OGE Energy : PUD 2020-00021 - Responsive Testimony FEA Michael P. Gorman

BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA

	)
IN THE MATTER OF THE	)
APPLICATION OF OKLAHOMA	)
GAS AND ELECTRIC COMPANY	)
FOR AN ORDER OF THE	)
COMMISSION APPROVING A	)	CAUSE NO. PUD 202000021
RECOVERY MECHANISM FOR	)
EXPENDITURES RELATED TO	)
THE OKLAHOMA GRID	)
ENHANCEMENT PLAN	)
	)

Responsive Testimony of

Michael P. Gorman

Managing Principal

Brubaker & Associates, Inc.

On behalf of

Federal Executive Agencies

August 25, 2020

RESPONSIVE TESTIMONY OF MICHAEL P. GORMAN	PAGE 1 OF 23
CAUSE NO. PUD 202000021

Table of Contents for the
Responsive Testimony of Michael P. Gorman
	Page
I. COMPANY PROPOSAL .............................................................................................	5
II. GEP MECHANISM.....................................................................................................	7
II.A. Revised GEP Surcharge Revenue Requirement.............................................	11
II.B. Allocation and GEP Mechanism Factor ...........................................................	16
II.C. GEP Mechanism is Not Balanced Policy.........................................................	18
Qualifications of Michael P. Gorman .............................................................................	20
Direct Exhibit MPG-1 through Direct Exhibit MPG-4

RESPONSIVE TESTIMONY OF MICHAEL P. GORMAN	PAGE 2 OF 23
CAUSE NO. PUD 202000021

BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA

	)
IN THE MATTER OF THE	)
APPLICATION OF OKLAHOMA	)
GAS AND ELECTRIC COMPANY	)
FOR AN ORDER OF THE	)
COMMISSION APPROVING A	)	CAUSE NO. PUD 202000021
RECOVERY MECHANISM FOR	)
EXPENDITURES RELATED TO	)
THE OKLAHOMA GRID	)
ENHANCEMENT PLAN	)
	)

Responsive Testimony of Michael P. Gorman

1. Q PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
2. A Michael P. Gorman. My business address is 16690 Swingley Ridge Road, Suite 140,
3. Chesterfield, MO 63017.
4. Q WHAT IS YOUR OCCUPATION?
5. A I am a consultant in the field of public utility regulation and a Managing Principal with
6. the firm of Brubaker & Associates, Inc. ("BAI"), energy, economic and regulatory
7. consultants.
8. Q PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND EXPERIENCE.
9. A This information is included in Appendix A to my testimony.
10. Q ON WHOSE BEHALF ARE YOU APPEARING IN THIS PROCEEDING?
11. A I am testifying on behalf of the Federal Executive Agencies ("FEA"), consisting of
12. certain agencies of the United States government which have offices, facilities, and/or

RESPONSIVE TESTIMONY OF MICHAEL P. GORMAN	PAGE 3 OF 23
CAUSE NO. PUD 202000021

1. installations in the service area of Oklahoma Gas and Electric Company ("OG&E" or
2. "Company"), from whom they purchase electricity and energy services.
3. Q WHAT IS THE PURPOSE OF YOUR TESTIMONY?
4. A I will respond to OG&E's proposal to implemental a rider mechanism to recover
5. capital expenditures associated with the Oklahoma Grid Enhancement Plan ("GEP").
6. Q PLEASE SUMMARIZE YOUR RECOMMENDATIONS AND CONCLUSIONS.
7. A In my testimony, I address the Company's proposal for a GEP Mechanism to adjust

8	prices and bills to customers to reflect additional charges for GEP-related
9	investments. My recommendations concern the following:
10	1. OG&E has not established the need to recover additional revenues in a
11	GEP Mechanism. Indeed, based on the evidence in its filing, OG&E has
12	not established that the revenue collected in base rates will not be
13	adequate to provide it a fair opportunity to recover its GEP capital plan
14	costs.
15	2. If a GEP Mechanism is approved, I recommend several adjustments in the
16	development of revenue requirement, adjustments in the allocation of the
17	reconciliation component of the GEP Mechanism across rate classes, and
18	propose to modify the GEP Mechanism charge per class, from a kWh
19	charge, to a kW charge for classes that largely pay for distribution and
20	transmission services in demand charges.
21	3. With respect to the revenue requirement measurement for GEP
22	incremental investments, I propose the following changes:
23	a. Modify the rate base to an incremental rate base	formula by
24	tracking accumulated depreciation reserve changes over time for
25	the amount of investments recorded in the same FERC accounts
26	that the GEP investments will be recorded. This will ensure that
27	the GEP Mechanism tracks changes in the net plant in-service
28	rather than the gross plant in-service, for the FERC accounts
29	where GEP investments will be recorded.
30	b. I recommend modifying the authorized return on equity used in the
31	GEP Mechanism to track today's much lower capital market costs
32	relative to OG&E's last base rate case, and to reflect reduced cost
33	recovery risk associated with the implementation of the GEP
34	Mechanism.
	RESPONSIVE TESTIMONY OF MICHAEL P. GORMAN	PAGE 4 OF 23
	CAUSE NO. PUD 202000021