

3,721,275 137,280 10,900,006 2,204,374 16,962,935

1,326,482 1,688,425

1,402 180

165,045 5,162 205,527,344 205,527,344

0.05352 0.011626

0.05680 0.03480

22.50 27.50

22.50 27.50 0.05352 0.011626

33,600 10,320 202,112 (52,008) 43,903 237,926

25,155 40,515 236,266

75,344 58,757

31,545 4,950

3,713,513 141,955 10,999,823 2,389,395 17,244,686

OCA Recommended Revenues

165,390 4,992 203,662,298 203,662,298

22.50 27.50

91,425 55,114

470,014 3,484,921

25.00 30.00 0.05352 -0.02979 0.011626

905,715 2,310 468,761 101,825 1,478,611

Existing Rates

1,380 180

0.05680 0.03480

26,779 39,979 249,297

1,344 344 3,776,376 1,745,833 3,776,376

270.00 330.00 0.05352 0.011626

OCA Adjusted

1,609,600 1,583,739

0.05352 0.010824

30,000 7,920 141,964 (31,599) 28,710 176,995

3,355 7 8,758,613 8,758,613

Billing Units

500,347 3,693,686

25.00 30.00 0.05352 -0.02979 0.010824

905,445 1,980 438,864 88,754 1,435,043

Revenues

1,200 264 2,652,548 1,060,731 2,652,548

270.00 330.00 0.05352 0.010824

PRECorp. Application

3,354 6 8,200,000 8,200,000

1


Powder River Energy Corp.

5.

General Service Customers 1 Phase Customers -3 Phase Total kWh COPA Revenue Total Revenue

Docket 10014-145-CR-13 Adjusted Test Year Dec. 31, 2012

6.

General Service CBM Customers-I Phase Customers 3 Phase Total kWh Capital Cost Recovery COPA Revenues Total Revenue -

-

7.

Billing Adjustment COPA Revenue Total Revenue

kWh

Irrigation Total Horsepower

8.

Large Power Secondary Customers First50kW ExcesskW First 200 kWh per kW Excess kWh Large Power Primary Customers First 50kW ExcesskW First 200 kWh per kW Excess kWh Primary Service Disount COPA Revenues Total Large Power Revenues

857,304 1,117,056 7,577,081 1,546,809 11,098,250

32,135 35,530 141,196,180 141,196,180

27.00 32.00 0.05302 0.011626

867,645 1,136,960 7,486,221 1,641,502 11,132,328

Exhibit 201.5

27.00 32.00 0.05302 0.010824

35.00 40.00 0.05932

31,752 34,908 142,909,871 142,909,871

1,513 14,899 66,820,763

1,533 16,065 66,261,032 0.010824

35.00 40.00 0.05932

66,261,032

15.50 0.04790

467,709,997

1,454 80,205 415,252 80,851,300 118,886,540

9,226 454,288 587,663 146,676,520 121,295,637

3,810,069

5,877 3,810,069

0.011626

75.00 2.65 5.35 0.05131 0.03131

90.00 2.65 5.35 0.05131 0.03131

0.011626

15.50 0.04790

109,050 212,543 2,221,598 4,148,480 3,722,338 (233,210) 5,437,447 32,120,185

830,340 1,203,863 3,143,997 7,525,972 3,797,766

91,094 182,502 4,028 44,295 321,918

52,955 595,960 3,963,808 753,698 776,837 6,143,257

5,164 2,500,000

0.0 10824

782,640 1,160,595 2,685,801 6,538,437 3,181,383

0.011626

2,500,000

90.00 2.65 5.35 0.05131 0.03131

66,820,763

8,696 437,961 502,019 127,430,063 101,609,170

75.00 2.65 5.35 0.05131 0.03131

111,375 207,409 2,280,937 4,665,753 4,590,940 (233,210) 5,050,329 31,022,387

53,655 642,600 3,930,604 1,068,005 717,188 6,412,052

1,485 78,268 426,343 90,932,621 146,628,545

0.0 10824

80,039 119,750 4,028 27,059 230,876

466,600,400

2


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Dec. 31, 2012 9.

Large Power CBM Secondary Customers First 50kW Excess kW First 200 kWh per kW Excess kWh Large Power CBM Primary Customers First 50 kW Excess kW First 200 kWh per kW Excess kWh Primary Service Disount (Demand) Primary Service Disount (Energy) Capital Cost Recovery (CCR) COPA Revenues Total Large Power CBM Revenues

10. Large Power Transmission Retail Rate Customer (12 Month Sum) SystemNCP -Trans. PerNCP kW

@ Sales Level

Wholesale Rate Fixed Charge perNCP kW kWh COPA Revenue Total LPT Revenue 11. Large Power Transmission CBM Retail Rate Customer (12 Month Sum) SystemNCP-Trans.PerNCPkW Wholesale Rate Fixed Charge per CP kW kWh @ Sales Level COPA Revenue Total LPT Revenue

Exhibit 201.5

60 134,435

1,121,946,000

2,266,320 1,121,946,000

156 2,266,320

431,747,000

437 16,276 236,138 43,963,474 41,925,131 252,415

19,992 790,441 864,179 215,748,578 130,109,818

12.29 0.02 1422

600.00 1.05

0.01444

9.47 0.021164

600.00 0.80

0.010824

135.00 3.00 7.00 0.04920 0.02920 -0.43000 -3.00%

100.00 3.00 7.00 0.04920 0.02920

1,071,984 4,410,408

1,428,785 1,732,483

36,000 141,156

16,195,567 63,309,141

21,462,052 23,744,865

93,600 1,813,056

88,238,412

126,426 88,238,412

60 145,567

1,215,533,861

2,464,727 1,215,533,861

156 2,464,727

496,696,575

413 22,324 323,106 55,514,216 49,321,504 345,430

20,188 986,680 1,168,510 243,650,178 148,210,677

0.013029

12.29 0.02 1422

600.00 1.05

0.01407

9.47 0.021164

600.00 0.80

0.011626

135.00 3.00 7.00 0.04920 0.02920 -0.43000 -3.00%

100.00 3.00 7.00 0.04920 0.02920

1,149,640 4,782,503

1,553,776 1,890,243

36,000 152,844

17,103,801 68,235,706

23,340,965 25,725,559

93,600 1,971,782

2,018,800 2,960,040 8,179,570 11,987,589 4,327,752 0 55,755 66,972 2,261,742 2,731,299 1,440,188 (148,535) (125,145) 3,310,926 5,774,435 44,841,388

116,256 80,874,000

0.013255

1,999,200 2,371,323 6,049,253 10,614,830 3,799,207 0 58,995 48,829 1,652,967 2,163,003 1,224,214 (108,538) (101,617) 4,212,090 4,673,087 38,656,842

80,874,000

3


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Dec. 31, 2012

-

12. Large Power Compression CBM Retail Rate Customer (12 Month Sum) System NCP Trans. PerNCP kW Wholesale Rate Fixed Charge perNCP kW kWh @ Sales Level Total LPT Revenue 13. Street Lighting 100 Watt HP Sodium 150 WattHPSodium 175 Watt MV 400 WattMV 400 Watt HP Sodium Billing Adjustments COPA Revenues Total Large Power Revenues 14. OutDoor Lighting 100 Watt HP Sodium 150 Watt HP Sodium 175 Watt MV 400 WattMV 400 Watt HP Sodium Billing Adjustments COPA Revenues Total Large Power Revenues

Revenues

15. Black Hills Electric Base Revenue COPA

Total Revenue 16. Total System Revenues Base Revenues COPA Revenues Other Revenues Total Revenues

52 kWh 78kWh 82 kWh l72kWh 188 kWh

52 kWh 78 kWh 82kWh l72kWh 188 kWh

2,110,577

708 192 24,980 21 84

905,837

240 1,908 2,724 516 2,307

46,891 33,754,000

24 56,875

0.010824

6.95 6.95 6.95 12.05 12.05

0.010824

6.95 6.95 6.95 12.05 12.05

16.74 0.0425 10

600.00 1.05

1,013,242

4

14,400 59,718 0 784,949 1,434,883 2,293,950

1,668 13,261 18,932 6,218 27,799 8 9,804 77,690

4,921 1,334 173,611 253 1,012 1,075 22,844 205,050

2,101,450

708 192 22,358 21 84

916,136

240 1,620 2,580 516 2,163

44,372 27,919,347

24 44,372

0.011626

6.95 6.95 6.95 12.05 12.05

0.011626

6.95 6.95 6.95 12.05 12.05

16.74 0.0425 10

600.00 1.05

Exhibit 201.5

14,400 46,590 0 742,781 1,186,851 1,990,622

1,668 11,259 17,931 6,218 26,064 8 10,651 73,799

4,921 1,334 155,388 253 1,012 1,075 24,431 188,414

45,333

45,333

919,524 45,738

154,534,271 34,538,673 1,880,118 190,953,062

45,738

144,910,170 31,676,486 1,880,118 178,466,773


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

Exhibit 201.6

ADJUSTED CUSTOMER COUNT BY RATE CLASS Dec. 31, 2012 Test Year 164,045 4,717 1,404 172 963 224 171,525

Residential Res >200 Amps Residential ToD Res ToD >200 Amps Res Heat Rate Res Heat Rate >200 Total Residential Seasonal Residential Season >200 Amps Total Seasonal Irrigation

PRECorp. Adjustmetns 1,345 275 (24) 8 237 40 1.881

PRECorp. Application 165,390 4,992 1,380 180 1,200 264 173,406

OCA Ad justments 1,000 445 (2) 8 381 120 1,952

OCA Recommended 165,045 5,162 1,402 180 1,344 344 173,477

2,266

222

2.044

0

2,044

40,254 72 40,326

421 0 421

40,242 72 40,314

409 0 409

39,833 72 39,905

1,513 14,899 16,412

(20) (4,764) (4,784)

1,533 16,065 17,598

0 (3,598) (3,598)

1,533 19,663 21,196

GS I Ph CBM GS 3 Ph CBM Total General Service CBM

32,135 35,530 67,665

301 766 1,067

31,752 34,908 66,660

(82) 144 62

31,834 34,764 66,598

GS I Ph GS 3 Ph Total General Service -

-

-

Large Power

9,775

406

10,181

905

10,680

0 360 360

0 3 3

0 357 357

0 0 0

0 357 357

24

0

24

0

24

7,740

4,956

7,739

4,955

2,784

24

6

24

6

18

LP Compression CBM

60

14

60

14

46

LPTransCBM

156

0

156

0

156

Large PowerTrans

24,899

Large Power CBM

Idle Services Black Hills Security Lighting Street Lighting Total Lighting Total Customer Count

339,327

(4,470)

(335)

20.429

(4.298)

20,601

339,791

464

338,992

1


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

ADJUSTED kWh’s SOLD BY RATE CLASS PRECorp. Application

OCA Recommended

1,481,285 (61,799) 89,837 958,158 259,097 10,283,607

8,723,894 34,719 8,758,613

600,168 2,851,990 924,386 212,788,641

OCA Adlustments 7,557,029

1,962,971 689,577 210,008,532

92,452 (20,572) 71,880

3,810,069

PRECorp. Adjustmetns

8,147,807 52,193 8,200,000

(615,327)

141,196,180

36,813,410 104,382,770

Dec. 31, 2012 Test Year

6,805,926 367,342 201,844 34,959 69,139 24,288 7,503,498

2,500,000

2,012,761 (809,992)

Large Power CBM

Large Power

Total General Service CBM

GS I Ph-CBM GS 3 Ph CBM

1,013,242

0

31,754,186

102,816,544

1,227,007,339

579,824,495

440,889,881

79,160,604

4,899,029 74,261,575

0

0

1,999,814

(21,942,544)

0

(148,077,495)

25,710,519

(12,899,572)

(798,319) (12,101,253)

3,016,414

2,110,577 905,837

1,013,242

0

33,754,000

80,874,000

1,121,946,000

431,747,000

466,600,400

66,261,032

4,100,710 62,160,322

(87,683,711)

(9,127) 10,299 1,172

(93,718)

0

(3,834,839)

(14,578,132)

(11,473,478)

(83,127,920)

26,820,116

(12,339,841)

(133,923) (12,205,918)

2,733,409,568

3,017,586

2,101,450

919,524

0

88,238,412

1,215,533,861

496,696,575

467,709,997

66,820,763

4,765,106 62,055,657

2,884,753

186,426,859 10,062,171 2,946,552 510,331 1,893,832 665,289 202,505,034 (483,635) 0 (483,635)

35,525,645

1,202,769

193,983,888 11,543,456

Residential Res >200 Amps Residential ToD Res ToD >200 Amps ResHeatRate Res Heat Rate >200 Total Residential 8,631,442 55,291 8,686,733 0

142,909,871

107,384,226

Large Power Trans

2,110,577 905,837

0 0 0

2,568,830,491

545,290

Seasonal Residential Season >200 Amps Total Seasonal 4,425,396

2,916,460

724,996 2,191,464

193,232,785 10,429,513 3,148,396

Irrigation

139,993,411

34,800,649 105,192,762

Black Hills

3,016,414

(145,272,955)

LP Compression CBM Idle Services

Total Customer Count

916,136

27,919,347

Security Lighting Street Lighting

2,821,093,279

LP Trans CBM

Total Lighting

-

Total General Service

*

GS I Ph GS 3 Ph

-

1

Exhibit 201.7


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

*The LPC CBM: Prior to May 2O13PRECorp. billed the LPC CBM class one month before receiving the assoicated power bill from Basin Electric, which is a direct pass-through charge. However, there was not a proper procedure in place in order to ensure that the amounts always matched since the usage billed to the customer wouldn’t show up on the direct pass through of cost until the following month. In April of 2013 an error was discovered caused by this timing issue. -

-

kWh’s were not billed to the LPC CBM Class in May 2013 to correct any errors from the point in time that the accounts within this class were created. This resulted in skewed data. Additionally, billing procedures were changed in May 2013 so that the current month billing actually reflected previous months usage. Example June 2013 kWh’s sold actuall reflects May’s usage. -

Nov.) and PREC0rp. was contacted in order to get normalized kWh’s sold that reflected eleven months of actual sales (Jan. available, one month of projections (Dec.) for the year-end 2013. At the time of this filing, the figures were not made sold however, I was able to get twelve months of actual data for the year-ending Dec. 31, 2013. Therefore the actual kWh’s were used for the LP Compression CBM customer class.

2

Exhibit 201.7


Powder River Energy Corp. Docket 10014-145-C-13 Adjusted Test Year Ending Dec. 31,2012

Exhibit 201.8

ADJUSTED PURCHASED POWER COSTS

Dec. 31, 2012 Test Year Large Power Transmission Large Power Transmission CBM Large Power Compression CBM Remaining Customer Classes Total Power Purchased Costs NRECA Dues Total Adjusted Purchased Power Costs -

-

62,646,797 5,021,650 2,024,952 75,135,379 144,828,778

PRECorp. Adj. Test Year 61,402,485 4,233,252 2,219,832 72,559,282 140,414,851

OCA Recommended 65,970,300 4,579,773 1,815,752 77,690,387 150,056,212 90,560 150,146,772

Follow-up with the company revealed that the NRECA Dues in the amount of $90,560 had been inadverty excluded from the amended power cost provided as part of the OCA’s second data request. This amount, shown above, was added to the power cost which is reflected in the total adjusted amount.

1


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

___________

115,462 378,498 140,908 100,816 226,628 962,312

144,828,777

Dec. 31, 2012 Test Year 144,828,777

172,808 (27,870)

2,867 9,139 12,006

(88,792) 0 0 (156,044)

(72,725)

5,473

(4,413,927)

PRECorp. Adjustmetns (4,413,927)

1,317,356 520,379 1,576,980 357,497 17,672 1,823,787 29,723 3,595,202 48,293 9,286,889

179,240 85,589 264,829

52,116 100,816 226,628 806,268

305,773

120,935

140,414,850

PREC0rp. Application 140,414,850

6,787 2,895 296,346 24,657 3,161 1,205 8,282 90 343,423

182,763 (25,010) (284,724) (15,481) 2,369 161,268 3,711 382,365 0 407,261

3,030 9,662 12,692

(155,321)

5,785 (72,426) (88,680) 0 0

5,317,995

5,317,995

OCA Adjustments

47,363 269,859 3,120,161 183,127 33,666 9,097 77,464 999 3,741,736

1,327,311 523,239 1,588,156 358,923 17,800 1,835,458 29,924 3,615,838 48,293 9,344,942

179,403 86,112 265,515

121,247 306,072 52,228 100,816 226,628 806,991

150,146,772

150,146,772

OCA Recommended

ADJUSTED OPERATING EXPENSES

176,373 76,450 252,823

(16,907) 2,241 149,597 3,510 361,729 0 349,208

46,994 269,702 3,104,129 181,797 33,495 9,032 77,015 995 3,723,159

Acct. 555.00 Purchased Power PP Bill Credit Total Power Costs

1,144,548 548,249 1,872,880 374,404 15,431 1,674,190 26,213 3,233,473 48,293 8,937,681

6,418 2,738 280,314 23,327 2,990 1,140 7,833 86 324,846

570.00 Maintenance of Station Equipment 571.00 Maintenance of Transmission Lines Total Transmission Maintenance

Supervision Station Expense OHLineExpense Trans ofElec. By Other Misc. Trans. Expense Total Transmission Operations

Supervision & Engineering Station Expenses Overhead Line Underground Expenses StreetLighting Meter Expense Customer Installations Miscellaneous Rent Total Distribution Operations

40,576 266,964 2,823,815 158,470 30,505 7,892 69,182 909 3,398,313

560.00 562.00 563.00 565.00 566.00

580.00 582.00 583.00 584.00 585.00 586.00 587.00 588.00 589.00 Supervision & Engineering Station Expenses Overhead Line Underground Expenses Street Lighting Meter Expense Customer Installations Miscellaneous Total Distribution Maintenance

(295,900)

590.00 592.00 593.00 594.00 595.00 596.00 597.00 598.00

1

Exhibit 201.9


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

5,664,904

902,144 271,164

2,561,422 1,222,534 307,135 311,786 88,719

52,880 28,274 81,154

2,542,471

(146,266)

81,267

476,756

(45,841) 9,396

425,059 16,854 0 29,506 41,782

2,304 1,143 3,447

205,547 299,842

1,098,501 17,201 13,572,289

10,719,518

1,737,069

6,141,660

856,303 280,560

2,986,481 1,239,388 307,135 341,292 130,501

55,184 29,417 84,601

579,102 278,220 1,984,991 2,842,313

(14,730)

(34,150) (78,975)

210,383 11,218 15,602

(146,266)

81,267

478,322

(44,281) 9,932

449,171 17,866 0 30,644 14,990

2,434 1,208 3.642

15,108 217,176 316,880

84,596

0

0 0

1,098,501 17,201 13,572,289

10,719.518

1,737,069

6,143,226

857,863 281,096

3,010,593 1,240,400 307,135 342,430 103,709

55,314 29,482 84,796

2,859,351

583,682

Salaries Office Supplies & Expenses Outside Services Injuries&Damages Regulatoiy Commission

908.00 CustomerAssistance 909.00 Information Total Customer Service 920.00 921.00 923.00 925.00 928.00

Total Administrative & General

930.00 Miscellaneous 932.00 Maintenance of General Plant

-

405.10 Amort. Of Land Rights Transission

53,485 430,793 97 484,375

0

2,088,788 2,216,643

(4,231,907)

932,000

0

0 0

932,000

(2,088,788) (2,216,643)

38,138,383

178,553,233

1,416,375

97

53,485 430,793

932,000

0 0

278,858

5,596,853

932,000

0

0 0

932,000

(2,088,788) (2,216,643)

38,235,221

188,381,993

1,416,375

97

430,793

932,000 53,485

0 0

279,049 1,996,620

1,655,802

0 0

80,016 14,279

10,865,784

210,383 11,218 156,602

0

499,086 263,941 1,779,444

403.10 Transmission Deprec.

(34,150) (78,975)

Total Consumer Accounting

403.20 Distribution Deprec.

888,118 5,983 13,415,687

(14,730)

901.00 Supervision 902.00 Meter Reading 903.00 Customer Records

403.40 General Deprec. 403.50 Capital Leases Total Depreciation

14,730

34,150 78,975

-

-

405.20 Amort. Of Land Right Distribution 405.30 Amort. Of Land Right Capital Leases

182,785,140

182,020

407.30 Regulatory Debits Total Amortization & Regulatory Adjust.

Total Operating Expenses

37,956,363

408.70 Other Taxes Total Taxes

408.10 Property Tax 408.50 Franchise Tax 408.60 Public Utility Tax

Total Operating Expenses (less) PP Cost

2

Exhibit 201.9


18,675 17,883 6,937

Dec. 31, 2012 Test Year

9,438

4,052 3,880 1,505

PRECorp. Adjustmetns

12,132 38,562 50,694

52,933

22,727 21,764 8,442

134,659 39,210 152,568 19,628 1,783 157,893 2,771 276,828 785,340

2,282 7,253 9,535

9,956

4,275 4,094 1,588

OCA Adlustments

722,925 210,500 819,068 105,374 9,574 847,654 14,876 1,486,165 4,216,135

12,250 38,940 51,190

53,452

22,950 21,977 8,525

OCA Recommended

ADJUSTED PAYROLL EXPENSED

43,495

2,163 6,876 9,039

715,912 208,458 811,123 104,352 9,481 839,432 14,732 1,471,749 4,175,238

562.00 Station Expense 563.00 OH Line Expense Total Transmission Operations

Total Transmission Maintenance Supervision & Engineering Station Expenses Overhead Line Underground Expenses Street Lighting Meter Expense Customer Installations Miscellaneous

62,436 10,947 149,554 222,937

5,000 2,165 223,441 18,409 2,253 881 6,111 70 258,329

335,190 58,771 802,885 1,196,846

98,831 12,097 4,728 32,805 373 1,386,851

1,199,551

5,792 66 244,876

331,939 58,201 795,097 1,185,236

PRECorp. Application

9,969 31,686 41,655

127,647 37,168 144,623 18,606 1,690 149,670 2,627 262,412 744,443

Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

Acct.

588,265 171,290 666,500 85,746 7,790 689,762 12,105 1,209,337 3,430,795

560.00 Supervision

Total Distribution Operations

4,739 2,053 211,805 17,451 2,136 35

26,581 11,512 1,187,915 97,872 11,980 4,682 32,486 370 1,373,398 59,185 10,377 141,765 211,327

26,841 11,625 21,842 9,459 976,110 80,422 9,844 3,847 26,694 304 1,128,522

973,909

272,754 47,824 653,331

Supervision & Engineering StationExpenses OverheadLine Underground Expenses Street Lighting Meter Expense Customer Installations Miscellaneous Total Distribution Maintenance

570.00 Maintenance of Station Equipment 571.00 OperatingRevenues

580.00 582.00 583.00 584.00 585.00 586.00 587.00 588.00

590.00 592.00 593.00 594.00 595.00 596.00 597.00 598.00

Total Consumer Accounting

901.00 Supervision 902.00 Meter Reading 903.00 Customer Records

1

Exhibit 201.10


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

Salaries Office Supplies & Expenses Injuries & Damages Regulatory Commission Miscellaneous Maintenance of General Plant Total Administrative & General

908.00 Customer Assistance 909.00 Information Total Customer Service 920.00 921.00 925.00 928.00 930.00 932.00

Total Payroll Expenses

1,772 914 2,686

9,514 4,906 14,420

2,546

9,421 4,859 14,280

1,680 866

7,741 3,992 11,734

331,203 17,209 15,731

1,778,077 92,389 84,450 6,147 113,229 37,568 2,111,861

313,955

21,091 6,998 393,376

9,030,754

75,180

1,760,829 91,493 83,631 6,087 112,131 37,204 2,091,375

1,682,160

1,446,874

8,943,154

1,145

68,720 5,002 92,138 30,571 1,718,484 1,594,560

16,313 14,911 1,085 19,993 6,633 372,891

7,348,594

2

Exhibit 201.10


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

3,354

6,473 20,845 27,318

PRECorp. Application 13,048 12,600 4,125 29,772

49,309 14,038 54,714 6,939 600 59,107 961 107,761 293,429

3,230

2,465

765

OCA Adjustments 1,543 1,490 488 3,520

15,557 6,337 634,619 54,307 7,892 2,814 18,899 177 740,602

502,689 8,174 916,477 2,495,523

20,961 27,470

6,509

OCA Recommended 13,120 12,670 4,148 29,938

ADJUSTED BENEFITS EXPENSED

Dec. 31,2012 Test Year 11,578 11,180 3,660 26,418 729 2,349 3,078

417,036 118,726 462,746 58,683 5,078 499,905 8,128 911,402 2,481,705

1,829 745 74,620 6,386 928 331 2,222 21 87,082

PRECorp. Adjustmetns 1,470 1,420

5,744 18,496 24,240

46,987 13,377 52,137 6,612 572 56,324 916 102,687 279,611

15,471 6,302 631,105 54,006 7,848 2,798 18,794 176 736,501 21,601 4,071 65,551 91,222

191,718 36,129 581,801 809,648

22,668 4,272 68,790 95,730

192,786 36,330 585,040 814,156

5,106

170,117 32,058 516,250 718,426

465

370,049 105,349 410,609 52,071 4,506 443,582 7,212 808,715 2,202,094

1,743 710 71,106 6,085 884 315 2,118 20 82,981

Acct. 560.00 Supervision 562.00 StationExpense 563.00 OH Line Expense Total Transmission Operations

Supervision & Engineering Station Expenses Overhead Line Underground Expenses Street Lighting Meter Expense Customer Installations Miscellaneous Total Distribution Operations 13,728 5,592 559,999 47,921 6,964 2,483 16,677 156 653,520

570.00 Maintenance of Station Equipment 571.00 Operating Revenues Total Transmission Maintenance 580.00 582.00 583.00 584.00 585.00 586.00 587.00 588.00

Supervision & Engineering Station Expenses Overhead Line Underground Expenses Street Lighting MeterExpense Customer Installations Miscellaneous Total Distribution Maintenance

419,358 119,387 465,323 59,010

590.00 592.00 593.00 594.00 595.00 596.00 597.00 598.00

901.00 Supervision 902.00 Meter Reading 903.00 Customer Records Total Consumer Accounting

1

Exhibit 201.11


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

674 301 975

1,023,111 6,881

8,288

5,729 2,559

8,242

120,300 809

45,089 3,535 67,540 25,462 1,171,618

5,697

642 287 929 1,017,446 6,843

5,302 416 7,941 2,994 137,761

5,287,594

5,055

2,258 7,313 114,635 771

44,839 3,516 67,166 25,321 1,165,130

621,727

2,545

902,812 6,072

5,052 396 7,568 2,853 131,274

5,258,316

Total Customer Service

39,787 3,119 59,598 22,468 1,033,856 592,449

908.00 Customer Assistance 909.00 Information

Total Administrative & General 4,665,867

920.00 Salaries Office Supplies & Expenses Injuries & Damages Regulatory Commission Miscellaneous Maintenance of General Plant

921.00 925.00 928.00 930.00 932.00

Total Benefits Expenses

2

Exhibit 201.11


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

(49) (47) (18) (114)

978 3,280 4,259

1,800 705 4,405

PRECorp. Application 1,900

(1,206) (306) (1,271) (151) (14) (1,294) (21) (2,225) (6,487)

(17) (56) (73)

(31) (12) (76)

OCA Adjustments (33)

2,497 943 100,807 8,111 1,140 395 2,959 26 116,878

70,897 17,979 74,737 8,871 818 76,089 1,252 130,827 381,469

987 3,309 4,296

1,816 712 4,444

OCA Recommended 1,917

ADJUSTED PAYROLL TAX & WORKERS COMPENSATION EXPENSED

1,949 1,847 724 4,520 (25) (85) (111)

70,276 17,821 74,083 8,793 811 75,424 1,241 129,682 378,132

(42) (17) (1,714) (138) (19) (7) (50) (0) (1,988)

570.00 Maintenance of Station Equipment 571.00 Operating Revenues Total Transmission Maintenance

PRECorp.

1,004 3,366 4,369

(1,826) (463) (1,925) (228) (21) (1,960) (32) (3,369) (9,825)

2,475 935 99,925 8,040 1,130 391 2,934 25 115,856

Adjustmetns

72,102 18,284 76,008 9,022 832 77,383 1,273 133,052 387,956

(64) (24) (2,596) (209) (29) (10) (76) (1) (3,010)

106,921

30,403 6,647 69,871

(2,708)

(770) (168) (1,769)

104,213

29,633 6,478 68,102

(1,788)

(508) (111) (1,168)

105,133

29,895 6,536 68,703

Dec. 31, 2012 Test Year

Supervision & Engineering Station Expenses Overhead Line Underground Expenses StreetLighting Meter Expense Customer Installations Miscellaneous Total Distribution Operations 2,539 960 102,522 8,249 1,159 401 3,010 26 118,867

Acct.

580.00 582.00 583.00 584.00 585.00 586.00 587.00 588.00

Supervision & Engineering Station Expenses Overhead Line Underground Expenses StreetLighting Meter Expense Customer Installations Miscellaneous Total Distribution Maintenance

560.00 Supervision 562.00 Station Expense 563.00 OH Line Expense Total Transmission Operations

590.00 592.00 593.00 594.00 595.00 596.00 597.00 598.00

Total Consumer Accounting

901.00 Supervision 902.00 Meter Reading 903.00 CustomerRecords

1

Exhibit 201.12


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

139,414 9,063 8,070 534 10,191 3,587 170,859

730 401 1,130

(20,123)

(3,530) (230) (204) (14) (258) (91) (4,327)

(18) (10) (29)

774,499

135,883 8,834 7,866 521 9,933 3,496 166,532

711 391 1,102

(13,288)

(2,331) (152) (135) (9) (170) (60) (2,857)

(12) (7) (19)

781,334

137,082 8,912 7,935 525 10,021 3,527 168,002

717 394 1,111

Salaries Office Supplies & Expenses Injuries & Damages Regulatory Commission Miscellaneous Maintenance of General Plant Total Administrative & General

794,621

908.00 Customer Assistance 909.00 Information Total Customer Service 920.00 921.00 925.00 928.00 930.00 932.00

Total Payroll Tax & Etc. Expenses

2

Exhibit 201.12


Powder River Energy Corp. Docket 10014-145-CR-13 Adjusted Test Year Ending Dec. 31, 2012

(19,500) (59,165) (21,763) (10,047)

113,890

5,612 20,561 0 0 0 0 77,717 10,000

OCA Recommended

(110,475)

OCA Adjustedment

ADJUSTED “OTHER DEDUCTION”

PRECorp. Adj. Test Year 5,612 20,561 19,500 59,165 21,763 10,047 77,717 10,000

Dec. 31, 2012 Test Year 5,612 20,561 19,500 59,165 21,763 10,047 77,717 10,000 224,365

-

224,365

-

Mt. Mine Acquisition Acq. Aniortization Bentonite Substation Acq. Amortiztion Scholarships Unclaimed Capital Credits Donations Unclaimed Capital Credits Donations Donations PRECorp. Foundation Other Deductions (work Order Abandonment) Interet on Economic Development Loan -

Total Estimated Power Cost

1

Exhibit 201.13


BEFORE THE PUBLIC SERVICE COMMISSION OF WYOMING iN THE MATTER OF THE APPLICATION OF POWDER RIVER ENERGY CORPORATION SUNDANCE, WYOMING, FOR AUTHORITY TO ADJUST RATES AND IMPLEMENT NEW TARIFFS EFFECTIVE MARCH 10, 2014

) )

) DOCKET NO. 10014-145-CR-13 ) Record No. 13644

AFFIDAVIT, OATH AND VERIFICATION Anthony J. Omelas (Affiant) being of lawful age and being first duly sworn, hereby deposes and says that: Affiant is a Rate Analyst with the Wyoming Office of Consumer Advocate which is a party intervener in the general rate increase application pursuant to its Notice of Intervention filed on September 5, 2013. Affiant prepared and caused to be filed the foregoing testimony. Affiant has, by all necessary action, been duly authorized to file this testimony and make this Oath and Verification. Affiant hereby verifies that, based on Affiant’s knowledge, all statements and information contained within the testimony and all of its attached schedules are true and complete and constitute the recommendations of the Affiant in his official capacity as a Rate Analyst for the Wyoming Office of Consumer Advocate. Further Affiant Sayeth Not. Dated this 22nd day of January, 2014. Anthony J. Omelas, Rate Analyst Wyoming Office of Consumer Advocate 2515 Warren Avenue, Suite 204 Cheyenne, WY 82002 (307) 777-5744

COMMaSN EXPIflOS LJG 25, 2014

STATE OF WYO]VfNG COUNTY OF LARAMIE

) ) )

SS:

The foregoing was acknowledged before me by Anthony J. Ornelas on this 22nd day of January, 2014. Witness my hand and official seal.

a Nor1Public s:a6.112S,” 4 Expire My Commission ’ Affidavit of Anthony J. Ornelas


anthony-ornelas-direct-testimony-full-scan