OGE Energy : PUD 2021-00164 - Direct Testimony of William Wai

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	)
AUTHORIZING APPLICANT TO MODIFY ITS	) CAUSE NO. PUD 202100164
RATES, CHARGES, AND TARIFFS FOR RETAIL	)
ELECTRIC SERVICE IN OKLAHOMA	)

Direct Testimony

of

William H. Wai

on behalf of

Oklahoma Gas and Electric Company

December 30, 2021

Direct Testimony of William H. Wai	Page 1 of 37
Cause No. PUD 202100164

TABLE OF CONTENTS
QUALIFICATIONS, EXPERIENCE AND PURPOSE............................................................	3
INTRODUCTION - RATE DESIGN..........................................................................................	4
Developing Proposed Rates ........................................................................................................	4
Unit Costs ...................................................................................................................................	6
Marginal Costs ............................................................................................................................	7
Changes to Existing Rates ..........................................................................................................	7
CURRENT VERSUS PROPOSED RATES...............................................................................	8
Overall Modification to Rates.....................................................................................................	8
Residential ..................................................................................................................................	8
General Service.........................................................................................................................	12
Time-of-Use ("TOU") ..............................................................................................................	13
Variable Peak Pricing ("VPP").................................................................................................	15
Public Schools...........................................................................................................................	17
Oil & Gas Producers ("OGP")..................................................................................................	19
Municipal Pumping ("PM")......................................................................................................	20
Large Power & Light ("LPL") TOU.........................................................................................	21
LPL Standard ............................................................................................................................	24
Municipal Lighting ("LM"), Outdoor Security Lighting ("OSL"), and LED ..........................	25
PROOF OF REVENUE .............................................................................................................	25
ELECTRIC VEHICLE ("EV") TOU RATE ...........................................................................	27
ENERGIZING RENEWABLE CONNECTIONS...................................................................	28
Existing OG&E Renewable Programs......................................................................................	28
Large Customer Renewable Desires .........................................................................................	28
Energizing Renewable Connections ("ERC" or "Program") ...................................................	31
CONCLUSION ...........................................................................................................................	37
TABLE INDEX
Table 1. Comparison of Proposed Residential Prices...............................................................	8
Table 3. Comparison of GS Current and Proposed Rates .....................................................	12
Table 4. Comparison of TOU Rates .........................................................................................	13
Table 5. Comparison of VPP Rates ..........................................................................................	15
Table 6. Comparison of current and proposed Public Schools-SM Rates............................	18
Table 7. Comparison of current and proposed Public Schools-L Rates...............................	18
Table 8. Comparison of current and proposed PL SL-5 Rates .............................................	20
Table 9. Comparison of current and proposed PL-TOUSL-5 Rates ...................................	21
Table 10. Comparison of current and proposed LPL Rates ..................................................	22
Table 11. Comparison of current and proposed LPL Standard Rates .................................	25

Direct Testimony of William H. Wai	Page 2 of 37
Cause No. PUD 202100164

William H. Wai

Direct Testimony

QUALIFICATIONS, EXPERIENCE AND PURPOSE

1. Q. Please state your name and business address.
2. A. My name is William H. Wai. My business address is 321 North Harvey, Oklahoma City,

3		Oklahoma 73102.
4
5	Q.	By whom are you employed and in what capacity?
6	A.	I am currently employed by Oklahoma Gas and Electric Company ("OG&E" or
7		"Company") as Manager of Pricing. I am responsible for retail electricity pricing, rate
8		design and tariffs. In that capacity, I direct and supervise the Company's pricing team that
9		develops and supports pricing structures, charges and service provisions of tariffs, product
10		platforms, pilot programs and other retail	electricity pricing initiatives. The pricing
11		department collects customer usage and revenue data, analyzes various cost information,
12		researches different regulated retail electricity pricing practices, and studies the impacts of
13		OG&E's pricing practices on customers.	My responsibilities also include overseeing
14		implementation of the Company's retail electricity rate and pricing plans.
15

1. Q. Please summarize your educational background and professional qualifications.
2. A. I earned my Bachelor of Science in Economics from Guangdong Institute for Nationals in

18	Guangdong, China.	I have a Master of Business Administration from the University of
19	Oklahoma and a Master of Science in Risk Management (Finance) from the Stern School
20	of Business at New York University. Prior to assuming my current position in OG&E, I
21	worked with the Company in various positions in Investor Relations, Corporate Risk, and
22	Structured Services.	Within	Structured Services, I was initially hired as Senior
23	Quantitative Analyst and consequently promoted to be the Director of the department.
24	During the 12 years I worked with the Structured Services group, my responsibilities
25	included valuating and pricing complex commercial transactions across various financial
26	engineering frameworks and quantifying various financial risk measures in the Company's
27	business management efforts.	I am a Financial Risk Manager ("FRM") and an Energy
28	Risk Professional ("ERP") both certified by the Global Association of Risk Professionals
	Direct Testimony of William H. Wai	Page 3 of 37
	Cause No. PUD 202100164

1	("GARP"). I also hold the Chartered Financial Analyst ("CFA") designation. I am a
2	member of the Global Association of Risk Professionals ("GARP"), and a member of the
3	Chartered Financial Analyst ("CFA") Oklahoma Society.
4

5 Q. Have you previously filed testimony before the Oklahoma Corporation Commission

6		("Commission")?
7	A.	Yes. I testified on behalf of OG&E in Cause Nos. PUD 201500273, 201700496,
8		201800140, 201900065, and 202100072 before the Commission. I have also submitted
9		testimony before the Arkansas Public Service Commission in Docket Nos. 16-052-U, 20-
10		037-U, and 21-050-TF.
11

1. Q. What is the purpose of your testimony?
2. A. The purpose of my testimony is to:

14	• Describe the process of developing the rates proposed by the Company in this
15	application;
16	• Show comparisons between the current and proposed rates and discuss customer
17	impacts associated with these changes and updates;
18	• Introduce and support the Electric Vehicle rate and the Energizing Renewable
19	Connections ("ERC") program; and,
20	• Sponsor OG&E's Proof of Revenue, Schedule M and associated workpapers, as
21	well as Schedule N, the proposed tariffs.
22
23	INTRODUCTION - RATE DESIGN
24	Developing Proposed Rates

25 Q. Please generally describe how the Company develops the rates requested in a general

26		rate case.
27	A.	The major steps in updating existing rates or developing new rates are as follows:
28		1) Develop pro forma year data - actual test year data (revenues and billing
29		determinants1) is collected and then adjusted to design rates consistent with the revenues
30		and expenses which are expected to occur in a normal year of operations. The result of
31		these normalizing adjustments is typically referred to as the pro forma year data. The
32		specific revenue and billing determinants adjustments made for the test year used in this

1 Billing determinants are customers' kWh usage, kW demand, and customer count.

Direct Testimony of William H. Wai	Page 4 of 37
Cause No. PUD 202100164

1	application are presented in Schedule H-2 of this filing and addressed in more detail by
2	OG&E Witness Jeremy K. Schwartz.
3	2) Determination of the pro forma year revenue from current rates - annual revenue
4	is calculated by applying the rates approved in the Company's previous rate case to the
5	billing determinants contained within the pro forma year data. The Proof of Revenue
6	Schedule M-4, which I sponsor, includes the calculation of current rate revenue for each
7	rate class.
8	3) Cost of Service Study ("COSS") - the pro forma year data along with other inputs
9	are used in the development of the COSS as described in the direct testimony of OG&E
10	witness Gwin Cash. The resulting COSS serves as the starting point for rate design.
11	4) Rate design - the cost of providing service calculated in the COSS is compared
12	to the pro forma revenue from current rates and the differential identifies a revenue
13	deficiency or surplus to be addressed when rates are determined. Proposed rates are then
14	designed to recover the appropriate revenue. The COSS results identify the revenue
15	requirement by class and then may be adjusted through the revenue allocation process.
16	OG&E witness Bryan J. Scott describes the revenue allocation process and presents those
17	results in his Direct Testimony.
18	5) Proof of revenue - the proposed rates are used to calculate the proposed revenue
19	for each rate class. Schedule M-4 shows these calculations, including, the sum of the
20	revenue requested from each rate classes, plus other listed revenue, equaling the total
21	OG&E requested revenue.
22

1. Q. What are the Company's objectives when designing rates?
2. A. The Company's rate design is driven by the objectives to:

25	• Promote efficient consumption of energy;
26	•	Provide pricing product choices that meet customers' pricing preferences; and,
27	•	Recover authorized revenue requirements.
28

1. Q. How does OG&E develop the proposed rates?
2. A. The proposed rates are designed so that proposed revenues in a normal year will match the

31	pro forma revenue requirement, i.e. any deficiency or surplus has been incorporated. Major
	Direct Testimony of William H. Wai	Page 5 of 37
	Cause No. PUD 202100164