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[00:00:02]

AND WE'RE ACTUALLY

[Energy Rate Proceedings]

ON THE RECORD NOW.

OKAY.

WE WENT ON THE RECORD.

THANK YOU.

SORRY.

OH, THAT'S FINE.

IT'S FINE TO HAVE THIS ON THE RECORD.

UM, NOW WE DON'T NEED ANY OF THEM FOR MS. .

OKAY.

SO IT SOUNDS LIKE, UH, THE PARTIES WANT A LITTLE BIT MORE TIME TO REVIEW S CPC 12 THROUGH 16.

THAT'S FINE.

AND MR. BRAZIL, IF YOU'LL JUST REMIND ME WHEN YOU'RE READY, WE'LL ADDRESS THEM VERY WELL.

ALL RIGHT.

THANK YOU.

ALSO, I RECEIVED A PACKET FROM YOU ALL OF 13, 14, 15, 16, BUT NOT 12.

YOU HAVE TO HAVE A COPY OF 12.

I TRUST THAT IT'S A DISCOVERY RESPONSE FROM US.

I'M LIKELY UNLIKELY TO OBJECT, BUT I DON'T WANT TO HAVE IT.

LET ME SEE IF I CAN FIND A COPY OF IT.

I THOUGHT I PUT ONE UP THERE, BUT I'LL FIND YOU ONE RIGHT AT SEE RESPONSE TO TWO DASH THREE, BUT I'LL SEE IF I CAN FIND A COPY OF THEIR, YOUR HONOR.

UM, ICA HAS ONE MORE CROSS EXHIBIT IF YOU'RE TRYING TO ADDRESS EXHIBITS.

YES.

I ALWAYS LIKE TO DO THOSE IN THE MORNING BEFORE WE GET STARTED.

SO THEY'LL SLOW DOWN AND WE'LL SEE, WE HAVE ONE, IT IT'S ICA 11.

IT WAS DISTRIBUTED LAST NIGHT.

IT'S AN EXCERPT FROM THE 1992 NAVY ROUTE MANUAL.

ALL RIGHT.

HAVE FOLKS HAD AN OPPORTUNITY TO TAKE A LOOK AT ICA 11? OKAY.

DOES ANYONE HAVE AN OBJECTION TO THE ADMISSION OF ICA 11? ICA 11 IS ADMITTED.

YES, YOUR HONOR.

YES.

UH, I'VE HAD A MOMENT TO LOOK AT CPC, UH, 16, AND I WOULD OBJECT TO IT JUST ON RELEVANCE GROUNDS.

IF YOU LOOK AT THE DOCUMENT IT'S REFERENCING, UM, A YEAR BUILT ON A 27 20 17 FACILITY.

AND SO I JUST DON'T SEE THAT BEING WITHIN THE SCOPE OF THIS RATE CASE.

RIGHT.

DO YOU HAVE ANY OBJECT? DOES ANYONE HAVE OBJECTIONS THROUGH 12 TO 12 THROUGH 15? AGAIN, YOUR HONOR.

I HAVEN'T SEEN 12 THROUGH 15, SO I'D LIKE TO HOLD BACK ON THAT ONE.

I DO AT LEAST HAVE A COPY OF 16 JUST TO RAISE THE OBJECTION ON IT NOW.

OKAY.

AND MR. BRAZELLE, THERE'S BEEN AN OBJECTION TO 16.

ANYONE ELSE HAVE AN OBJECTION TO 16? SO WE CAN AT LEAST DEAL WITH THAT ONE, BUT DO YOU NEED MORE TIME? WE, WE JOINED THEIR DATA BOUNDARIES.

OBJECTION.

ALL RIGHT.

I'LL TELL YOU WHAT, LET'S DEAL WITH THIS AT THE BREAK.

I'D LIKE TO GET MR. CONTE GOING AND GET OUR WITNESSES ROLLING.

SO, UM, JUST TO REITERATE C 19 THROUGH 23 HAD BEEN ADMITTED TO WR, PARDON ME? 23, 22 ARE ADMITTED.

ICA 11 IS ADMITTED AND THEN WE'LL TAKE UP AAICPC, UH, 12, 3 16 LATER.

UM, MR. HALLMARK, ARE YOU READY TO BEGIN YOUR PRESENTATION ACTUALLY, YOUR HONOR, WE HAD AN EXHIBIT AS WELL.

YES, I E 10.

OKAY.

UM, WHICH WE'VE PROVIDED TO PARTIES AND PUT UP THE FRONT, BUT PERHAPS YOU DON'T HAVE A CAR.

YEAH, I DON'T, I DON'T HAVE A COPY SITTING UP HERE, BUT UNLESS, UNLESS THERE'S AN OBJECTION, WE JUST GET THEM ADMITTED.

DOES ANYONE HAVE AN OBJECTION TO ? NO, YOUR HONOR.

MR. BRAZIL, WHAT IS IT? IT'S MR. JOHNSON'S RESPONSE TO ONE OF OUR DISCOVERY REQUESTS.

UH, YOU SHUT HER OUT WITH MR. BRAZIL.

OKAY.

THANK YOU THERE, MR. BRAZIL INDICATED THAT HE HAS NO OBJECTION, AUSTIN ENERGY 10 IS ADMITTED.

THANK YOU.

IT WAS ALL RIGHT.

ANY OTHER EXHIBITS BEFORE WE GET STARTED WITH TESTIMONY OR HOUSEKEEPING MATTERS.

OKAY.

MR. HALLMARK, WHENEVER YOU'RE READY.

THANK YOU, YOUR HONOR.

UP IN HALLMARK FOR TIC, UH, JUST TO MOVE THIS PROCESS ALONG, I'LL SIMPLY STAY THE TIBC IS SUBMITTED TESTIMONY IN THIS PROCEEDING FROM MS AND MR. POLLOCK ADDRESSES REVENUE REQUIREMENT ISSUES.

MR. POLLOCK ADDRESSES REVENUE REQUIREMENT ISSUES AS WELL, BUT MOSTLY COST ALLOCATION RATE DESIGN ISSUES.

UH, AND WE REQUEST THAT THEIR RECOMMENDATIONS BE ADOPTED.

AND WITH THAT, I WILL TEND TO MISS LACONTE FOR CROSS-EXAMINATION.

ALRIGHT, GOOD MORNING, MR. .

CAN YOU HEAR, UH, CAN YOU HEAR US OKAY.

UH, GOOD MORNING.

YES, I HEAR EVERYONE JUST FINE.

GREAT, GOOD.

UM, LET'S SEE.

TWO W R

[00:05:02]

QUESTIONS FROM MS. .

OKAY.

NOPE.

LET THE RECORD REFLECT NO QUESTIONS FROM TWO WR.

IS MR. ROBBINS PRESENT? NO, HE'S NOT GOING TO BE HERE TODAY.

THAT'S RIGHT.

UH, DATA FOUNDRY, NO QUESTIONS, YOUR HONOR.

HER NO QUESTIONS, YOUR HONOR.

SSC, UH, S CPC, NO QUESTIONS AND XP.

NO QUESTIONS, YOUR HONOR.

ICA.

NO QUESTIONS BELOW MISSOULA COUNTY.

YEAH, NO QUESTIONS THOUGH.

IS THAT, IS THAT CORRECT FROM ICA? THAT IS CORRECT.

OKAY, THANK YOU.

SORRY ABOUT THAT.

UM, AUSTIN ENERGY.

THANK YOU, YOUR HONOR.

I HAVE SOME QUESTIONS.

GOOD MORNING, MISSILE CONTACT.

GOOD MORNING.

YOU CAN HEAR ME ADEQUATELY.

ALL RIGHT.

NOW, AS I UNDERSTAND IT, AND YOUR TESTIMONY, YOU RECOMMENDED AUSTIN ENERGY REDUCED THE GENERAL FUND TRANSFER BY $11 MILLION TO 110 MILLION.

IS THAT CORRECT? THAT'S CORRECT.

AND YOU ALSO RECOMMEND THAT THERE'LL BE AN INCREASE IN DEBT FUNDING TO 60%.

IS THAT ALSO CORRECT? YES, THAT'S CORRECT.

AND THESE ADJUSTMENTS RESULT IN A DEBT SERVICE COVERAGE RATIO OF ONE, 2.3 AND THEY WERE, THAT WOULD, AND THEN THEY WOULD CUMULATIVELY REDUCE AUSTIN ENERGY'S REVENUE REQUIREMENT BY ABOUT $20 MILLION.

IS THAT RIGHT? THAT'S RIGHT.

COULD YOU TELL ME HOW THE GENERAL FUND TRANSFERS SET FOR OFTEN ENERGY? UH, IT'S MY UNDERSTANDING THAT THE GENERAL FUND TRANSFER IS BASED ON THREE YEAR AVERAGE OF, UH, OPERATING REVENUES AND THEN UP TO 12% OF THAT IS HOW YOU CALCULATE THE GFP.

AND SO, UH, AND WHAT IS THE BASIS OF THAT UNDERSTANDING, UH, A FINANCIAL POLICIES.

ALL RIGHT.

UH, AND IT'S CITY COUNCIL THAT, UH, APPROVES HOW THE GFT IS GOING TO BE SET THROUGH THE ADOPTION OF THAT POLICY.

IS THAT CORRECT? UH, THAT'S MY UNDERSTANDING, YES.

ALL RIGHT.

AND THAT POLICY IS CONTAINED IN A FINANCIAL POLICY 13.

IS THAT RIGHT? UM, IT'S CONTAINED IN THE FINANCIAL POLICY THAT WAS PROVIDED IN YOUR RATE FUNDING PACKAGE.

I DON'T KNOW THE NUMBER OF IT.

I THINK IT WAS APPENDIX A, B, B AS IN BOY.

YES.

OKAY.

UH, AND THE GENERAL FUND TRANSFER IS AN EXPENSE THAT AUSTIN ENERGY PAYS TO THE CITY.

IS THAT RIGHT? YES.

THAT'S MY UNDERSTANDING.

AND YOU CALCULATED THE GFT AS A PERCENT OF OPERATING REVENUES FOR FISCAL YEARS, 18, 19 AND 20.

IS THAT RIGHT? THAT'S RIGHT.

AND, UH, APPLYING THAT, UH, METHOD YOU, UH, CALCULATE THE, THE GFT AVERAGE 7.8% OF OPERATING REVENUES OVER THESE THREE YEARS.

IS THAT ALSO CORRECT? UM, YES I DID.

AND THAT WAS BASED ON A RESPONSE I RECEIVED FROM AA THAT SHOWED THE TOTAL OPERATING REVENUE AND THE HISTORICAL GFP.

AND IN YOUR CALCULATION INCLUDED THE POWER SUPPLY ADJUSTMENT COSTS AND NON ELECTRIC COSTS.

IS THAT RIGHT? YES.

THAT WAS INCLUDED IN THE DISCOVERY RESPONSE I RECEIVED.

ALL RIGHT.

BUT, UH, FINANCIAL POLICY THAT YOU REFERENCED EARLIER, THE GFT IS BASED ON REVENUES AND IT EXPRESSIVELY EXCLUDES POWER SUPPLY, ADJUSTMENT COSTS AND NON ELECTRIC COST.

DOES IT NOT? YES, THAT'S CORRECT.

WE ASKED HER TO FOLLOW UP QUESTION AND, UH, A PROVIDER THAT, AND PROVIDED WHAT THE PERCENTAGE OF THE GMT IS OF THAT EXCAVATING POWER SUPPLY COSTS.

AND IT'S HIGHER THAN THE 7.8% THEN THAT YOU CALCULATED.

OF COURSE, THAT'S CORRECT.

OKAY.

NOW YOU TESTIFIED THAT THE AMOUNT OF THE INTERNALLY GENERATED FUNDS SHOULD BE REDUCED TO REFLECT A 60% DEBT AND 40% CASH FUNDING.

IS THAT RIGHT? THAT'S RIGHT.

AND I BELIEVE YOU SAY THAT THAT WOULD ALLOW A, TO TAKE ADVANTAGE OF MORE DEBT, WHICH WOULD REDUCE COSTS TO CUSTOMERS IN YOUR OPINION.

THAT'S RIGHT.

IT WOULD RESULT IN AN ADDITIONAL $15 MILLION OF DEBT THAT A, WE NEED TO ISSUE THE COVER.

IT'S A CONSTRUCT AND FUNDS NOW, CITY COUNCIL APPROVED, UH, A POLICY THAT DICTATES OFTEN ENERGY TO IMPLEMENT A POLICY OF 50% FUNDING OF, UH, IGF FC.

RIGHT? UH THAT'S YES.

THAT'S MY UNDERSTANDING.

AND SO TO ADOPT YOUR RECOMMENDATION COUNCIL WOULD HAVE TO EITHER REJECT OR OVERTURN THAT POLICY IN SOME FASHION.

IS THAT RIGHT? YES.

MY UNDERSTANDING THAT THE COUNCIL HAS

[00:10:01]

THE DISCRETION TO DO THAT.

ALL RIGHT.

AND DID YOU HEAR MR. DOMBROSKI TESTIFY YESTERDAY ON THESE ISSUES? I DID.

AND YOU HEARD HIM TESTIFY THAT THERE WOULD BE OTHER RAMIFICATIONS ASSOCIATED WITH INCREASING DEBT AS WELL? UH, YES.

YOU'LL HAVE TO REFRESH MY MEMORY ON EXACTLY WHAT HE STATED.

UH, YOU'RE AWARE THAT TWO WEEKS AGO, A FITCH CREDITING RATING, FITCH CREDIT RATINGS, DOWNGRADED A E FROM AA TO AA MINUS, ARE YOU NOT? YES, I AM AWARE OF THAT.

AND HAVE YOU HAD A CHANCE TO READ THE PUBLIC STATEMENTS ASSOCIATED WITH THAT DOWNGRADE? UH, I WAS ABLE TO READ, UH, THE FITCH REPORT THAT YOU PROVIDED AND REBUTTAL TESTIMONY.

ALL RIGHT.

AND SO YOU'RE AWARE THEN THAT FITCH AND, UH, ISSUING ITS DOWNGRADE STATED THAT, UH, THE, THE BASIS AMONG OTHER REASONS WAS THE AUSTIN ENERGY'S ELEVATED LEVERAGE.

YEAH, THAT'S MY UNDERSTANDING, BUT THAT $15 MILLION THAT I'M PROPOSING IS DIMINIMOUS COMPARED TO AUSTIN ENERGY'S TOTAL, UH, OUTSTANDING DEBT THAT YOU HAVE NOW, WHICH IS ABOUT $2.1 BILLION.

AND I UNDERSTAND THAT THAT'S YOUR OPINION, BUT, BUT, UH, THE CREDIT RATING, UH, WAS ALREADY CONCERNED ABOUT THE ELEVATED, UH, LEVERAGE THAT ALL ENERGY HAS AND YOUR RECOMMENDATION WOULD INCREASE THAT EVEN FURTHER.

SO IT'S SLIGHTLY INCREASE IT.

ALL RIGHT.

UM, AND FITCH ALSO NOTED THAT THAT ONE OF THE CONSEQUENCES OF THAT INCREASE LEVERAGE WAS THAT IT HAS STEADILY INCREASED IN THE PAST THREE YEARS AND THAT THERE WERE WEAKER OPERATING CASH FLOWS, PRIMARILY DRIVEN BY LOWER BASE RATE REVENUES, UH, THAT ALSO CONTRIBUTED TO THE UTILITY FOR RISING LEVERAGE.

UH, YOU REVIEWED THAT AS WELL.

YES, I SAW THAT.

UH, AND THAT ASSUMED THAT THE FULL AMOUNT THAT IS BEING REQUESTED BY AA IN THIS CASE IS ADOPTED, RIGHT.

THAT'S MY UNDERSTANDING.

YES.

AND THAT, UH, THAT DOWNGRADE WAS ASSUMING A $48 MILLION INCREASE, WHICH IS THE AMOUNT AUSTIN ENERGY WAS REQUESTING AND ITS DIRECT CASE.

CORRECT? YES.

UH, AND ARE YOU AWARE THAT THAT'S NOT GOING TO OCCUR? YES.

IT'S MY UNDERSTANDING OF REBUTTAL TESTIMONY.

YOU REDUCED YOUR REVENUE REQUIREMENT INCREASE.

ALRIGHT.

NOW YOU ARE YOU THAT REDUCING THE GFT AND CASH FUNDING TO 40% WILL RESULT IN A DSE OF, I BELIEVE YOU SAID EARLIER 2.3, IS THAT RIGHT? YES.

AND YOU STATE THAT THAT'S ABOVE A TARGET, CORRECT? YES.

AND YOUR FINANCIAL POLICY.

IT'S MY UNDERSTANDING THAT EACH TARGET A MINIMUM OF 2.0 DEBT SERVICE COVERAGE RATIO AND WHAT IS DEBT SERVICE, COVERAGE RATIO, UH, IT'S AMOUNT OF FUNDS THAT ARE AVAILABLE TO FUND YOUR DEBT SERVICE.

SO IT'S THE FUNDS AVAILABLE, DIVIDED BY THE DEBT SERVICE COSTS AND DOES AUSTIN ENERGY, UH, USE THE DEBT SERVICE COVERAGE TO SET RATES? UH, IT'S MY UNDERSTANDING THAT AUSTIN ENERGY SETS ITS RAYS AND THEN THE DEBT SERVICE COVERAGE, AS A RESULT OF THE RATES THAT YOU SAID, IT'S NOT A TARGET THAT YOU SET AND THEN DETERMINE WHAT YOUR REVENUE REQUIREMENT WOULD BE, WHAT BE BASED ON THAT TARGET.

ALL RIGHT.

SO I'M SORRY.

WERE YOU SAYING SOMETHING ELSE? NO.

EXCUSE ME.

UM, SO THEY SET RATES USING THE CASH FLOW METHOD.

IS THAT RIGHT? YES.

THAT'S MY UNDERSTANDING, YES.

ALL RIGHT.

AND SO I THINK YOU JUST MAY HAVE SAID THIS, BUT JUST TO CLARIFY THE RECORD.

AND SO THE DEBT SERVICE COVERAGE, ISN'T, UH, A DRIVER OF RATES, UH, FOR OFTEN ENERGY, THE CASHFLOW METHOD IS NO, IT DOES NOT.

OKAY.

NOW YOUR SUGGESTION IS TO REMOVE NON-ELECTRIC REVENUES AND EXPENSES FROM THE CALCULATION OF THE DSE, RIGHT? YES, THAT'S CORRECT.

AND YOU ARGUE THAT AES RETAIL, ELECTRIC CUSTOMERS SHOULD NOT BE RESPONSIBLE FOR PROVIDING A RETURN ON ITS, I BELIEVE DISTRICT COOLING AND WHOLESALE TRANSMISSION BUSINESSES.

ISN'T THAT RIGHT? THAT'S RIGHT.

IT'S MY UNDERSTANDING THAT THE REVENUE REQUIREMENTS SET IN THIS HEARING IS FOR BOSTON ENERGIES, ELECT CUSTOMERS ONLY.

SO IT'S MY RECOMMENDATION THAT THE AUSTIN ENERGY ELECTRIC CUSTOMERS SHOULD NOT SUBSIDIZE A AS OTHER, UH, CUSTOMERS FOR ITS BUSINESSES THAT IT PROVIDES.

AND LIKE MOST, UH, MUNICIPALITIES OFTEN USES BONDS FOR ITS CAPITAL FINANCING.

ISN'T THAT CORRECT? YES.

AND, UH, THOSE BONDS ARE SECURED BY ALL AUSTIN ENERGY'S REVENUES, RIGHT? YES.

I UNDERSTAND THAT.

BUT IT'S, IT'S MY RECOMMENDATION THAT YOU SET RATES TO RECOVER

[00:15:01]

PROPER REVENUES.

UNDERSTAND THAT? I'M SORRY.

THAT'S MY PHONE FOR SOME REASONS.

I'M SORRY.

I APOLOGIZE.

TOTALLY UNDERSTAND.

IT'S MY UNDERSTANDING THAT BOSTON ENERGY SETS ITS RATES OR MY RECOMMENDATION THAT THEY SET ITS RATES TO ACHIEVE A CERTAIN DEBT SERVICE COVERAGE RATIO.

AND THEN ALSO SAID REVENUES FOR IT'S NOT ELECTRIC SERVICES TO ACHIEVE A CERTAIN DEBT SERVICE COVERAGE RATIO.

AND BASED ON MY CALCULATIONS FOR THE DSCR EXCLUDING NON ELECTRIC, THAT'S 2.5.

AND WHEN WE CALCULATE THE DSCR INCLUDING NON-ELECTRIC IT'S READINGS TO 2.32, WHICH INDICATES THAT AUSTIN ENERGY ELECTRIC CUSTOMERS ARE SUBSIDIZING YOUR NON ELECTRIC CUSTOMERS.

BUT AGAIN, WHEN, WHEN THE CITY ISSUES, BONDS, WHICH ARE REFERRED TO AS REVENUE BONDS, THOSE ARE SECURED WITH ALL OF THE REVENUES OF THE UTILITY, REGARDLESS OF THE SOURCE.

ISN'T THAT RIGHT? YES.

I UNDERSTAND THAT.

I'M JUST SAYING THAT THE NOT ELECTRIC REVENUE SHOULD BE SET TO MAINTAIN A HIGHER DSCR AND THEN WHEN IT IS, AND YOU COMPARE THAT 2.5 DSE TO FITCH'S RANGE OF 0.9 TO 3.96, IS THAT RIGHT? AND FITCH MAKES ADJUSTMENTS TO ITS DEBT SERVICE COVERAGE RATIO THAT INCLUDE ITEMS SUCH AS PURCHASE POWER AGREEMENTS AND TRANSFERS.

CORRECT? YES, THAT'S CORRECT.

BUT YOU DIDN'T, YOU DID NOT DO THAT.

NO, I DID NOT.

THEN THE INFORMATION THAT WAS PROVIDED TO ME BY AUSTIN ENERGY AND A DISCOVERY RESPONSE, UH, DID NOT MAKE THOSE ADJUSTMENTS EITHER, BUT IN ORDER TO DO A FAIR COMPARISON, YOU WOULD AGREE THAT, UH, THAT YOU WOULD HAVE TO MAKE THOSE ADJUSTMENTS CORRECT.

OTHERWISE YOU'RE COMPARING TWO DIFFERENT THINGS.

THE CREDIT RATING AGENCY WOULD MAKE THOSE ADJUSTMENTS.

YES.

BUT YOU DIDN'T ANSWER MY QUESTION IN ORDER TO DO A FAIR COMPARISON TO THE CREDIT AGENCIES CALCULATION, YOU WOULD ALSO HAVE TO MAKE THOSE SAME ADJUSTMENTS OR ASSUMPTIONS.

YES, THAT'S CORRECT.

NOW YOU ALSO STATE THAT THE 2.3 DFC IS WITHIN THE RANGE FOR PUBLIC POWER UTILITIES WITH THE AA RATED DEBT, UH, AND THAT YOUR RECOMMENDATION WOULD ALLOW A E TO MAINTAIN ITS BOND RATING, CORRECT? YES.

ALTHOUGH I DID DEMONSTRATE AS WELL IN MY TESTIMONY THAT IF THEY WAS REDUCED TO AN, A RATED AND, UM, THAT THE DEBT COSTS THAT IT FIT WITH IT AND CURVE FOR ANY DEBT THAT IT ISSUES GOING FORWARD WOULD STILL ALLOW IT TO MAINTAIN, UM, AN AA RATING.

BUT THE COST WAS REDUCED.

EXCUSE ME, I DIDN'T MAKE THIS INCREASE.

I'M SORRY.

IT'S OKAY.

IT'S ONE OF THE CONSTRAINTS OF THE TECHNOLOGY.

UM, BUT, BUT EVEN SITTING HERE TODAY IS NO LONGER A AA RATED COMPANY, RIGHT? NO, IT WAS REDUCED ONE NOTCH, A MINE IS, WHICH IS STILL A VERY GOOD CREDIT RATING.

ALL RIGHT.

WE'LL TALK ABOUT THAT IN A MOMENT, BUT DO YOU AGREE THAT A LOWER CRA CRA CREDIT RATING, I MEAN, IT WILL INCREASE THE CASH COLLATERAL REQUIREMENTS, UH, ON A E FROM ITS ENERGY TRADING COUNTERPARTIES, UH, AT SOME POINT IN THE FUTURE.

YES.

THAT'S MY UNDERSTANDING THAT IT WILL, I DO NOT KNOW WHAT THE AMOUNT WOULD BE UNDERSTOOD AND IT COULD ALSO IMPACT, UH, THE TERMS AND CONDITIONS, UH, THAT THEY WERE RECEIVING VENDOR CONTRACTS.

UM, I CANNOT SAY DEFINITIVELY THAT THAT WOULD OCCUR NOW IN YOUR TESTIMONY, YOU SAID THAT THERE ARE NO INVESTOR OWNED VERTICALLY INTEGRATED, REGULATED ELECTRIC PUBLIC UTILITIES IN TEXAS THAT HAVE A RATING AS HIGH AS OFTEN ENERGY.

IS THAT RIGHT? THAT'S CORRECT.

BUT YOU WOULD AGREE, WOULD YOU NOT THAT MOU IS AN IOUS, UH, HAVE DISTINCT CA UH, CAPITAL STRUCTURES? UM, CORRECT.

YES, THAT'S CORRECT.

FOR EXAMPLE, OFTEN ENERGY DOESN'T HAVE ACCESS TO EQUITY INVESTMENTS THAT, THAT I USE CAN AVAIL THEMSELVES OF WELL, AUSTIN ENERGY HAS A CASH FUNDING THAT I'VE SENT HER SIMILAR TO EQUITY FUNDING.

WELL, ACTUALLY THERE THERE'S, THERE'S A DIFFERENCE, RIGHT? THAT I'LL USE CAN ENGAGE IN, UH, TYPES OF EQUITY INVESTMENTS THAT MOU IS HAVE TO RELY UPON, OR YOU HAVE TO USE CASH FOR THAT'S CORRECT.

YOU DO HAVE TO USE CASH FOR THAT.

OKAY.

WHEREAS AN YOU DOESN'T NECESSARILY HAVE TO DO THAT THAT'S RIGHT.

BUT THEY ALSO WISH YOU DEAD SIMILAR TO AUSTIN AND ENERGY.

THEY DON'T ISSUE REVENUE, BONDS, DO THEY? NO.

IN REVENUE BONDS.

SO THEY'RE NOT

[00:20:01]

ISSUING DEBT IN THE SAME MANNER AS AN MOU HONOR, I'D ASK THAT THE WITNESS BE ALLOWED TO ANSWER THAT THAT'S OKAY.

UH, YES.

I WOULD SAY THAT MOU IS ISSUE REVENUE BONDS, WHICH ARE SEEN AS A LOWER END RISK AND THEN THE CORPORATE DEBT THAT I OWE USE ISSUE, BUT IT ALSO MEANS THAT THE CREDIT RATING ON DEBT IS MUCH MORE CRITICAL FOR AN MOU, UH, THAN AN IOU.

RIGHT.

I WOULDN'T NECESSARILY AGREE WITH THAT.

WELL, THEY'RE IMPORTANT TO BOTH OF THEM.

I'M SORRY.

CAN YOU REPEAT THAT? TH THE, I WAS SIMPLY SAYING THAT THAT THE, UH, CREDIT RATING IS, IS IMPORTANT TO, TO BOTH I'LL USE AN MOU IS THAT'S CORRECT.

ALL RIGHT.

NOW YOU CALCULATE IT AS A HYPOTHETICAL THAT AES ROE IS EQUIVALENT TO 12%.

IS THAT RIGHT? YES.

I BASE THAT ON YOUR, UH, OVERALL RETURN OF 7.9%.

I'VE LOOKED AT YOUR WEDDING COST OF DEBT AND YOUR CAPITAL STRUCTURE, AND WAS ABLE TO DETERMINE THAT THE ROE WOULD BE 12%.

AND THEN YOU COMPARE THAT HYPOTHETICAL ROE TO REGULATE IT I'LL USE.

YES, I DID.

AND SPECIFICALLY YOU CALCULATED A 12% ROE VERSUS THIS BENCHMARK OF 9.38% THAT YOU COME UP WITH.

YES.

THAT'S BASED ON, UM, REGULATED UTILITIES, ROE HAS BEEN APPROVED, UH, ACROSS THE COUNTRY, I THINK IN THE FIRST QUARTER OF 2022.

AND I THINK THEN YOU ANSWERED MY NEXT QUESTION, WHICH IS THAT YOU, SO YOU USED A METHODOLOGY THAT WAS BASED UPON AN IOU, UH, RATE OF RETURN CALCULATION METHODOLOGY THAT'S CORRECT.

DOES OFTEN ENERGY EARN A RETURN ON IT TO EQUITY? NO, IT DOES NOT.

IT WAS JUST FOR ILLUSTRATIVE PURPOSES THAT I CALCULATED THE RETURN ON EQUITY FOR AUSTIN ENERGY.

ALL RIGHT.

THANK YOU, MS. LAKANTO.

THOSE ARE ALL THE QUESTIONS THAT I HAVE FOR YOU THIS MORNING.

APPRECIATE YOUR TIME, YOUR TIME.

THANK YOU.

THANK YOU, MR. .

UM, MR. HALLMARK.

YES, YOUR HONOR.

THANK YOU.

UH, MR. CONTI, YOU WERE ASKED SOME QUESTIONS ABOUT THE AMOUNT OF THE GENERAL FUNDS TRANSFER IN RECENT YEARS.

DO YOU RECALL THAT? YES, I DO.

AND HOW DID YOU COME UP WITH YOUR CALCULATION OF WHAT PERCENT WENT INTO THOSE TRANSFERS? UH, INITIALLY I USE THE TOTAL OPERATING REVENUES, WHICH WAS PROVIDED IN A DISCOVERY RESPONSE, STRATEGIC IAC TO COME UP WITH THOSE PERCENTAGES, BUT I WAS INFORMED AND REBUTTAL TESTIMONY FROM AUSTIN ENERGY THAT THOSE NUMBERS WERE INCORRECT AND SHOULD, UH, REMOVE THE, THE PSAR FROM THOSE REVENUES.

SO THAT WAS PROVIDED IN, UH, AN ADDITIONAL DEBRA DISCOVERY RESPONSE FROM US AND THE ENERGY.

OKAY.

AND DOES THAT CHANGE IN THE DISCOVERY RESPONSE AFFECT THE AMOUNT OF THE GENERAL FUND TRANSFERS THAT WERE ACTUALLY MADE? IT DOES NOT CHANGE THE AMOUNT AND ONLY CHANGES THE PERCENTAGE.

SO DOES THAT CHANGE YOUR RECOMMENDATION IN THIS CASE? NO.

MY RECOMMENDATION WAS, UM, MAINLY BASED ON THE AMOUNT OF THE GFT, IT WAS NOT BASED ON THE PERCENTAGE.

AND DO YOU HAVE AN UNDERSTANDING WHETHER, UH, AUSTIN ENERGY'S PROPOSED GFT IN THIS CASE COMPLIES WITH THEIR FINANCIAL POLICIES FOR CALCULATING THE GFT? UH, IT'S MY UNDERSTANDING THAN IT IS.

AND ACCORDING TO THE FINANCIAL POLICIES, THE GMT SHOULD BE BASED ON AN AVERAGE OF THREE YEARS OF OPERATING REVENUES.

AND IN THIS CASE, UH, A DETERMINE THE GFT BASED ON ONLY THE TEST YEARS OPERATING REVENUES.

AND WHAT PERCENT DID THEY USE FOR THAT, UH, THAT THEY USE THE MAXIMUM PERCENTAGE OF 12%.

OKAY.

UM, YOU WERE ASKED SOME QUESTIONS ABOUT THE PERCENTAGE OF INTERNALLY GENERATED CASH CONTRIBUTIONS.

DO YOU RECALL THAT? YES.

WHAT IS THAT? AND YOU WERE ASKED SOME QUESTIONS ABOUT THE CITY OF AUSTIN'S POLICY ON, ON THAT.

DO YOU RECALL THAT? UM, YES, I WAS.

WHAT IS THE CITY OF AUSTIN? I'M SORRY, WHAT IS AUSTIN ENERGY'S FINANCIAL POLICY ON THE USE OF CASH VERSUS DEBT? UH, IT'S MY UNDERSTANDING THAT THE DEBT

[00:25:01]

BRAINS COULD GO FROM 35 TO 60%.

SO IT IN AUSTIN ENERGY'S FINANCIAL POLICIES.

IT'S NOT 50 50.

THAT'S RIGHT.

ARRANGED CAN BE SAID THAT IT'S NOT ONLY 50 50.

OKAY.

AND YOU WERE ASKED SOME QUESTIONS ABOUT AUSTIN ENERGY'S CREDIT RATING.

DO YOU RECALL THAT? YES.

AND WHAT IS AUSTIN ENERGY'S CURRENT CREDIT RATING AFTER THE DOWNGRADE AA MINUS.

AND HOW DOES THAT COMPARE TO OTHER VERTICALLY INTEGRATED UTILITIES IN TEXAS? UH, AT SIGNIFICANTLY ABOVE, I WOULD SAY IT'S ABOUT SIX NOTCHES ABOVE THE CREDIT RATINGS FOR IOUS AND TEXAS.

OKAY.

AND YOU WERE ASKED SOME QUESTIONS? WELL, WELL, LET ME BACK UP.

UM, MR. CONTI, DID YOU HAVE THE OPPORTUNITY TO VISIT WITH FITCH ABOUT YOUR RECOMMENDATIONS IN THIS RATE CASE? UH, NO.

I DID NOT.

AND JUDGING BY THE TIMING OF FITCH'S, UH, DOWNGRADE, DO YOU HAVE AN OPINION ABOUT WHETHER FITCH EVALUATED THE PROPOSALS OF INTERVENORS IN THIS CASE? UH, IT'S NOT.

I CAN NOT SAY DEFENDANT LEAVE AT FITCH DID THAT, I KNOW THAT THE TESTIMONY THAT WAS PROVIDED WAS PRIOR TO FITCH'S REPORT, BUT THAT WAS JUST THE PUBLISHING, UH, DATE OF THE REPORT.

IT'S NOT CERTAIN WHEN THEY ACTUALLY DETERMINE THOSE METRICS.

SURE.

UM, WHILE WE'RE ON TOPIC, YOU WERE ASKED SOME QUESTIONS ABOUT WHETHER AUSTIN ENERGY HAS, UH, AN EQUITY INVESTMENTS, RIGHT? YES.

DO YOU HAVE AN OPINION ABOUT WHETHER THE INTERNALLY GENERATED CASH, UH, IS EQUIVALENT TO EQUITY OR SIMILAR TO IT? I WOULD SAY IT'S SIMILAR TO IT, YOU KNOW, UH, IOUS USE EQUITY FUNDING, BUT FOR MOU THAT WOULD USE, UH, CASH FUNDING TO FUND THEIR CAPITAL PROGRAMS. SO IN A SENSE, THE CASH FUNDING IS SIMILAR TO THE EQUITY FUNDING.

DO YOU KNOW WHETHER AUSTIN ENERGY'S FINANCIAL POLICIES REFERRED TO THE CASH AS EQUITY? UH, IT'S MY UNDERSTANDING THAT WHEN FINANCIAL POLICY MAKES THE RECOMMENDATION ON THE DEBT TO EQUITY STRUCTURE, SPECIFICALLY REFERENCES EQUITY, ALL RIGHT.

YOU WERE ASKED SOME QUESTIONS ABOUT DEBT, SERVICE, COVERAGE, UH, AND ITS ROLE IN THE RATE SETTING PROCESS.

DO YOU RECALL THAT YES.

DOES THE DEBT SERVICE COVERAGE THAT WOULD RESULT FROM RATES BEING SET HAVE, HAVE RELEVANCE IN YOUR MIND? WELL, THE DEBT SERVICE COVERAGE, UM, YOU WANT TO SET IT SO THAT IT MEETS THE FINANCIAL POLICIES OF A MINIMUM OF 2.0, RIGHT.

UM, AND YOU WERE ASKED SOME QUESTIONS ABOUT WHETHER NON-ELECTRIC REVENUES SHOULD BE INCLUDED, REVENUES AND EXPENSES SHOULD BE INCLUDED IN THE DEBT SERVICE COVERAGE CALCULATION, RIGHT? YES.

AND MR. CONTENT IN YOUR VIEW, WHY SHOULD THOSE REVENUES AND EXPENSES FOR NON-ELECTRIC, UH, NOT BE INCLUDED BECAUSE IN THIS PROCEEDING WE'RE DETERMINING THE RATES FOR AUSTIN ELECTRIC CUSTOMERS ONLY.

AND IF YOU SET THE DSCR INCLUDING NON ELECTRIC, THEN ESSENTIALLY BECAUSE THE DSR INCLUDING NON ELECTRIC IS LOWER THAN EXCLUDING NON ELECTRIC, THE AUSTIN ENERGY, UH, ELECTRIC CUSTOMERS ARE SUBSIDIZING, UM, NON-ELECTRIC AND IT'S MY RECOMMENDATION THAT BOSTON ENERGY SHOULD REVIEW THE REVENUES THAT'S RECEIVED FROM THEM ELECTRIC CUSTOMERS TO MAKE SURE THAT THEY WILL MAINTAIN A SICK, UH, AN EFFICIENT DNC ARE.

RIGHT.

SO YOUR RECOMMENDATION IS NOT THAT THAT AUSTIN ENERGY SHOULD WELL STRIKE THAT.

UM, HAVE YOU CALCULATED THE EXTENT TO WHICH, UH, THE NON-ELECTRIC, UH, CUSTOMERS ARE BEING SUBSIDIZED BY AUSTIN ENERGY'S ELECTRIC CUSTOMERS WITH RESPECT TO THE DEBT SERVICE COVERAGE? YES, I DID.

I CALCULATED, UH, DRCR EXCLUDING NON-ELECTRIC.

I HAVE THE DSCR INCLUDING NON ELECTRIC FROM A E AND THEN I ALSO DID A DSR ANALYSIS FOR NON ELECTRIC OPERATIONS.

AND DO YOU HAVE THAT CALCULATION?

[00:30:02]

UH, YES, I DO.

I, UH, CALCULATED THE DATA USING THE RATE FILING PACKAGE, UH, WORK PAPERS THAT THEY PROVIDED AND BASED ON MY CALCULATIONS, THE DSCR I HAVE FOR NON ELECTRIC, YOUR HONOR, I'M GOING TO OBJECT.

UM, I DON'T KNOW WHAT MR IS LOOKING AT, BUT IF IT'S HER TESTIMONY OR IN HER TESTIMONY, PLEASE APPRISE ME IF IT IS THAT THAT'S FINE.

BUT IF SHE'S GONE AND PREPARED SOME ADDITIONAL SOMETHING THAT SHE'S LOOKING AT ON HER COMPUTER, UM, WE'D LIKE TO GIVE YOU AN OBJECTION ABOUT THAT.

IF YOU JUST MAYBE JUST KIND OF EXPLAIN WHAT SHE'S DOING.

SORRY.

IT'S JUST HARD TO KNOW.

UH, WELL, YOUR HONOR, FIRST OF ALL, THIS GOES TO THE QUESTION OF SUBSIDIZING FROM THE ELECTRIC REVENUE, THE ELECTRIC CUSTOMERS FOR THE NON ELECTRIC, AND WHY MS. THINKS THAT YOU SHOULD REMOVE THE NON-ELECTRIC FROM THE CALCULATION.

UH, YEAH, I, I COULD JUST ASK HER TO GO THROUGH IT.

UH, AND MAYBE THAT WOULD, WOULD HELP, UH, LET ME ASK THIS IS, IS THIS, UM, IN, UH, MR. TESTIMONY ALREADY, IS THIS SOMETHING THAT, WHEREAS A SUPPLEMENTAL, THIS PARTICULAR CALCULATION IS NOT IN HER TESTIMONY? ALL RIGHT.

HERE'S WHAT I PREFER TO DO, MR. PICADO YOUR OBJECTION IS A GOOD ONE.

UM, HOWEVER, I'D LIKE TO HAVE AS FULL AND COMPLETE A HEARING AS POSSIBLE.

UM, I WILL OVERRULE THE OBJECTION.

HOWEVER, ON REBUTTAL, YOU CAN GO INTO THIS AS MUCH AS YOU, LIKE WHEN YOU SAY REBUTTAL THAT YOU MEAN WHEN YOUR REBUTTAL WITNESSES GET UP, THEY CAN ADDRESS THIS ISSUE.

AGAIN, YOU'RE GOING OUT.

IF YOU'RE GOING OUTSIDE THE SCOPE OF YOUR DIRECT, THAT'S GENERALLY A PROBLEM, RIGHT? AND THAT'S EXACTLY WHAT YOUR OBJECTION IS, CORRECT.

HOWEVER, I WANT TO HAVE AS, AS COMPLETED HEARING AS POSSIBLE SO THAT WHEN WE ISSUE THE REPORT, WE CAN GIVE THE CITY, UH, POSITION AND ADDRESS IT.

SO MY PREFERENCE IS TO OVERRULE THE OBJECTION, BUT ALLOW YOU TO, UH, YOU CAN ASK QUESTIONS, YOU CAN GO INTO IT AND REBUTTAL, IF YOU HAVE TO HAVE SUPPLEMENTAL REBUTTAL, IN OTHER WORDS, AN EXHIBIT, WHATEVER IT IS, YOU CAN GO INTO THAT.

AND I KNOW IT'S MORE WORK FOR YOU.

I REALIZE THAT, BUT I WOULD PREFER TO HEAR THIS AND ADDRESS IT THAT EXCLUDED.

TOTALLY UNDERSTAND.

AND WHEN WE CERTAINLY WANT TO BE COOPERATIVE, UM, ALL I WOULD ASK IF I MAY IS THAT IF MR. HAS, UH, SOME TYPE OF NEW CALCULATION, WHICH IT SOUNDS LIKE SHE DOES, IF WE COULD JUST SIMPLY, UH, GET A COPY OF IT AND SOME MASHER MAN OR A SEE HOW IT WAS CALCULATED SO THAT WE COULD KIND OF TEST IT FOR REBUTTAL.

YEAH.

IT'S MY UNDERSTANDING THAT, UH, WE'VE GOT THAT ON THE WAY.

OKAY.

ONE OTHER THING IS MISS AVAILABLE TOMORROW FOR SOME TYPE OF SUPPLEMENTAL CROSS ON THAT EXHIBIT.

SHE IS NOT, SHE HAD TO GO THIS MORNING CAUSE SHE'S LEAVING TOWN.

UM, CAN WE GO OFF THE RECORD FOR A SECOND? LET'S GO OFF THE RECORD.

UH, SOUNDS LIKE THIS ISSUE HAS BEEN RESOLVED AND TIC IS GOING TO MOVE, MOVE ON.

YEAH.

THAT'S THAT'S ALL I HAVE, YOUR HONOR.

THANK YOU.

OKAY.

ANY FOLLOW-UP QUESTIONS? ANYONE BEFORE WE GET TO AUSTIN ENERGY? MS. COOPER, IS IT ON NOW? YES, NOW IT IS.

OKAY.

ALL RIGHT.

UH, GOOD MORNING, MS. LACAN.

I DON'T WANT TO, I WANT TO START WHERE A TIC ENDED.

AND, UH, ARE YOU FAMILIAR WITH, UH, YOU REFERRED TO IT IN YOUR TESTIMONY? A AUSTIN ENERGY'S ANSWERED TO A T I E C S THIRD RFI THREE DASH THREE.

YES.

AND DO YOU HAVE THE SUPPLEMENTAL IN FRONT OF YOU? THE SUPPLEMENTAL RESPONSE? IF YOU COULD HOLD ON ONE THAT'S OKAY.

YEAH.

THERE'S SUPPLEMENTAL RESPONSE TO WHAT EXHIBIT OR WHAT EXHIBIT I'VE BEEN? ENERGY'S RESPONSE TO T I E C S THIRD RFI THREE DASH THREE.

I THINK THAT'S TREC EXHIBIT SEVEN.

UH, BEN, YOU CAN CORRECT ME IF I'M WRONG.

UM, WELL, I, I, I AM NOT IN THE ELECTRONIC AGE, SO I DO NOT HAVE THAT YET, BUT IT'S IN MY COMPUTER AT HOME, SO I APOLOGIZE.

BUT, UM, SO, UH, DO YOU HAVE THE SUPPLEMENTAL ONE? YES, I DO.

THANK YOU SO MUCH FOR OKAY.

IF SOMEONE COULD TELL ME, CAUSE TELL YOU SEE SEVEN IS NOT A SUPPLEMENTAL RESPONSE.

IT LOOKS LIKE THERE WERE AUNTS FROM GRANT RAVEN TO TIC THREE.

IF YOU LOOK AT THE TOP RIGHT-HAND CORNER DOES SUPPLEMENTAL.

[00:35:01]

YEAH.

AND THANK YOU, MR. HALLMARK.

ALRIGHT.

SO IF WE LOOK AT, AT, AT T I SEE EXHIBIT SEVEN, WHAT IT DOES IS IT, IT LAYS OUT THE CALCULATION, NOT JUST NUMERICALLY, BUT ALSO IT GIVES YOU THE INSTRUCTIONS ON HOW TO DO IT.

IS THAT RIGHT? THAT'S CORRECT.

NOW, CAN WE, UH, TAKE THE NON-ELECTRIC UTILITY DATA THAT IS REPRESENTED IN THIS EXHIBIT AND COME UP WITH ITS OWN DEBT SERVICE COVERAGE? YOUR HONOR, I'M GOING TO OBJECT TO FRIENDLY CROSS HERE BY MRS. COOPER, TRYING TO GET THE CALCULATION DONE THAT SHE COULDN'T DO BEFORE, BUT MS. COOPER, THIS IS GETTING INTO FRIENDLY CROSS.

IT SURE.

SOUNDS LIKE IT.

I WAS THINKING THAT BEFORE HE MADE THE OBJECTION.

CAN YOU EXPLAIN TO ME HOW THIS IS NOT FRIENDLY CROSS? WELL, I'M JUST TRYING TO PROVE MY CASE, YOUR HONOR.

I MEAN, THAT'S JUST, THAT'S JUST IT.

YOU DO IT THROUGH CROSS.

WELL, THAT'S NOT NECESSARILY, I MEAN, I TRY TO PROVE MY CASE THROUGH AUSTIN ENERGY.

I MEAN, I, I HAVE A HARD TIME WITH FRIENDLY CROSS.

I UNDERSTAND THAT THAT'S SUPPOSEDLY SOME KIND OF RULE, BUT, UH, YES, IT'S NOT A RULE OF EVIDENCE, BUT, BUT I UNDERSTAND AND, UM, UH, I'LL, I'LL MOVE ON.

OKAY.

THANK YOU.

FRIENDLY CROSS I SET UP.

OKAY.

UH, AND THEN LASTLY, I WANT THIS TO CLARIFY THE RECORD, UH, AND THAT IS, UH, YOU TALKED ABOUT THE GENERAL FUND TRANSFER TRANSFER, IS THAT CORRECT? YES.

CAN YOU, CAN YOU TELL ME AGAIN, YOU SAID THAT, UH, AUSTIN ENERGY HAD NOT DONE THE, UH, THE PROPER CALCULATION TO COME UP WITH THE, WITH THE DEBT SERVICE.

I MEAN THE GENERAL FUND TRANSFER THAT'S INCLUDED IN THE RATES AND OBJECTION, YOUR HONOR, I'M ASKING FOR A CLARIFICATION, ARE YOU REFERENCING? YEAH, BUT THE CLARIFICATION IS AS YOU WOULD PUT IT IN AND FURTHER.

AND SO OF YOUR CASE, WHICH IS A LIE.

NOW GIVE ME BUDDY TO, TO ASK HIM QUESTIONS.

ISN'T FURTHER IT'S OTHER CASE NOT IN ALIGNED IN ALIGNMENT WITH THE WITNESS.

I'M ASKING FOR A CLARIFICATION OF THE RECORD TO MAKE IT CLEAR.

WHAT'S IN THE RECORD, YOUR HONOR.

IT'S EXPLAIN.

EXPLAIN TO ME WHAT, WHAT IS UNCLEAR BEFORE WE GET AN ANSWER FROM THE WITNESS? UM, NOW I CAN'T EVEN REMEMBER MY QUESTION.

WE'RE GETTING TO SO MUCH QUIBBLING HERE.

UH, WELL, WHAT I WANTED TO UNDERSTAND IS, UH, SHE SAID THAT SHE SAID SOMETHING ABOUT THE CALCULATION WAS, WAS NOT CORRECT.

AND I WANTED TO KNOW WHAT CALCULATIONS SHE WAS TALKING ABOUT.

OKAY.

CAN YOU ANSWER THAT, MR. CONTE, WHAT CALCULATION, WHERE YOU TALKING ABOUT WHEN YOU SAID THE CALCULATION IS INCORRECT? WELL, THE FIRST CALCULATION THAT I SAID WAS INCORRECT IS THE GFT THAT'S INCLUDED IN THE TEST HERE, WHICH IS BASED ON 12% OF THE TESTS.

YOUR REVENUE GOES ACCORDING TO AES FINANCIAL POLICY, THE GFT SHOULD BASED ON BE BASED ON, UM, THREE YEARS OF OPERATING REVENUES.

AND THEN YOU APPLIED THE PERCENTAGE.

AND IF THAT WAS, IF, IF THEY HAD DONE THAT AND IT'S FILING THEM, THE GFT WOULD BE SIGNIFICANTLY LOWER, A LOT, 114 MILLION.

OKAY.

I RECALL THAT TESTIMONY, UH, EARLIER, AND I THINK I UNDERSTAND WHAT YOU WERE SAYING.

NO, THANK YOU, MR. AND THANK YOU, JUDGE.

AND I WILL TRY TO, MY HEART IS NOT TO ASK FRIENDLY CROSS.

I JUST GET CURIOUS.

SO I APOLOGIZE, YOUR HONOR.

ARE THERE ANY OTHER, ANY OTHER QUESTIONS I HAVE A COUPLE OF YOUR YEARS? OH, SORRY FROM THEM.

YEP.

THAT'S OKAY.

MR. BROOKLINEN.

THANK YOU.

UH, HELLO.

SO DO YOU KNOW WHAT FITCH PEER REVIEW IS? YES.

I'M FAMILIAR WITH IT.

AND YOU REVIEW THAT FROM TIME TO TIME.

UH, I REVIEWED WHAT WAS PROVIDED IN THIS CASE IS RIGHT.

AND SO, UH, THEN YOU'RE AWARE, UH, THAT IT'S IN THE RECORD THAT THE FITCH 2021 PEER REVIEW, UM, SAMPLES, 80 TOTAL RETAIL, PUBLIC, UM, POWER PROVIDERS AND OF THOSE 80 51 OR 64% ARE RATED BETWEEN AA PLUS AND AA MINUS I'LL OBJECT THAT THIS GOES OUTSIDE THE SCOPE OF MY REDIRECT.

I DIDN'T ASK HER ABOUT FITCH, UH, REPORTS IN 2020, ACTUALLY.

HE DID.

HE ASKED SPECIFICALLY ABOUT, UM, UTILITIES, CREDIT RATINGS.

OVERRULED.

I SEE IT RIGHT HERE.

UH, AND SO YOU'VE SEEN THAT IN THE REBUTTAL TESTIMONY, IT'S A CONTACT, UM,

[00:40:01]

I'M SORRY, YOU'RE SAYING THAT I SAW IN THE REBUTTAL TESTIMONY, THE NUMBER OF RETAIL, UH, UTILITIES THAT ARE RATED FROM A TRIPLE EIGHT, A MINUS AA PLUS TO AA MINUS.

YES.

OH YES.

I DID SEE THAT.

OKAY.

OKAY.

AND 21 OF THOSE 80 ARE AT AA.

I CAN'T SPECIFICALLY, WELL, SUBJECT TO CHECK IF IT FEEL SAME, THAT I'M CORRECT.

THEN, UH, THEN THERE ARE QUITE A FEW, UM, PUBLIC POWER PROVIDERS, UM, THAT ARE AT, ARE HIGHER THAN A AES, UM, CREDIT RATING.

ISN'T THAT CORRECT? SUBJECT TO SUBJECT TO CHECK.

UH, I WOULD AGREE WITH THAT.

ALL RIGHT.

AND SO WHEN, WHEN AN IOU GOES OUT AND GETS EQUITY, HOW DO THEY DO THAT? WELL, THEY ISSUE STOCK MARKET.

AND WHEN I, UH, WHEN OFTEN ENERGY WANTS TO USE CASH ON HAND, HOW DID THEY GET THOSE FUNDS THREE-YEAR REVENUES FOR YOUR RATES THAT YOU APPLY TO YOUR CUSTOMERS? AND AUSTIN ENERGY CANNOT ISSUE STOCK IN ORDER TO GET EQUITY LIKE YOU, RIGHT? NO AUSTIN ENERGY RECOVERS REVENUES FROM ITS CUSTOMERS.

WHAT SHOULD USE A PROPORTION OF CASH FUNDING, BUT SIMILAR TO IOU IS, UM, BOSTON ENERGY ALSO PAYS A GMT, WHICH COULD BE SEEN AS A DIVIDEND TO THE CITY CITY, WHICH IS SIMILAR TO THE IOU.

BUT THAT'S REALLY, WASN'T THE QUESTION THAT YOU WERE ASKED BY EITHER YOUR ATTORNEY OR BY ME, WHICH IS WHETHER CASH FUNDING IS THE SAME AS EQUITY FUNDING FOR AN OWL, YOU, THOSE THINGS, THANK YOU.

AES FINANCIAL POLICIES, THE CASH FUNDING, AS I UNDERSTAND IT IS REFERRED TO AS EQUITY, BUT THEY'RE DIFFERENT REGARDLESS, REGARDLESS OF HOW THERE, IT MIGHT BE, REGARDLESS OF THE NOMENCLATURE CASH THAT YOU HAVE TO COLLECT FROM RE PAYER THROUGH RATES IS DIFFERENT FROM ISSUING STOCKS FOR NOW YOU, IN TERMS OF THEIR CAPITAL STRUCTURE.

YES.

THAT'S DIFFERENT.

ALL RIGHT.

AND, UH, AND JUST TO SORT OF CLOSE THE LOOP ON THIS, IN YOUR DISCUSSION WITH MR. HALLMARK, THE DFC IS A CHECK ON, BUT NOT A DRIVER OF REVENUE REQUIREMENTS IN THIS CASE.

UH, THAT'S THE WAY A KIND OF TRADES.

YEAH.

SOME OF THE DSE IS A CHECKOFF.

ALL RIGHT.

THANK YOU, MR. .

THOSE ARE ALL THE QUESTIONS.

UM, MR. HALLMARK, JUST NOTHING MORE FROM ME.

OKAY.

I JUST, I JUST HAVE ONE VERY BASIC QUESTION THAT EVERYONE KNOWS THE ANSWER TO FROM MS. JUST TO FOLLOW UP REAL QUICK ON, UM, MR. LAST SERIES OF QUESTIONS, UH, I'LL USE ALSO ARE IN CASH FROM RATES.

IS THAT CORRECT? I'M SORRY.

CAN YOU REPEAT THAT? DO IOUS ALSO EARN CASH FROM RATES? ALL RIGHT.

ANYTHING FOLLOWING UP ON THAT? UH, YES, YOUR HONOR.

IF I MAY, UM, MS. LACAN, IN YOUR OPINION, DO IOUS HAVE THEIR RATES SET SPECIFICALLY TO GENERATE EXTRA CASH TO USE IN CONSTRUCTION PROGRAMS? UH, I WOULD SAY YES.

I WOULD SAY IF THEY DO SET RATES TO PREP CASH, ADDITIONAL CASH TO FUND THEIR CAPITAL PROGRAMS, AS WELL AS EQUITY AND DEBT THROUGH ROE.

WELL, YES, ROE ROE HAS SAID TO RECOVER A SUFFICIENT RATES, WHICH COULD BE APPLIED TO THEIR CASH FUNDING.

OKAY.

AND THEN THE IOU WOULD, I GUESS, DECIDE WHETHER TO RETAIN THE CASH OR TO SEND IT TO THE PARENT.

RIGHT.

THAT'S RIGHT.

THEY CAN RETAIN IT OR THEY COULD PAY A DIVIDEND TO THE PARENT COMPANY.

ALL RIGHT.

UH, THANK YOU, MR. CONTI.

ALL RIGHT.

THANK YOU, MS. .

UM, IF THERE'S NOTHING FURTHER, MR. CONTE IS EXCUSED.

THANK YOU.

YOU'RE WELCOME.

THANK YOU.

UH, LET'S GO OFF THE RECORD FOUR MINUTES.

UM, MR. HALLMARK INDICATED THAT MR. POLLOCK IS, IS AVAILABLE AND READY TO GO.

UM, I REALIZED IT'S BEEN A SHORT BREAK, BUT HAS, HAVE YOU ALL HAD A CHANCE TO LOOK AT SEPC 16? I THINK WAS REALLY THE ONE THAT WAS AN ISSUE.

UH, YES, YOUR HONOR.

I WOULD MAINTAIN THIS TOD KIMBRO FOR DATA FOUNDRY.

UM, IT WOULD MAINTAIN THE OBJECTION ON SEPC 16.

NO OBJECTION ON 12, 3 15.

OKAY.

MR. HALLMARK JOIN.

YEAH, SAME PLACE.

ALL RIGHT, SO LET'S GO AHEAD AND ADMIT, SE LET'S GO ON THE RECORD, PLEASE.

[00:45:03]

LET'S GO AHEAD AND ADMIT, UH, CPC 12 THROUGH 15, AND THEN ON SEPC 16, LET'S VISIT ABOUT IT.

I, I NEED TO TAKE A LOOK AT IT AND LET'S SEE WHAT THE ISSUE IS WITH THAT.

WHAT WAS 16 AGAIN? AND WE HAVE IT UP HERE, RIGHT? IT'S PROBABLY BEHIND ME.

16 IS AN AUSTIN ENERGY DOCUMENT FROM 2018.

THAT RELATES TO REBATES THAT WERE PROVIDED TO DATA FOUNDRY IT'S RELEVANT, IT'S DIRECTLY RELEVANT TO ISSUES IN THE CASE, WITHIN THE SCOPE OF THE CASE.

FIRST OF ALL, BECAUSE OF THE FACT THAT IT RELATES TO THE FACT OR RELATES TO THE FACT THAT THE MEMBERS OF THE PRI TWO HIGH LOAD FACTOR RATE CLASS ARE RECEIVING BENEFITS UNDER THE EES, WHICH IS AN ISSUE THAT'S FRONT AND CENTER IN THE CASE.

ALSO IT DIRECTLY RELATES TO STATEMENTS THAT WERE MADE YESTERDAY ON THE RECORD BY THE DATA FOUNDRY WITNESS.

SO IS 16 GOING TO BE USED IN CROSS-EXAMINATION? IS THAT THE POINT OF 16? IT MAY BE USED IN CROSS EXAMINATION.

IT MIGHT COME UP AS AN EXHIBIT DISCUSSED DURING MR. REED'S TESTIMONY THOUGH.

AGAIN, WE WOULDN'T BE ABLE, WE WOULDN'T HAVE THE RIGHT TO RAISE IT.

IT WOULD HAVE TO BE SOMETHING THAT CAME UP AS PART OF THE DISCUSSION.

WELL, WHERE I'M GOING WITH THIS IS IF YOU, IF YOU'RE USING IT AND CROSS IT'S CROSS.

SO EVEN IF IT'S BEYOND THE TEST YEAR, IT DOESN'T MEAN YOU CAN'T GET INTO SOMETHING THAT'S RELEVANT.

UM, AND YOU HAVE RAISED THESE ISSUES IN THIS CASE.

THEY'RE VERY MUCH IN THE MIDDLE OF THE CASE.

YES.

SO, UM, I'M INCLINED TO, TO ALLOW YOU TO USE IT, BUT LET'S GET INTO CROSS RAISE IT, SPLAIN IT TO ME AND I'LL MAKE A RULING.

OKAY.

THANK YOU.

ALL RIGHT.

BUT 12 THROUGH 15 ARE ADMITTED 16.

WE'RE JUST WAITING TO SEE.

ALL RIGHT.

UM, ALL RIGHT.

ANYTHING ELSE BEFORE WE START WITH MR. POLLOCK? OKAY, MR. HALLMARK, WHENEVER YOU'RE READY.

UH, GOOD MORNING, MR. POLLOCK.

GOOD MORNING.

CAN YOU HEAR ME OKAY.

CAN I HEAR YOU? OKAY.

UH, YOU FILED DIRECT TESTIMONY IN THIS CASE AND ALSO CROSS REBUTTAL, RIGHT? YES.

AND YOU HAVE THOSE TESTIMONIES IN FRONT OF YOU? YES.

UH, I'M REALIZING, I FORGOT TO ASK MR. CONTI THIS, BUT DO YOU HAVE ANY CHANGES THAT YOU NEED TO MAKE TO YOUR TESTIMONY? NO.

ALL RIGHT.

WELL, I'LL TENDER MR. POLLOCK, HER CROSS EXAMINATION.

OKAY.

ONE OTHER THING I NEED THAT I SHOULD HAVE DONE FIRST THING THIS MORNING, NOW THAT I THINK ABOUT IT IS YESTERDAY.

WE DID NOT HAVE APPEARANCES FROM AN ON TUESDAY FOR THE PRELIM.

WE DID NOT HAVE APPEARANCES FROM VICTOR MARTINEZ, NATIONAL INSTRUMENTS, ARMA, OR C CARE.

I JUST WANT TO ASK AGAIN, IS THERE ANYONE HERE FOR ANY OF THOSE PARTIES, PARTICIPANTS? ALL RIGHT.

HEARING NOTHING.

I ASSUME THAT NO ONE IS HERE ON THEIR BEHALF, UH, TO WR OR QUESTIONS.

YES.

MA'AM MORNING, MR. POLLOCK.

GOOD MORNING.

UM, I JUST, HAVE YOU HAD GIVEN SOME TESTIMONY REGARDING, UH, REVENUE ADJUSTMENTS FOR, UH, HURRICANE URI? IS THAT CORRECT? WINTER STORM, YOUR YES.

YES.

I'M SORRY, NOT HURRICANE IT'S IT'S ON MY MIND, I GUESS, BUT WINTER STORM URI.

I APOLOGIZE.

THANK YOU FOR HELPING ME ON THAT HURRICANE.

I KNOW, I KNOW, BUT THE QUESTION I HAVE FOR YOU IS, DO YOU KNOW, UH, HOW MANY, UH, COMMERCIAL CUSTOMERS WERE, UH, SERVICES WAS, WAS INTERRUPTED AND FOR HOW LONG? UH, NOT SPECIFICALLY.

I'M GENERALLY AWARE THAT A LOT OF CUSTOMERS, INCLUDING TIC MEMBERS WERE, WERE AFFECTED BY IT SEVERELY.

OH, RIGHT.

OKAY.

SO YOU, UH, YOU DID NOT DO ANY KIND OF SURVEY AMONG YOUR MEMBERSHIP IN TERMS OF THE NUMBER OF DAYS OF INTERRUPTION AND THE LENGTH OF INTERRUPTION DID NOT KNOW.

ALL RIGHT.

THAT'S ALL YOUR HONOR.

THANK YOU.

AND THANK YOU, MR. POLLOCK.

THANK YOU.

UM, THANK YOU, MS. COOPER.

UM, NEXT UP, MR. ROBBINS IS NOT HERE.

A DATA FOUNDRY, NO QUESTIONS, YOUR HONOR.

HERFF NO QUESTIONS, YOUR HONOR.

S C S C P S.

SORRY.

I'M SORRY.

AS CPC.

THIS A FEW QUESTIONS, YOUR HONOR.

YES, MA'AM GOOD MORNING, MR. POLLACK.

GOOD MORNING.

T IEC HAS NOT PROVIDED ANY SPECIFIC EXAMPLES IN THIS PROCEEDING OF THE ENERGY EFFICIENCY MEASURES THAT LARGE INDUSTRIAL CUSTOMERS USE, CORRECT? I'M NOT SURE WHAT YOU MEAN BY SPECIFIC EXAMPLES.

I THINK WE'VE IDENTIFIED OUTLINED SOME GENERAL THINGS THAT GIC MEMBERS HAVE DONE TO IMPROVE ENERGY EFFICIENCY AND SAN ENERGY

[00:50:01]

EFFICIENCY MEASURES, BUT, BUT NOT, NOT AS JUST SPECIFIC NUTS AND BOLTS AND TIBC DOES NOT COLLECT SPECIFIC DATA REGARDING THE ENERGY EFFICIENCY AND DEMAND RESPONSE INVESTMENTS OF ITS MEMBERS.

CORRECT.

UM, I'M NOT AWARE WHAT TIC DOES.

I HAVE NOT COLLECTED ANY INFORMATION.

AND DO YOU KNOW IF IAC HAS ANY WAY TO MEASURE THE EFFICIENCY OF ITS MEMBERS, ENERGY EFFICIENCY AND DEMAND RESPONSE INVESTMENTS? T I C WOULDN'T DO THAT.

UM, IF THEY MEMBERS WANTED US TO DO THAT ANALYSIS, THEY WOULD REQUEST THAT WE DO SO OVER.

USUALLY THOSE, THOSE INITIATIVES ARE PRETTY CONFIDENTIAL AND, AND WE'RE USUALLY NOT PRIVY TO THE SPECIFICS BECAUSE IT'S PROPRIETARY INFORMATION.

WOULD YOU AGREE THAT REPORTING NON-CONFIDENTIAL INFORMATION WOULD ALLOW THE PUBLIC AWESOME ENERGY AND THE COMPANIES TO DETERMINE THE BENEFITS OF THE CURRENT INVESTMENTS AND THE NEED FOR ADDITIONAL ENERGY EFFICIENCY PROGRAMS FOR WHOM THE ENERGY EFFICIENCY PROGRAMS WOULD BENEFIT? I'M SORRY, I DON'T UNDERSTAND YOUR QUESTION.

WHO, WHO, FOR WHOM ONE THIS STUDY BE DONE? OH, FOR, TO ALLOW THE GENERAL PUBLIC TO UNDERSTAND THE BENEFITS OF THE PROGRAMS AND, AND WHICH PROGRAMS WE'RE TALKING ABOUT.

THE PROGRAMS THAT THE INDIVIDUAL CUSTOMERS THAT HAVE IMPLEMENTED ON THEIR OWN, OR THE PROGRAM SAYS AUSTIN ENERGY HAS IMPLEMENTED, AND HE WANTS TO KNOW THE REPORTING WOULD BE FOR THEM BASICALLY.

OH, SORRY.

ARE YOU ASKING IF THE REPORTING WOULD BE FOR TIC YES.

FOR TIC AND WHETHER OR NOT TIC MEMBERS SHOULD REPORT WHAT THEIR ENERGY EFFICIENCY PROGRAMS ARE TO THE PUBLIC? YEAH.

I'M NOT SURE THEY COULD DO THAT.

GIVEN THAT A LOT OF THE PROCESSES WITHIN THEIR PLANTS ARE PROPRIETARY.

HOWEVER, IF YOU LOOK AT, FOR EXAMPLE, UH, WEBSITES OF VARIOUS TIC MEMBERS, YOU WILL FIND IN JUST ABOUT EVERY WEBSITE, TIC MEMBERS DO DISCUSS THE FACT THAT THEY TAKE ENERGY AND ENVIRONMENT THIS SERIOUSLY, AND HAVE INVESTED IN PROJECTS THAT ADDRESS AND TRY TO MINIMIZE ENERGY USAGE BECAUSE IT'S AN EFFICIENT WAY.

AND COST-EFFECTIVE WAY TO, FOR THEM TO REMAIN COMPETITIVE.

DO YOU THINK THAT T IUC AND ITS MEMBERS COMPANY AND ITS MEMBER COMPANIES OPERATING IN THE AUSTIN ENERGY SERVICE TERRITORY WOULD BE WILLING TO CONSIDER A REPORTING REQUIREMENT FOR ENERGY DEMAND OR PEAK DEMAND SAVINGS? I DON'T KNOW THAT, UM, I THINK YOU'D HAVE TO TALK TO THE COMPANIES INDIVIDUALLY.

UM, BUT, BUT UNLESS THERE'S, YOU KNOW, SOME, SOME INITIATIVE THAT WOULD SOMEHOW COMPENSATE THEM FOR THE COSTS THAT THEY'VE ALREADY INVESTED, I'M NOT SURE WHAT VALUE THAT REPORTING WOULD HAVE.

THOSE ARE ALL OF OUR QUESTIONS.

THANK YOU.

ALL RIGHT.

THANK YOU VERY MUCH.

UM, IN XP, NO QUESTIONS, YOUR HONOR, RIGHT.

THANK YOU, MR. HUGHES, MR. KAUFMAN, ICA EIC HAS NO QUESTIONS.

THANK YOU, AUSTIN ENERGY.

THANK YOU, YOUR HONOR.

GOOD MORNING, MR. POLLOCK, MR. ROCHA, HOW ARE YOU? GOOD.

IT'S BEEN A WHILE.

GOOD TO SEE YOU.

LIKEWISE.

I CAN'T REALLY SEE.

I HAVEN'T, I HAVEN'T AGED AT ALL EITHER.

UH, BUT YOU CAN HEAR ME CLEARLY.

YES.

OKAY.

SO IN YOUR LET'S START WITH BILLING DETERMINANTS.

SO IN YOUR TESTIMONY, YOU RECOMMENDED THAT THE FUTURE BILLING, THE FUTURE BILLING DETERMINANTS FOR F Y 2023, BE UTILIZED TO SET BASE RATES FOR ALL SYNERGIES THAT, RIGHT? NO, YOU'RE NOT.

YOU'RE NOT RECOMMENDING FUTURE USE OF FUTURE BILLING DETERMINANTS.

NO.

TH THE TESTIMONY THAT I REFERENCED ABOUT FUTURE BILLING DETERMINED, THIS IS JUST VAGUE POINT THAT IF YOU UNDERSTATE THE BILLING DETERMINANTS FOR PROTEST YEAR, BECAUSE RATES WILL ACTUALLY BE AN EFFECT AFTER THE TEST HERE, YOU'RE GOING TO OVER COLLECT THAT BASE REVENUE REQUIREMENT.

THAT WAS THE ONLY REASON FOR MY REFERENCE TO, TO POST-TEST YOUR BILLING DETERMINANTS, BUT I'M NOT PROPOSING TO USE THOSE.

POST-TEST YOUR BILLING DETERMINANTS.

ALL RIGHT, GOOD.

CAUSE THAT WOULD HAVE BEEN A PROBLEM.

SO YOU, YOU RECOMMEND USING THE AVERAGE ENERGY CONSUMPTION FOR CUSTOMERS OVER THE FOUR YEARS FROM FYI 2017 THROUGH .

IS THAT RIGHT? SO TO ADJUST THE REV BASE REVENUES TO REFLECT, UM, TO ELIMINATE THE EFFECTS

[00:55:01]

OF WINTER STORM AREA, THAT'S WHAT I DID.

YES.

AND EXHIBIT J PEOPLE ON SPECIFIC, I LOOKED AT THE AVERAGE USE PER CUSTOMER FOR THE PERIOD PRIOR FOUR YEARS, AND THEN MADE AN ADJUSTMENT TO TEST YOUR SALES, TO ACHIEVE THE, ROUGHLY THE AVERAGE OF THE LAST FOUR.

AND YOU MAY HAVE JUST SAID THIS, BUT THOSE HISTORICAL ENERGY SALES FROM 17 THROUGH 20, I MEAN, THEY'RE NOT WHAT WEATHER NORMALIZE, RIGHT? THAT'S RIGHT.

THAT'S WHY I TOOK A LONGER PERIOD BECAUSE THEY AREN'T WEATHER NORMALIZED.

AND SO THAT, AGAIN, TRYING TO AVERAGE THE DIFFERENT DIFFERENT YEARS WOULD TEND TO SMOOTH THOSE WEATHER VARIATIONS.

AND YOU UNDERSTAND THAT WHILE WINTER STORM YURI WAS, UH, DRAMATIC, IT WAS NOT, UM, THE ONLY WEATHER EVENT THAT AUSTIN ENERGY, UH, EXPERIENCES.

WELL, I DON'T KNOW.

I SOUNDED PRETTY DIRECT TO ME FROM CERTAINLY FROM MY VANTAGE POINT.

IT CERTAINLY IT'S VERY DRAMATIC FOR OUR CLIENT THAT WAS OUT FOR A LONG TIME, BUT I THOUGHT YOU JUST TESTIFIED WITH MS. COOPER, THAT YOU DIDN'T KNOW HOW LONG THAT, THAT, UH, THAT THEY WERE OUT.

I DON'T KNOW HOW LONG THEY ARE OUT.

I KNOW THEY WERE OUT.

AND I KNOW THAT JUST BY LOOKING AT THE KILOWATT HOUR USAGE OF THE CLASS, I THINK IT'S VERY OBVIOUS THAT THEY ARE OUT FOR QUITE SOME TIME.

AND YOU ADMIT THOUGH THAT ALL SYNERGY DOES EXPERIENCE OTHER TYPES OF WEATHER EVENTS, ICE STORMS, HURRICANES, THINGS OF THAT NATURE FROM TIME TO TIME.

YES.

AND USUALLY THE PRACTICE IS THAT WHEN YOU HAVE SOME EVENTS THAT, THAT ARE RECURRING, LIKE LET HER STORM URINE MAJOR EYE STORMS OR MAJOR HEAT WAVES, YOU KNOW, FOR EXAMPLE, WEATHER TEMPERATURE, YOU NORMALIZE IT IN SOME RELATION, ALSO REMOVE THE EFFECTS OF NON-RECURRING EVENTS LIKE WINTER STORM, URI, MAJOR ICE STORMS. BUT YOU DID NOT DO THAT FOR 20 17, 20 18, 20 19, OR 2020.

NO, THAT'S WHY I TOOK AN AVERAGE OF THE FOUR YEARS, BECAUSE YEAH.

STUFF THAT'S GOING TO HAPPEN OVER THOSE FOUR YEARS, BUT, BUT, YOU KNOW, OVERALL, THEY SHOULD EVEN OUT.

SO YOU SH YOU CAN EITHER NORMALIZE BY, UH, REMOVING, UH, UNIQUE OR EXTREME EVENTS, OR YOU CAN EXTEND, YOU CAN NOT NORMALIZE AND JUST EXTEND YOUR AVERAGE OVER A LONGER PERIOD OF TIME.

YEAH.

JUST USE IT, USE AN AVERAGE THAT'S REFLECTIVE OF RECENT HISTORY.

AND THAT SHOULD AVERAGE OUT THESE, THESE ANOMALOUS EVENTS.

OBVIOUSLY IT WOULD BE BETTER TO TAKE THE TEST HERE AND DO A FORENSIC ANALYSIS AND ADJUST THE TEST YEAR.

BUT IF YOU DON'T HAVE THAT INFORMATION, THEN YOU HAVE TO HERE'S WHAT'S AVAILABLE.

ALL RIGHT.

LET'S TALK ABOUT PASS-THROUGH COSTS FOR A MOMENT.

NOW YOU CONTEND THAT PASS THROUGH COSTS TO NOT BE INCLUDED IN THE BASE COST OF SERVICE ANALYSIS, RIGHT? YES.

AND AM I RIGHT? THAT YOU SUGGEST THAT HAVING THE PASS-THROUGH COSTS REPRESENTED IN THE COST OF SERVICE IMPACTS THE ALLOCATION OF SERVICE AREA LIGHTING? IS THAT YOUR TESTIMONY? YES.

CAUSE SERVICE ERA LIGHTING IS A, IS A SPECIFIC CLASS.

SO YOU'RE ACTUALLY DETERMINING IN THE COST OF SERVICE STUDY, WHAT THE REVENUE REQUIREMENT IS THAT YOU THEN INTEND TO RECOVER FROM EVERYBODY ELSE.

SO IT'S, IT'S, IT'S IMPORTANT TO DO THE COST OF SERVICE STUDY INCLUDE THE SERVICE AREA, LIGHTING CLASS.

YOU SEE WHAT THE OWNER REQUIREMENT IS, AND THEN IF YOU'RE GOING TO PASS THROUGH THOSE COSTS TO EVERYBODY ELSE, THEN YOU AT LEAST HAVE THE AMOUNT OF MONEY THAT SHOULD BE PASSED THROUGH EVERYBODY.

YEAH.

NOW YOU UNDERSTAND THAT THAT SERVICE AREA LIGHTING, WHAT IS YOUR UNDERSTANDING OF WHAT SERVICE AREA LIGHTING IS FOR AUSTIN ENERGY? I DON'T REALLY HAVE A VERY GOOD UNDERSTANDING OF THAT.

SO OTHER THAN IT'S TREATED AS A PASS THROUGH COST, BUT DO YOU KNOW WHAT IT'S COLLECTING? UM, I CAN SAY ALL RIGHT, BUT YOU KNOW THAT IT'S NOT COLLECTED AS A PART OF BASE RATES.

WELL, TH TH YOU'VE MADE IT THE ASTA ENERGY'S MADE A DECISION NOT TO RECOVER IT IN BASE RATES.

THAT DOESN'T MEAN THAT IT'S NOT A SERVICE THAT AUSTIN ENERGY PROVIDES AND THAT, THAT THEY, THE COST OF WHICH SHOULD BE DETERMINED IN A COST OF SERVICE STUDY.

SO IT IS A SEPARATE CLASS OF CUSTOMERS TO BE SURE.

AND IT SHOULD BE TREATED THE SAME AS ALL OTHER CUSTOMER CLASSES, BUT YOU HAVEN'T, THE DECISION WAS DECISION TO WHAT TO DO WITH THE REMEDIES AS A POLICY ONE, LIKE, DO WE LET THEM PAY FOR IT DIRECTLY? OR DO WE SPREAD THOSE COSTS AMONG ALL THE OTHER CLASSES, WHICH IS WHAT THE POLICY THAT AUSTIN ENERGY GET SELECTED, BUT YOU DON'T KNOW IF AUSTIN ENERGY HAS REMOVED ALL OF THOSE COSTS AND ASSOCIATE WITH SERVICE AREA LIGHTING SERVICE AND COLLECTED THOSE SEPARATELY THROUGH SOME OTHER CHARGE OF PASS THROUGH OR SOMETHING OF THAT NATURE.

YES.

I, I DO KNOW THAT, I MEAN, THERE, THERE IS A, ON EACH OF THE DIFFERENT TARIFFS, UH, NOT, NOT EVERY TERROR, BUT CERTAINLY ON SOME OF THE TARIFFS IS PART OF THE, PART OF THE OTHER CHARGES INCLUDES A CHARGE FOR SERVICE AREA STREET LINING.

AND IN FACT, THE AUSTIN ENERGY SPREADS THOSE COSTS TO, TO CUSTOMER CLASSES.

BUT AGAIN, THOSE ARE NOT PART OF BASE RATES.

THEY'RE NOT COLLECTED

[01:00:01]

AS PART OF BASE RATES AS, AS AUSTIN ENERGY HAS SAY TO POLICY, NOT TO COLLECT THOSE AS PART OF BASE RATES.

HOWEVER, AS I SAID BEFORE, THE AMOUNT OF THAT COST IS STILL A FUNCTION OF THE COST OF SERVICE STUDY, OR SHOULD STILL BE A FUNCTION OF THE COST OF SERVICE STUDY.

ALRIGHT, LET'S TALK ABOUT PRODUCTION DEMAND COSTS FOR A FEW MOMENTS, UM, UH, AND SHORT A, HE SAYS THAT THEY SHOULD BE ALLOCATED USING A 12 CP METHOD, RIGHT? YES.

AND TO BE CLEAR, NOT 12 CP BASED ON AUSTIN, ENERGY'S 12 CP BASED ON ERCOT PEAKS.

CORRECT.

AND THERE'S A, THERE'S A, THERE'S A WIDE DIFFERENCE BETWEEN THE, I UNDERSTAND MS. PAULA, BUT IF YOU WOULD JUST ANSWER MY QUESTIONS.

YES.

I AGREE WITH YOU.

IT'S BASED UPON AN ARCHIVE 12 CP, AND YOU SAY INSTEAD THAT AN A AND E FOR CP METHOD SHOULD BE USED, RIGHT? YES.

AND MR. JOHNSON SAYS THAT A BIP OR BIT METHODS SHOULD BE USED.

THAT'S WHAT HE SAYS.

ALL RIGHT.

LET'S TALK ABOUT THE OUTCOMES OF THESE METHODS FOR A MOMENT.

AND THEN WE CAN DISCUSS THE DETAILS.

NOW, ADOPTION OF MR. JOHNSON'S PROPOSAL WOULD SHIFT MORE COST AWAY FROM THE RESIDENTIAL CLASS AND MORE COST TO COMMERCIAL CUSTOMERS AND YOUR CLIENTS, IS THAT RIGHT? WELL, IF APPLIED CORRECTLY, IT MIGHT NOT, BUT, BUT HE DIDN'T APPLY IT CORRECTLY.

OKAY.

BUT THAT'S ANOTHER ISSUE FOR YOU AND YOUR LAWYERS, I SUPPOSE, BUT, BUT, UH, AS HE'S PROPOSED IT, THAT WOULD BE THE EFFECT, RIGHT.

THAT'S RIGHT.

WHEN YOU ONLY APPLY HALF OF A THEORY, YOU'RE GOING TO GET A DIFFERENT ANSWER THAN IF YOU APPLY THE ENTIRE THEORY UNDERSTOOD.

AND YOUR PROPOSAL WOULD SHIFT MORE COSTS RELATIVE TO THESE OTHER PROPOSALS AWAY FROM COMMERCIAL CUSTOMERS AND TOWARDS THE RESIDENTIAL CLASS.

WELL, LET ME ALSO CLARIFY WHEN I SAY SHIFT, WE'RE NOT SHIFTING ANYTHING, WE'RE JUST SIMPLY TRYING TO FIGURE OUT WHAT THE COSTS ARE AND THAT DECISION IS WHAT REVENUES DO YOU WANT TO RECOVER FROM EACH CLASS? ALL RIGHT.

SO IF, IF YOU, UH, IF YOU CHANGE THE WORD FROM SHIFT TO, IT WILL ALLOCATE MORE TO, UH, UH, RESIDENTIAL CLASS RATHER THAN TO THE COMMERCIAL CUSTOMERS RATHER.

YEAH, THAT'S RIGHT.

ALL RIGHT.

AND THEN AES PROPOSAL IS SOMEWHERE IN THE MIDDLE BETWEEN MR. JOHNSON'S PROPOSAL AND THE YOU'RE A FORCE EPA APPROACH.

WELL, IT'S DEFINITELY NOT IN THE MIDDLE, BUT IT'S, IT'S I THINK FOR CLOSE, IT'S CLOSER TO ANY FOUR CP THAT MR. JOHNSON, I SAY IT'S IN BETWEEN.

OKAY.

I, THAT'S WHY I USED THE WORD SOMEWHERE IN THE MIDDLE.

THAT WAS, THAT WAS THE INTENT OF THAT.

UM, ALRIGHT.

SO, UM, SO FOR PURPOSES OF THIS DISCUSSION, WHAT ARE THE SUMMER MONTHS? JUNE, JULY, AUGUST, SEPTEMBER.

ALL RIGHT.

UH, AND YOU'VE SEEN, UH, MR. DANIEL'S TESTIMONY.

YES.

AND IN THAT TESTIMONY, DID YOU SEE THAT HE HAS, UH, A CHART? I BELIEVE IT'S FIGURE ONE ON PAGE 23, WHERE HE SHOWS THE AMOUNT OF AUSTIN ENERGY, UH, GENERATION THAT'S THAT WAS DISPATCHED DURING 2021.

YES.

I'VE SEEN THAT CHART.

ALL RIGHT.

AND, AND IT'S CORRECT.

IS IT NOT THAT OFTEN ENERGY GENERATION RESOURCES WERE DISPATCHED TO MEET ERCOT LOAD AND, AND, UH, THE SUMMER MONTHS, SORRY, REPEAT THAT, PLEASE.

IT'S UH, THAT CHART DEMONSTRATES OR, UH, REFLECTS THAT AUSTIN ENERGY'S, UM, GENERATION RESOURCES WERE DISPATCHED TO MEET ERCOT LOAD DURING THE SUMMER MONTHS.

IS THAT RIGHT? YES.

UH, IT ALSO SHOWS THAT ALL SYNERGIES RESOURCES WERE DISPATCHED TO MEET ERCOT LOAD DURING JANUARY.

IS THAT RIGHT? OH, ABSOLUTELY.

I MEAN, GENERATION IS GOING TO ALWAYS BE DISPATCHED TO AROUND.

THAT'S NOT, THAT'S NOT THE ISSUE THOUGH.

ALL RIGHT.

BUT, UH, BUT YOU AGREE THEN THAT, THAT IT WAS, UM, THEIR GENERATION UNITS.

WEREN'T WHERE DISPATCH REALLY THIN THROUGHOUT THE YEAR.

YEAH.

BECAUSE PEOPLE USE ELECTRICITY THROUGHOUT THE YEAR THAT THAT'S, THAT'S, THAT'S OBVIOUS, BUT THAT'S NOT, BUT THAT'S NOT THE QUESTION.

RIGHT.

IT'S NOT RELEVANT.

THE RELEVANT POINT IS THAT AUSTIN ENERGY'S GENERATION DISPATCHED, UH, GENERATION DIRT THROUGHOUT THE YEAR.

JUST TO ANSWER THE QUESTION, IF YOU WOULD, MR. POLLOCK.

YES.

YES.

THE DEGENERATION IS DISPATCHED EVERY HOUR OF THE YEAR, BUT OFTEN ENERGIES GENERATION.

THAT WAS MY QUESTION.

YES.

ALL RIGHT.

UM, AND INDEED WINTER STORM YURI, WHICH WE WERE TALKING ABOUT A MOMENT AGO, IT OCCURRED WHEN

[01:05:01]

FEBRUARY OF 20, 21 21.

YES.

ALL RIGHT.

AND THAT'S AN EXAMPLE THAT SHOWS THAT ALL SYNERGY WAS ABLE TO PROVIDE GENERATION, UH, OUTSIDE THE SUMMER MONTHS, ALONG WITH THE OTHER MASS.

OKAY.

YES.

I'M NOT, THERE'S NOT DISPUTING THAT THE OSS ENERGY CAN PROVIDE GENERATION OUTSIDE OF THE SUMMER MONTHS.

IT ALWAYS DOES.

AND IT DOES EVERY UTILITY PROVIDES GENERATION OUTSIDE THE SUMMER MONTHS.

AND THAT HAS, UH, WELL, NOT EVERY UTILITY NECESSARILY IN ARCHIVE.

NO, NOT EVERY UTILITY, BUT IF THEY HAVE GENERATION AND YOU CAN OPERATE IT AND IT'S DISPATCHED BY OUR CUT, THEN THEY'RE GOING TO JUST, YOU'RE GOING TO DISPATCH IT.

OTHERWISE YOU'RE GOING TO BUY THE ENERGY.

YOU'RE GOING TO BUY ALL THE ENERGY IN THE MARKET.

ANYWAY, THE QUESTION IS, HOW MUCH ARE YOU GOING TO OFFSET THAT'S PURCHASES BY DISPATCHING YOUR OWN GENERATION UNDERSTOOD.

AND SO IT'S, IT'S A, I GUESS IT'S AN OBVIOUS, UH, POINT THEN IT OFTEN ENERGIES, GENERATION RESOURCES PROVIDED VALUE TO AES CUSTOMERS DURING THOSE PERIODS.

WHEN, WHEN THE GENERATIONS DISPATCH, THERE'S CERTAINLY VALUED, BUT YOU HAVE TO LOOK AT WHEN THIS IS VALUE THE GREATEST.

AND THAT'S, THAT'S, THAT'S HOW DEMAND ALLOCATION WORKS AS YOU LOOK AT WHEN THE MOST VALUE OCCURS, BECAUSE ONCE YOU HAVE THAT VALUE CREATED FOR A CERTAIN PERIOD IN THIS CASE, THE SUMMER MONTHS, THEN THAT VALUE IS THERE TO MEET THE NEEDS ALL YEAR ROUND.

UH, MR. POLLOCK, LOOK, I WOULD JUST ASK THAT YOU, UH, ANSWER MY QUESTIONS.

YOU'LL HAVE PLENTY OF TIME ON REDIRECT TO EXPAND AND STATE YOUR, UH, VIEW OF THE, THE ISSUE.

UM, BUT MY QUESTION WAS A PRETTY SIMPLE ONE, AND THAT IS THAT, UH, THAT GENERATION PROVIDES VALUE TO AES CUSTOMERS THROUGHOUT THE YEAR, RIGHT? YES.

OKAY.

UM, AND YOU WOULD AGREE THAT CONSISTENCY AND COST ALLOCATION IS AN IMPORTANT ELEMENT IN, IN RATE DESIGN AS A GENERAL PRINCIPLE.

WHAT DO YOU MEAN BY CONSISTENCY AND COST ALLOCATION? WELL, UH, JUST WHAT THE PLAIN MEANING OF THE WORDS THAT IT'S IMPORTANT THAT CUSTOMERS DON'T SEE A CONTINUING CHANGE IN, IN, UH, THE, THE MANNER IN WHICH COSTS ARE ALLOCATED.

WELL, IT'S NOT CLEAR AS A CUSTOMERS EVER SEE HOW IT COSTS ARE ALLOCATED.

IT'S WHAT THEY SAY IS WHAT THEY PAY IN THE RATES.

AND SO IF YOU'RE ASKING, SHOULD RATE MAKING, YOU KNOW, TRY TO RECOGNIZE, UH, RATES STABILITY OR, OR GRADUALISM, I CERTAINLY AGREE WITH THAT, BUT THAT HAS VERY LITTLE TO DO WITH THE COST ALLOCATION STUDY.

ALL RIGHT.

SO YOU DON'T BELIEVE THAT IT'S IMPORTANT FOR THERE TO BE CONSISTENCY AND COST ALLOCATION? I BELIEVE THAT YOU SHOULD PARDON ME? I BELIEVE YOU SHOULD USE CONSISTENT METHODOLOGIES THAT REFLECT COST CAUSATION AND NOT TRY TO CHANGE THOSE METHODOLOGIES FROM, FROM TIME TO TIME, IF YOU CAN, UH, HOWEVER, HOW YOU SET UP THE RATES IS, IS REALLY KIND OF A SEPARATE ISSUE.

OKAY.

FAIR ENOUGH.

BUT WE WERE TALKING ABOUT THE ALLOCATION METHODOLOGY THAT'S RIGHT.

EXCUSE ME.

OKAY.

NOW, IN YOUR TESTIMONY, YOU STARTED AT AUSTIN ENERGY'S REVENUE DISTRIBUTION DOES NOT FOLLOW THE COST OF SERVICE STUDIES THAT, RIGHT? YES.

AND I THINK YOU JUST SAID A SECOND AGO THAT, UH, THAT YOU'RE FAMILIAR WITH THE, UH, THE CONCEPT OF GRADUALISM, RIGHT? YES.

AND LET ME, LET ME BACK UP A MINUTE.

YEAH.

I SAID IT