Government Management, Accountability and Performance

1
Government Management,Accountability and
Performance

• March 1, 2006
• ENERGY SECTION
• Jim Russell, Glenn Blackmon,
• Bob Wallis, Jeffrey Showman

PPT Available at I\GMAP\Energy Regulation\Energy
Presentation 2006
2

• GMAP Quotes (GMAPGuidelines for Agencies)
• At its core, GMAP is simply a meeting where
  managers report in person to the leadership team.
  The purpose of the meeting is to share
  information that will help the agency achieve
  results.
• POG is about budgeting. GMAP is about managing.
  POG helps the Governor and agencies make
  decisions on where to invest money to get results
  that matter most to citizens.

3
Topics Covered

• I. Introduction (Who What).
• Costs and Benefits of Energy Regulation.
• III. Energy Measures (Discussion)
• IV. Tools, Training, Challenges.
• V. Administrative Law Division

4

• I. Introduction
• (Who we are, Who we regulate, What we do)

5
ENERGY SECTION Who We Are.

• 14 Professional Staff
• 7 Analysts with Financial/Accounting Focus
• 7 Analysts with Economic/Statistical/Engineering
  Focus
• 1.2 Million Budget
• Salaries Benefits (1.1 Million)
• Rent (77,000)
• Travel (15,000)
• Training (5,500)
• MS, Printing (2,500)

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ENERGY SECTION Who We Regulate.

• 3 Electric Utilities (Revenues)
• Puget Sound Energy (1,600 Million)
• Avista (300 Million)
• PacifiCorp (210 Million)
• 4 Gas Utilities
• Puget Sound Energy (900 Million)
• Avista (170 Million)
• Cascade Natural Gas (250 Million)
• NW Natural (80 Million)
• 3.5 Billion in Annual Revenues (WA GDP 262T)
• 2.4 Million Energy Consumers (Pop. 6.26M)
• (Includes businesses, and GE customers twice)

7

• Environment in Which We Operate

High Rates High Returns
Low Rates Low Returns
Commissioners, ALD, Policy
Public Counsel
Energy Utilities
WUTC Energy Staff
Trade Organizations
Investors Stocks Bonds
Consumers
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ENERGY SECTION PERSPECTIVE ON COMMISSION
MISSION STATEMENT

• The WUTC protects consumers by ensuring that
  energy utility and transportation services are
  Fairly priced, Available, Reliable and Safe.

9
ENERGY SECTION WHAT WE DO.

• Economic Regulation of Investor Owned Gas And
  Electric Utilities (Fairly Priced).
• General Rate Cases (GRC)
• Power Cost Gas Cost Adjustments (PCA/PGA)
• Tariff Filings Petitions (Acctg, Transfers,
  Securities)
• Financial Reviews Staff Investigations
• Adequacy of Energy Supplies (Available, Reliable,
  Safe).
• Integrated Resource Planning (IRP)
• Reliability/Vegetation Management Reporting
• Staff Investigations

10
ENERGY SECTION Tasks We Perform.

• GRCs Energy Tariffs Fin. IRPs
• MAJOR TASKS Cost Adjs Petitions Reviews Reli
  ability
• Read and Scope Filings X X X X
• Auditing Financial Analysis X X X
  X
• Power Supply/Gas Supply Modeling X X
  X
• Weather Hydro Normalization X X X
• Revenue Requirement Modeling X X X
  X
• Forecasting X X X X
• Class Cost-of-Service Studies X X
• Rate Spread Rate Design Studies X X
  X

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Energy Section What We Do.- 2005 Energy
Section Work Load (Hours)
11
132
6
117
24
290 Dockets (64 of time Docketed)
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Energy Section What We Do.2005 Workload Hours

• Measure Percent of time spent on different
  casework.
• Strategic goal Focus activities on most
  pressing/important work given caseload.
• Data source Records Management System and
  timesheet analysis.

• Next steps
• Identify opportunities for efficient rate case
  resolution.
• Foster cooperation in a litigious working
  environment.
• Develop best practices for processing general
  rate requests (i.e Scoping, assignment of issues,
  I\ratecase folders, negotiations, etc)

Discussion Since 2000 we have been busy
processing 14 (2.5/yr on avg) general rate cases
and 30 (5/yr) energy cost adjustment filings.
Rate case fatigue is setting in. Jaws of
statutory deadlines (blue) are eating into other
duties and analysis.
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Energy Section What We Do.2005 Workload Hours
(Detail)

• of Staff Supports Mission Statement
  Goal
• Dockets Hours Fairly Priced Available
  Reliable Safe
• General Rate Case 5 8,929 X
  X X x
• Mergers Acquisitions 1 444 X
  X X
• Power Cost Adjustments 4 1,199 X
  X X
• Purchased Gas Adjustments 7 511
  X X X
• Other Tariff Filings 91 661 X
  X X x
• Accounting Petitions 14 736 X
• Transfer of Property 8 253 X
• Security Filings 14 105 X
• Integrated Resource Planning 13 1,154
  X X X x
• Request for Proposals 5 203 X
  X X
• Financial Reviews (WAC Repts) 105 271
  X
• Staff Investigations 7 648 X
  X X x
• Special Contracts 4 28 X
• Rule Making 5 725 X X
  X x
• Reliability Reports 5 30 X
  X X
• Certificates 1 4 X
  X X

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• II. Costs Benefits of
• Energy Regulation

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WUTC Energy Regulation- Funding Covers Costs (
More)
5.9M
5.5M
3.8M
3.7M
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• ENERGY REGULATION
• GRC Docket Value Chain
• (Example UE-040640/641)

(Goal Maximize the Slope of the Consumer/Owner
Value Line)
Commission Order
Commission Order
Briefs Cross Examination
Negotiation/Settlement Written Testimony
(Regulatory Steps)
COMMISSIONERS
ALD
Consumer/Owner Value
Policy
STAFF ANALYSIS (See Slide 10)
Net Value To Consumers/Owners
ENERGY STAFF
(Regulatory Departments)
Records Center
Docket Distribute
PSE Filed GRC
Statutory Time
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Energy Regulation- Energy Company General Rate
Requests
PSE 040640 (Slide 15)
Graph represents completion of 14 Energy Rate
Cases
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Energy Regulation- Energy Company General Rate
Requests
Cumulative BenefitCost ratio 15
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Energy Regulation2005 Average Costs per Energy
Dollar
Total 1.00 (GE Combined)
Energy Costs .52
Depreciation .10
WUTC Energy Regulation Cost .00106
OM .14
Taxes .10
Return .10
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Energy Section Cost Comparison of Energy
Regulation (Regulators vs Utilities)

• Energy Regulatory Section Costs WUTC ID, OR,
  MT WA Regulated CA
• PUCs Energy Utilities
• Total Costs Per Regulatory Empl.
  101,300 118,000 203,100
  238,400
• Cost Per Dollar of Utility Revenue .0004
  .0007 .0018 .0009
• of Regulatory Employees Per Utility 1.86
  1.53 5.36 9.44
• Annual Costs Per Customer 0.55 1.07
  2.60 0.94
• Source NRRI, RRA, Utility Commissions,
  Statistical Reports, and Regulated Utilities.

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Energy RegulationMeasure Fairly Priced Natural
Gas

• Measure Residential natural gas prices, for
  investor-owned utilities.
• Strategic goal Customers pay as stable as
  practical natural gas rates.
• Data source Utility tariffs, PGA filings

• Discussion
• Two natural gas rate cases are currently pending
  at the Commission.
• IRP process helps identify opportunities for
  low/stable natural gas rates in todays volatile
  climate.
• PGA process helps smooth out short term
  volatility.

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Energy RegulationMeasure Fairly Priced
Electricity

• Measure Residential electricity prices, for
  investor-owned utilities compared to public
  utilities
• Strategic goal Customers pay low, stable energy
  rates
• Data source EIA reports (need to update graph
  through 2005)

• Discussion
• Investor owned utility (IOU) electric rates
  declined, in inflation adjusted terms, more than
  any other type of WA utility from 1989 to 2003.
• Regulated Utilities weathered the energy crisis
  relatively well thanks in part to the IRP
  process.
• Two rate cases are currently pending at the
  Commission.

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COMPETITIVENESS OF WA ELECTRIC RATES Investor-Owne
d Electric Utilities
http//www.pacificpower.net/Article/Article45955.h
tml
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• III. Energy Measures (discussion)
• ULTIMATE MEASURE What would energy Rates,
  Reliability and Service be absent WUTC
  regulation?
• How do we measure the Energy Staffs contribution
  to Fairly Priced, Available, Reliable and Safe
  service?
• How do we measure the quality of our analysis and
  recommendations?
• Docket (timeliness)/Timesheet/Cost Analysis.
• Compare costs spent per utility.
• Comparison of our cost to our peers (PUCs,
  Utilities).
• Peer review (internal/external).
• Percent of recommendations adopted?
• Need applicable internal data!

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Measure Energy Conservation

• Measure Annual first-year energy savings from
  conservation electric and gas
• Strategic goal Sufficient energy supplies,
  cost-effective investments, resource diversity
• Data source Regulated company conservation
  reports

• Discussion and Next Steps
• Companies and consumers responded to high 2001
  energy prices with aggressive conservation, which
  has reverted to pattern of steady growth.
• Many programs contribute to energy savings
  Weatherizing homes, retrofitting equipment and
  facilities, and energy education.
• Review of Integrated Resource Planning (IRP) rule
  and gas decoupling will ensure that companies
  plan for the future.

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Energy Measure Green Power Sales

• Measure Track Green Power Sales.
• Strategic goal Make sure regulated utilities are
  meeting the demand for clean energy in a
  responsible manner.
• Data source Green Power Programs in WA 2002-2005
  Reports to the Legislature.

• Discussion and next steps
• Continue to monitor and track success of this
  program.

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Energy Measure Electric Reliability (SAIDI and
SAIFI)

• Measure Electric company reliability.
• Strategic goal Uphold reliability, minimize
  consumer frustration.
• Data source 2005 Reliability Reports.
• SAIDI Sustained Average Interruption Duration
  Index
• SAIFI Sustained Average Interruption Frequency
  Index

• Discussion and next steps
• Continually monitor reliability through reporting
  and review of vegetation management programs.
• Address problem areas in a timely fashion.
• Consider reliability capital investment
  requirements in future reports?

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Electric Consumer Complaints(Per 10,000
customers and by type)

• Measure Electric company complaints per 10,000
  customers (quarterly data, average for four
  previous quarters), and by type (by year)
• Strategic goal Uphold service quality, minimize
  consumer frustration
• Data source UTC Consumer Contact System

• Discussion and next steps
• Consumer Affairs continually monitors complaints.
• Consider developing a monthly or quarterly report
  from Consumer Affairs to identify problem areas
  for consideration in Energy Section work.

Total Number of Electric Complaints
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Natural Gas Consumer Complaints(Per 10,000
customers and by type)

• Measure Natural Gas company complaints per
  10,000 customers (quarterly data, average for
  four previous quarters), and by type (by year)
• Strategic goal Uphold service quality, minimize
  consumer frustration
• Data source UTC Consumer Contact System

• Discussion and next steps
• Consumer Affairs continually monitors complaints.
• Consider developing a monthly or quarterly report
  from Consumer Affairs to identify problem areas
  for consideration in Energy Section work.

Total Number of Gas Complaints
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Investors Perspective on WA

• Measure Evaluation of regulatory climate from
  shareholders perspective
• Strategic goal Balance interests of companies,
  allow shareholders opportunity to earn fair rate
  of return on investment.
• Data source Regulatory Research Associates (RRA)
  Regulatory Focus, 1/6/06

• Discussion
• RRA evaluates the regulatory climate of each
  State public utility commission from an
  investors perspective.
• We want to be in the middle rating, neither
  overly pro-investor nor pro-consumer.
• Since last report, Oregon declined one notch and
  Calif went up one notch.

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Energy Company Credit Ratings

• Measure Unsecured corporate credit ratings for
  regulated companies
• Strategic goal Strong, stable companies have
  access to capital on reasonable terms (Utilitys
  secured ratings are more relevant for ratemaking
  purposes)
• Data source Standard Poors credit rating
  history

• Discussion
• Energy service requires substantial investment in
  capital infrastructure, such as generation
  facilities and distribution networks.
• Credit ratings help investors evaluate the
  financial strength of companies.
• Ratings have declined for all three electric
  utilities since the Western energy crisis.
• Avista has slipped below investment grade, and
  PSE is at the lowest investment grade.

• Next steps
• Two of three electric utilities have power-cost
  adjustments, which should help improve their
  financial strength in the long term.
• The Commission will be reviewing rate cases for
  two electric utilities and two gas utilities in
  2006-2007.

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Measure Energy Staff Evaluations

• Measure Status of Energy Staff evaluations
• Strategic goal 100 of evaluation complete on
  time
• Data source Human Resources

• Discussion
• All interim reviews were completed through Dec 05
  by Roger Braden before his departure.
• Next Steps
• Complete annual evaluations in a timely fashion
  next cycle (from 1/06 forward).
• Complete performance descriptions (PD) for each
  position.

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IV. ENERGY SECTION Tools, Training Challenges

• Tools Training
• Software/Hardware
• Training
• NARUC
• Institutional Memory - I/Ratecase Folder.
• Challenges
• Retain Experienced Employees.
• Post Energy-Crisis Workload.
• Changing Energy Environment.

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V. Administrative Law DivisionEnergy Case Work
Presentation By Bob Wallis
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ALD Energy Proceedings 2004 to 2006

• Discussion
• Six electric cases currently pending (three rate
  cases/mergers, one complaint, one tariff filing,
  and one PCA).
• Two gas rate case currently pending.
• All energy cases proceed to a final order, with
  no initial orders, but multiple interim orders.
• Trend Steady load of energy rate cases is
  likely to continue.

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ALD Timeliness of Initial Notice Energy Cases

• Measure 14 calendar days to issue initial
  notice of hearing.
• Note Measurement begins when ALD receives
  the case, e.g., a suspension order following an
  open meeting.
• Strategic goal Reducing regulatory burden by
  starting the process quickly, ensuring due
  process.
• Data source UTC Records Management System.

• Discussion / Next steps
• Average time is nine calendar days for gas cases,
  six days for electric cases, excluding outlying
  data. Overall average is seven calendar days.
• Delay in issuing notices is due, in part to
  requests by staff or parties for time for
  settlement discussions or the need to coordinate
  schedules.
• ALD will require parties seeking delay to file
  letters with Records requesting delay, and
  letters requesting ALD to proceed.

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Timeliness of Prehearing Conference Orders
Energy Cases

• Discussion/Next Steps
• Average time to enter a prehearing conference
  order is five calendar days for gas cases, six
  for electric.
• Issuing the orders promptly provides parties a
  record of the schedule for the proceeding, other
  procedural guidelines, and contact information
  for all parties.
• Continue efforts to consistently enter prehearing
  conference orders promptly after the hearing.

• Measure Seven to 21 calendar days to enter an
  order following the prehearing conference (seven
  for less complex cases, and 21 for more complex
  cases).
• Strategic goal Providing reliable, responsive
  information and process to stakeholders
  (regulated companies, customers, and other
  parties).
• Data source UTC Records Management System.

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ALD Timeliness of Interim Orders Gas Cases

• Measure Seven calendar days to enter interim
  procedural orders and 21 calendar days to enter
  interim dispositive orders.
• Strategic goal Providing reliable, responsive
  information and process to stakeholders
  (regulated companies, customers, other parties).
• Data source UTC Records Management System.

• Discussion
• Of the cases in which ALD entered interim orders,
  ALD entered procedural orders in an average of
  four calendar days, and dispositive orders in an
  average of 11 calendar days.
• ALD entered 12 procedural and 5 dispositive
  interim orders in gas cases in FY04 through FY06.
  
• Continue efforts to consistently enter interim
  orders promptly during proceedings.

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ALD Timeliness of Interim Orders Electric Cases

• Measure Seven calendar days to enter interim
  procedural orders and 21 calendar days to enter
  interim dispositive orders.
• Strategic goal Providing reliable, responsive
  information and process to stakeholders
  (regulated companies, customers, other parties).
• Data source UTC Records Management System.

• Discussion
• Of the electric cases in which ALD entered
  interim orders, ALD entered procedural orders in
  an average of five calendar days, and dispositive
  orders in an average of 13 calendar days.
• ALD entered 16 procedural and 21 dispositive
  interim orders in electric cases in FY04 through
  FY06.
• Continue efforts to consistently enter interim
  orders promptly during proceedings.

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Time from Initial Notice to Entering Order
Energy Cases

• Discussion/Next Steps
• On average, ALD entered a final order within 198
  calendar days of issuing the notice of hearing in
  gas cases, and 191 calendar days in electric
  cases, excluding outlying data.
• Where over 200 days elapse before ALD enters an
  order, delays are due to settlement discussions,
  or court appeals.
• Require parties seeking delay in scheduling
  prehearing to file request letters with Records
  and evaluate requests for continuances critically
  after first request.

• Measure Evaluative measure to assist in
  measuring timeliness of ALD management of
  proceedings.
• Strategic goal Providing reliable, responsive
  information and process to stakeholders
  (regulated companies, customers, other parties).
• Data source UTC Records Management System.

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ALD Timeliness of Final Order Energy Cases

• Measure 45-60 calendar days to enter an initial
  or final order.
• Note Measurement begins after last day of
  hearing, or last filed brief.
• Strategic goal Providing reliable, responsive
  information and process to stakeholders
  (regulated companies, customers, other parties).
• Data source UTC Records Management System.

• Discussion/Next Steps
• On average, the Commission entered final orders
  in gas cases within 19 calendar days of the
  trigger event, and in electric cases within 32
  days of the trigger event.
• Administrative Procedure Act requires initial and
  final orders entered within 90 calendar days (RCW
  34.05.461(8)(a)).
• Work towards consistently entering initial and
  final orders within 60 calendar days of
  triggering event.

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Thank You!
Contributors Ann Rendahl Graciela Etchart Joanna
Huang Joelle Steward Roger Kouchi Christian
Ward Mike Young Yohannes Mariam