PENNSYLVANIA ELECTRIC COMPANY
FlUNG REQUIRP.MENT 1-A-1:
Penelec Exhibit CVF-1 Witness: C. V. f-'ullern
Page L ofG
" Provide a summary discussion of the rate change request, includ ing specific reasons for each increase or decrease. A I so provide a breakdown which identifies the revenue requirement value of the maj01' items generating the requested rate change."
RESPONSE:
Introduction
Pennsylvania Electric Company Statement of Reasons for Rate Changes
Pennsylvania 1-:lcctric Company (' 'Penclcc" or th l:! "Company'1) has filed a tal'iiT
supp lement and accompanying supporting data setting forth a proposed distribution base
rate increase and other proposed tariff revisions ("Rate Plan'') for approval by the
Pe1u1sylvania Pu bli c Utility Commiss ion ("Commission'').
The Rate Plan proposes rates thal would produce an increase in Penelec's ann ual
distribution revenue or $158.8 million based on a fully projected futu re test year endi 11g
December 31, 2017 and renecting the Company's proposed overall rate of return of
8.58% and a rate of return on the common equity portion of its capital structure of
11.30%. The average total-bill inc1·eases under the proposed rates vary by class of
customers, and average class increases range fi·om approximate ly 0. 15% to 32.04% te l'
customers that receive de fault serv ice from the Company. The monthly bill of a
residential dcfau It service customer us ing I ,000 kilowatt-hours ("kW h") per month
wou ld increase rrom $ 137.89 to $161.50.
Pcnclcc Exhibit CVf-1 Witness: C. V. Fullem
Page 2 of6
Principal Reasons For The Proposed Increase ln Rates
Five principal factor~ are driving the Company's need to increa':ie its distribution
rates:
I. Growth in the Compaoy's distribution rate base. One of the factors driving
Penelec's need for raLe reliefis the II% growth in the Company's rate base
attributable lo ils ongoing investment in distribution plant (including smart meter
and DSIC-e li gible investment). As shown in the table below, the Company' s
estimated rate base at December 31 , 2017, as developed in Mr. I)' Ange.lo' s
Penelec Kxhibit RAIJ-1, is expected to be approximately $165 mill1n11 greaLer
than the level renected in current rates:
Penelec - ~
~ (thousands) ·- ·-·-.. ---'---
Rate 13asc Docket No. R-20 14-242R743 $ 1,465,01 g
Rate Base RAD-1 pg. 1 line 19 $1,631,037
Increase $ 165,120
Percentage Change 11%
2. Reduction in sales. Penelec' s projected 2017 revenue at current rates is twenty
three million dollars less than the revenue requirement in the Settlement
t\greement approved by the Comm ission at Docket No. R-20 14-2428743. Sales
to the residential class as a whole are expected to decrease by 2.14% annually,
driven by a decline in the average usage per customer of approximately 2.10%
annually over the next tour years, offset slightly by increases in the number of
residential customers. The decline in the average residential usage in the
Pcnclec 8xhibit CVF- L Witness: C. V. Pullem
Page 3 or6
Company's !:>ervice area is p1·imarily due to implementation of Pennsylvania's
stale-mandated energy effic iency programs (Act 129), as well as federally
mandated energy efliciency I ighting standards.
3. Deferred Taxes. Penelec's derenecl ta.'< expense for the FPFTY is higher than the
amount rct1ectecl in its last base rate proceeding.
4. Depreciation expense associated with increased investment in plant in
service. The Company has included with this filing a new service life study
rct1ecting adoption ofthe Equal Life Group Method. The updated accrual rates,
along with the new distribution plant, result in corresponding increases in
depreciation expense.
5. lucrease in opera tions and maintenance ("O&M") expense. Implementation
oft'he Company's Commission-approved Long Termlnfrastructurc lmprovement
Plan ("LTllP") will drive higher O&M expenses as work included in the LTJIP
has an on-going O&M component in addition to the capita l component. In
addition, the Company has budgeted increases in vegetation management, facility
repairs and substation maintenance, as part of its on-going ~:: rrorts to enhance
reliabili ty. Finally, the Company continues to experience increased uncollectible
accounts expense.
Due in large part to its substantial investment in utility plant and
notwithstanding its success in containing O&M expenses, Penelcc's overall rate of return ,
at present rates, is projected to be only 3.42% for the fully projected ·future test year.
Penelec Exhibit CVF-1 Witness: C. V. Fullcm
Page 4 of6
More importantly, the indicated rt:tu1·n on common e4uity under present rates is
anticipated to he only 1.93%, whidJ is inadequate by nny reasonable standard.
Principal Components of the Rate Plan
The Company's Rate Plan consists orthe following principal components:
I. The Company is proposing a general rate im;rease to its distribution rates and
is also requesting increases in its Default Service Support Rider and llourly
Pricing Defzndt Service Rider in order to fully col lect the uncollectible
expense assoc iated with the provision ol default service, as well as the
Purchase of Receivable Program o!lered Lo hlectric Generation Suppliers. In
addition, the Company is proposing to include smart meter and DSTC
(Distribution SystciTI Improvement Charge) investmt:nt costs in base rntes.
2. The Company currently has a Stnart Meter 'l 'echnologit:s Chargt: ("SMT-C'')
Rider through which it recovers the costs or implcmenling its Smart Meter
Plan. Absent the fi ling of this base rate request, the Company's SiviT-C
Rider, which is currently set at zero, wou ld be rcinstatt:ld beginning in 2017 to
collect a budgeted $3,871,000 of smart meter costs during 2017. Hecause or
lhis filing, the Company will include its 2017 smart meter costs in base raLes
and will maintain its SMT-C Rider rate at zero. The SMT-C Rider will
remain in the Company' s tariff and will be uti! ized to recover the costs or its
Stnart Meter Plan in excess ofthc level of such costs included in base rales,
net of applicable savings.
Penelec Exhibit C YF- 1 Witn~ss : C. V. Fu llem
Page 5 of6
3. Likewise, the Company has sought the Commission's approval to im plement
a Distribution System Improvement Charge ("DSTC Rider'') for service
rendered beginning .July 1, 2016 at Docket No . .P-20 15-2508936. The
Company proposes to ro ll the projected OSTC Rider Ghargcs and costs into
base distribution rates, and lo reset the DSfC Rider to zero as of the effective
date of the base rates determined in this case. The DSIC Rider wi ll remain at
zero until Penelec has added plant through its L TTrP in excess of the claimed
amount included in its estimated December 3 1. 2017 rate base in the present
case.
C ustomer TmJJact/Bi ll Comparisons
As previous ly noted_ if Penelec·s proposed rates were fully implemented. a
residentia l customer of the Company using 1,000 kWh of electricity per month and
receiving default service wou ld pay a total monthly bill of$161 .50. That amount is
competitive with the month ly bills of default service customers LISing I ,000 kWh per
month served by the three other majOI' EDCs in Pennsylvania not affi I iated with Ptmelec, 1
which range tl·om $136.37 to $156.21 under those companies' existing rates.
Conclusion
The Rate Plan reflects the Company's need tor adequate and timely rate relief to
support the substantial amounts of add itional investment it will be required to make to
maintain and enhance rel iab ility, replace aging infrastructure, ami fu ll y implement its
Smart Mcler Plan while continuing to furn ish its customers the safe, reliab le and high-
Duquesne Lighl Company, PECO F.ucrgy Company and PPL Electric Utilities Corporation.
Penelec Exhibit CVF-1 Witness: C. V. Full em
Page 6 of6
quality electric service they have come to expect. Accordingly, it is critically important
for both the Company and its customers that the Rate Plan be approved.
Pcnclec Exhibit CVF-2 Witness: C. V. Fullem
Page 1 of 1
PENNSYLVANIA ELECTRIC COMPANY
FILING REQUIREMENT J-A-2:
" Identify the proposed witnesses for all statements and schedules of revenues, expenses, taxes, property, valuation, and the like."
RESPONSE:
Statement
Witness Designation i\rea of Testimony
C.Fullem Statement 1 Overview of Distribution Base Rate Case Filing
R. D'Angelo Statement 2 Revenue Requirements
K. Siedt Statement 3 Sales & Revenue Normalization, Rate Design, and
Proposed Changes in Tariff
T. Dolezal Statement 4 Cost of Service
J. Adams Statement 5 Cash Working Capital
L. Gi1Tord Statement 6 Unbundled Uncollectible Expense, Smart Meters
Cost Savings Baseline, and Smart Meter Revenue
Requirements
J. Spanos Statement 7 Annual and Accrued Depreciation Service Lives
P. Ahern Statement 8 Cost of Common Equity
J. Dipre Statement 9 Weighted Average Cost of Capital, Capital
Structure, and Cost of Long-Term Debt
Penelec Exhibit CVF-3 Witness: C. V. Full em
Page 1 of 1
PENNSYLVANIA ELECTRIC COMPANY
FILING REQUIREMENT I-A-3:
"Provide a single page summary table showing, at present and at proposed rates, together with references to the fi ling information, the fol lowing as claimed for the fully adjusted test year:
Revenues Operating Expenses Operating Income Rate Base Rate of Return (produced)"
RESPONSE:
Revenues
Operating Expenses
Operating Income
Rate Base
Rate of Return (produced)
Total Distribution At Present Rates*
Jurisdictional ($millions)
(Exhibit RAD-2 Page 1, Col. 7)
$ 381
$ 325
$ 56
$ 1,631
3.42%
Total Distribution At Proposed Rates*
Jurisdictional ($ millions)
(Exhibit RAD-2 Page 3, col. 25)
$ 534
$ 394
$ 140
$ 1,631
8.58%
*There is an increase in the total revenue requirements because of changes in the Default Service Support Rider of$ and Universal Service Cost Rider of $5,835.
PENNSYL V ANlA ELECTRlC COMPANY
FILING REQUlREMENT l-B-1:
Penelec Exhibit CVF-4 Witness: C. V. Fullem
Page 1 of2
"Provide a corporate history including the dates of original incorporation, subsequent mergers and acquisitions. Indicate all counties, cities and other govemmental subdivisions to which service is provided, including service areas outside this Commonwealth, and the total nwuber of customers or billed units in the areas served."
RESPONSE:
Pennsylvania Electric Company ("Penelec" or the "Company"), a Pennsylvania corporation, traces its roots back to 1880, when a group of Johnstown businessmen indicated their intent to form an electric light company. Between 1901 and 1925, a series of various mergers and acquisitions led to the formation of what became Penn Public Service Corporation. In 1927, the name was changed to Pennsylvania Electric Company. During the next few years many small companies were acqujred and merged with Penelec, and in 1944, the trade name "Penelec" was adopted.
1n 1946, General Public Utilities, Inc. (later "GPU Inc.'') was created, forming the umbrella under which Metropolitan Edison Company, Penelec and Jersey Central Power & Light Company conducted business.
lo 1956, Penelec's service territory was increased by more than one-tbjrd through a merger with Northern Pennsylvania Power Company ("North Penn"). As lessee of a subsidiary, The Waverly Electric Light and Power Company, North Penn also served the ViiJage of Waverly, New York and vicinity. Brockway Light, Heat & Power Company and Colver Electric companies were added in 1958. Three other additions to the Penelec system included Waterford Electtic Company in 1976, Rockingham Light, Heat & Power Company and Windber Electric Corporation in J 978.
On November 7, 2001, GPU merged with FirstEnergy Corp. Since that merger, Penelec has been a wholly owned subsidiary ofFirstEnergy Corp.
The Company's principal business is the transmission, distribution and sale of electticity in northern Pennsylvania and the Waverly District ofNew York. Penelec is affiliated with three other Pennsylvania electric distribution utilities (Metropolitan Edison Company, Pennsylvania Power Company and West Penn Power Company), as well as six additional sister distribution utilities in New Jersey, Ohio, Maryland and West Virginia. Other affiliates include FirstEnergy Service Company (a service company) and various regulated transmission and unregulated competitive energy companies.
Penelec Exhibit CVF-4 Witness: C. V. Fullem
Page 2 of2
The Company provides retail service to approximately 590,000 customers in all or portions of thirty-three counties in the northern and central parts of Pennsylvania. The municipalities which the Company serves are listed in the Company's filed Electric Service Tariff, Electric Pa. P.U.C. No. 81.
PA 1,000 kWh Residential Default Service Bill Comparison
$180.00
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$-
Met-Ed Penelec Penn Power West Penn
• Customer Charge D Distribution Charge • Total Rider Charge D Total Generation Charge
PPL
Penelec Exhibit CVF-5
Witness: Charles V. Fullem
Page 1 of 2
DUO
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$-
Met-Ed
PA 1 ,000 kWh Residential Delivery Bill Comparison
Penelec Penn Power PECO
Penelec Exhibit CVF-5 Witness: Charles V. Fullem
Page 2 of 2
PPL DUO I Other PA Avg
a Customer Charge DDistribution Charge •Total Rider Charge a Distribution System Improvement
FirstEnergy Web Changes
Penelec Exhibit CVF-6 Witness: C. V. Fullem
Page 1 of 4
Based on PA PUC Requirements for Meter Reading
Order:
"The Company shall revise its website and customer education materials within ninety days of
the Final Order in this proceeding to explicitly inform its customers, in plain language, of the
Company's standard policy to issue bills based on actual meter readings every other
month. The Company's website shall also explain, in plain language, that customers may
provide actual readings in months when the Company would provide an estimated bill and the
procedure for self-readings."
Before July 1, 2015
1. Meter Reading (Help)
www.firstenergycorp.com/content/customer/my account/Submit Meter Reading.html
Met-Ed" AFTS!I'ffl'gy~~
Help
Managing My Account
Billing & Payments
Billing & Payment Options
About Your Bfll
Meter Reading
Locating Meter Info
Reading Load Meter
Reading Meter
View fv1eter Reading Schedules
Rates and Tariffs
Cred!tPolky
Bill Inserts
Bil! Explanation of Terms
Assistance & Service Programs
Making Setvice Requests
Outages
Safety
Saving Energy
Communication Tools
Pennsylvania Smart Meters
Contact Center
Useful Brochures & Fonns
Help • Billing & Payments • Meter Reading
Meter
At times, severe weather conditions or other unforeseen problems might prevent us from reading your meter. When this
happens, your electricity usage is estimated based on your previous electric bills. If you do not want to receive an estimated
bill, you can enter your meter reading online.
We organize meter reading schedules by cycles. To know when your meter is scheduled to be read, look for the meter
reading cycle code on your bill, and find the corresponding code to identify when your meter is scheduled to be read.
Please be aware that your meter might be read one day before or after the scheduled meter read date if the meter reader
needs to adjust the schedule because of weather, holidays, vacation, or sick days.
Still need help?
Contact us with your questions.
Want a convenient and easy way to be reminded when to submit your meter reading?
If you register to receive text and/or email notifications, you will receive monthly alerts letting you know when to submit your
meter reading. In addition, you can choose to receive alerts for:
" Restoration updates when you have reported an outage
" Notifications of scheduled power outages
" Severe weather alerts in advance of storms
" Billing reminders, including alerts when a new bill is available, a payment is due, a payment has been posted, or no payment has been received
"' Learn more
~ ,iqn nr lor alerts and text messaging. Text REG to 644487 {LIGHTS) f to get started I "
Learn More e '
Penelec Exhibit CVF-6 Witness: C. V. Fullem
Page 2 of 4
2. Submit Meter Reading (My Account)
www.firstenergvcorp.com/content/cus!Qmer/my account&ld!!lDl:tJ~L~!er Reading.html
Account
Pay My Sill
Bill
View Paymem History
View Accounts
;.'\na~yze Usnge
When Should You Submit Your Meter fleadi11!f?
You may choose to submit your meh:n !eddin.g
'y'Our b!ll dunflfJ trus time ·vve 'Nil! use ,·our ptOvK!-ed !f :loU enter a re2.d1ng L'l.dSJde o~ th1s
Account
Name
J'\ddress
1000838349234, 123 Address John Smith
123 Street Greensburg, PA 15601
w1thm me dates
Severe weather cortdlHOot. or a-ccess prob!erns can preient -us from re2d1ng your electnt meter. lf th!S happens. v,;e tssue an e-stimated bill that is based on your usag-e history. YotJr account
reading
he afJtonHFcall't' adjusted '.uhen v;e obtain an actua!
If you havf; received an estimated blll, you may use the forrn beimv to submit your ovm meter reading and you may receive an
adJusted bdl. In order to pro•1icle a read1ng for your next bill, you must wait 18 day·s from the date of )'our last bill•nq If we do not obtain a reading ourse~ves, V\ie 'Ni!! use your reading to calculate the next
1. Meter Reading (Help)
After July 1, 2015
Penelec Exhibit CVF-6 Witness: C. V. Fullem
Page 3 of 4
www.firstenergycorp.com/content/customer/my account/Submit Meter Reading.html
We provide electricity to millions of customers and strive to deliver accurate bills
eve!)' month. However, if you feel you've received a bill that is not accurate, you
can read your meter and compare that reading with the one on your bilL
To submit your reading, you must enter it within a three-day window, which is listed
under the "Messages" section on your bill, the month before a scheduled
estimation. We will use your actual supplied reading to calculate your bill only if it
is entered within this window. If you enter a reading outside of this window, we will
prorate your bill using the reading you provided.
Urrpiarmed Estimated Meter Readings
At times, severe weather conditions or other unforeseen circumstances might
prevent us from reading your meter. On the months your meter is not read. your
bill is estimated. You can submit a meter reading online or by calling our Contact
Center if you prefer not to receive an estimated bill.
Help
Managing My Account
Billing & Payments
BiiHr.g & Payment Options
About Your Bill
VAeter Reading
Locating Meter Info
Reading Load Meter
Reading Meter
View Meter Reading Schedules
Rates and Tariffs
Credit Policy
BiU Inserts
Bill b:planation of Terms
,.U..ssista n ce & Service Programs
Making Service Requests
Outages
Safety
Saving Energy
Communication Tools
Pennsylvania Smart Meters
Contact Center
Useful Brochures & Forms
Help • Billin,
Meter R~
Our meter 1
depending 1
shows whe·
Ohio Edis.ion
The Hluminati
Toledo Edisk
Met-Ed
Penelec
Penn Power
West Penn F
Jersety Cent
Mon Power
PotomacEdil
Potomac Ed!!
On the mor
based on d
between yo
time your n
After there
compares)
usage, the
associates.
another rea
Penelec Exhibit CVF-6 Witness: C. V. Fullem
Page 4 of 4
2. Submit Meter Reading (My Account}
www.firstenergy_~~~fcustQ!I!ErLD::tL.StiT9UQtfSubmit l\lleter Reading.htrn.!
My Account
Pay My Bill
View My Blll
View Payment History
Vie~JV Usage History
View Accounts
Manage My Account
Payment & Sllling Options
Subrrlit
Itemized Account Statement
View Bill inserts
Analyze Usage
Search
LlJ'f\ccount v- .Submit Ueter FZeadfng
\!Vest Penn Pmr;er issues bills based on actual meter readings every other rnonth (bimonthly}- On the months your meter is
not read_ your bill rs estimated. You can submit a meter reading online or by calling our Contact Center if you prefer not to
receive an estimated bi!L
To submit your reading. you must enter it within a three~day 11vinclow. which is listed on your bill the- month before a scheduled
estimation. VVe will use your actual supplied reading to calculate your bill only if it is entered ~vith!n this windo-w. If you ente1
a reading outside of this 1,vindow. vve will prorate your bill using the reading you provided
Account 1 000'.!3346235. 4113 CYPRESS ST ~
Name RICHARD A FRY
Address 4113 CYPRESS ST BUTLER PA 16001
Severe weather conditions or access problems can prevent us frorn reading your electric meter. If this happens, we issue an
estimated bill that is based on your usage history. Your account will be automatically adjusted when 'Ne obtain an actual
readin(j.
Hol}/ to Read Your Meter
Meter Reading VVork Schedule
About Your Bill