OGE Energy : PUD 2021-00164 - Direct Testimony of Bryan Scott

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

Direct Testimony

of

Bryan J. Scott

on behalf of

Oklahoma Gas and Electric Company

December 30, 2021

Direct Testimony of Bryan J. Scott	Page 1 of 7
Cause No. PUD 202100164

1	QUALIFICATIONS, EXPERIENCE AND PURPOSE

1. Q. Please state your name and business address.
2. A. My name is Bryan J. Scott. My business address is 321 N. Harvey Ave., Oklahoma City,

4	Oklahoma 73102.
5

1. Q. By whom are you employed and in what capacity?
2. A. I am employed by Oklahoma Gas and Electric Company ("OG&E" or "Company") as the

8	Director of Pricing and Load Analysis. In that capacity, I am responsible for overseeing
9	the development of rates for each of the services provided to our customers.

10

1. Q. Please summarize your educational qualifications and professional experience.
2. A. I graduated from the University of Tulsa with a Bachelor of Science degree in Economics.

13	I began working at Public Service Company of Oklahoma ("PSO") in 1979 where I held
14	various positions in its Rates Department. In 1994, I joined the Central and South West
15	("CSW") Rates Department as Manager of Pricing and Costing (CSW was the holding
16	company for PSO at that time). In 1995, I became responsible for new pricing programs
17	as Senior Project Manager for Pricing Development for CSW. In 2000, I became the
18	Manager of Texas Retail Pricing for American Electric Power ("AEP") in preparation for
19	the deregulated market in Texas (AEP assumed control of CSW in 2000). In 2002, I left
20	AEP to become a consultant with B&B Consulting International and then with UtiliPoint
21	International. I joined OG&E in March 2008. I have been involved with electricity pricing,
22	costing, rate administration and regulatory issues for over 42 years.
23

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

25	(the "Commission")?

1. A. Yes. I have previously filed testimony on behalf of OG&E in Cause Nos. PUD 200800398,
2. 200900230, 200900231, 201000037, 201100087, 201200134, 201400286, 201400307,
3. 201500247, 201500273, 201600366, 201600441, 201700216, 201700496, 201800070,
4. 201800074, 201800140, 202100018, and 202100159. I have previously submitted

30	testimony on behalf of PSO in proceedings before this Commission. I have also submitted
31	testimony before the Arkansas Public Service Commission, the Louisiana Public Service
	Direct Testimony of Bryan J. Scott	Page 2 of 7
	Cause No. PUD 202100164

1	Commission, the Public Utility Commission of Texas, and the Federal Energy Regulatory
2	Commission.
3

1. Q. What is the purpose of your testimony?
2. A. The primary purpose of my testimony is to support the allocation of the Oklahoma

6	jurisdictional revenue requirement among customer classes as recommended by OG&E in
7	this Cause.
8
9	REVENUE ALLOCATION

10 Q. What is revenue allocation and what role does it play in the development of proposed

11rates?

12 A. In its simplest form, rate design is the process of pricing the services offered OG&E's

13	customers so as to produce the revenues needed to pay for the costs of providing those
14	services. That process begins with the identification of the costs assigned to each customer
15	class in a Cost of Service Study ("COSS"); and revenue allocation is the process of
16	adjusting results of the COSS to establish the target revenue requirement for each class or
17	group of retail customers. The pricing process then establishes rates for each tariffed
18	service so as to collect the targeted revenue requirement.
19	As can be seen in Chart 1 below, the Minimum Filing Requirements package for
20	OG&E's Application in this Cause includes schedules and work papers which provide in
21	detail the information the Company uses to develop the proposed rates for each of the
22	tariffed services offered to our customers. As seen below, Revenue Allocation is one of
23	the final, primary inputs which the Company considers when developing the pricing for
24	those tariffs.

Direct Testimony of Bryan J. Scott	Page 3 of 7
Cause No. PUD 202100164

Chart 1. The Rate Design Process

Financial/	Class		Marginal
Revenue	Revenue
Accounting	Bill
Requirement	Allocation	Cost Data
Data	Comparisons
Schedule L-1
Schedules A-J			W/P M-5
				Proof of
Customer	COS		Pricing	Revenue
	Final
Usage Data
Schedule K
W/P L-13,14			Prices
			W/P M-4
				Tariffs
Billing Data		Unit Costs	Billing	Schedule N
	Data
W/P H-2		W/P L-8
	W/P H-2

1. Q. What is the purpose of a COSS?
2. A. As mentioned earlier, COSS results are used to establish the amount of revenues that would

3	be collected from each customer group or class if each class were to pay its full cost for
4	receiving electric service. In those circumstances, the class' revenue requirement is
5	described as being at 100% relative rate of return ("RROR") or at an equalized rate of
6	return ("ROR"). OG&E Witness Cash supports the company's COSS.
7

1. Q. What were the results from the COSS for this Cause?
2. A. Table 1 shows the results of the COSS found in Section K of the Company's filing package

10	and depicts the revenue requirements, revenue deficiencies and percent increases which
11	would provide a 100% RROR for each customer group or class.
12	The first column is the customer group. The second column is the current revenue
13	from each customer group after pro forma adjustments are made and also include fuel
14	revenue and continuing rider revenues. These pro forma adjustments are described on
15	Schedule H-2 of the Application package and discussed by OG&E Witness Cash. The
16	third column is the total proposed revenue, which also includes current fuel revenue and
17	rider revenues. The proposed revenues represent the amount	needed to fund the
18	Company's costs of service when new rates become effective, assuming no changes to
19	riders or fuel costs. The fourth column shows the difference between current revenues and
	Direct Testimony of Bryan J. Scott	Page 4 of 7
	Cause No. PUD 202100164

1	proposed revenues at 100% RROR based on current rider and fuel revenues. The last
2	column is the proposed percent change	for each class	or group of Oklahoma retail
3	customers and represents the impact to customers' bills if all groups were taken to 100%
4	RROR.
5	Table 1. Cost of Service Study Results
				Proposed Total		Proposed	% Change
		Total Current		from Current
	Class		Revenue @	Increase @
		Revenue		@ 100%
			100% RROR	100% RROR
				RROR
	RESIDENTIAL SERVICE	$	919,191,981	$	1,003,512,461	$	84,320,480	9.2%
	GENERAL SERVICE	$	189,501,292	$	203,403,855	$	13,902,563	7.3%
	PUBLIC SCHOOLS SM	$	15,673,870	$	22,292,209	$	6,618,339	42.2%
	OIL & GAS PRODUCTION	$	19,027,240	$	18,154,731	$	(872,508)	-4.6%
	PUBLIC SCHOOLS LG	$	14,381,034	$	18,025,916	$	3,644,882	25.3%
	POWER & LIGHT	$	485,592,371	$	513,407,670	$	27,815,299	5.7%
	LRG. PWR & LGHT	$	253,022,330	$	269,403,883	$	16,381,554	6.5%
	MUNICIPAL PUMPING	$	8,449,545	$	8,612,063	$	162,518	1.9%
	MUNICIPAL LIGHTING S/L-5	$	6,051,604	$	8,502,289	$	2,450,725	40.5%
	SECURITY LIGHTING S/L-5	$	13,794,478	$	16,297,820	$	2,503,431	18.1%
	LED LIGHTING S/L-5	$	14,001,310	$	20,614,529	$	6,613,270	47.2%
	OKLA RETAIL	$	1,938,687,054	$	2,102,227,427	$	163,540,553	8.4%
	JURISDICTION

6 Q. Are these the revenue requirements OG&E utilized to price tariffs for the respective

7		classes?
8	A.	No, as mentioned above, at times in the rate design process the revenue allocation process
9		may result in a particular class' allocated revenues being set at an amount higher or lower
10		than is required to pays its full cost of service as identified in the COSS.
11

1. Q. What are the considerations in the revenue allocation process?
2. A. From OG&E's perspective, the preference is to set each class' revenue requirement as close

14	as possible to a target RROR of 100%. We believe that ultimately each customer group
15	should pay the full cost for its electric service.	However, external, or unusual
16	circumstances are legitimate considerations in the allocation of revenue recovery to each
17	class and the Company pricing proposals have historically been reflective of other
18	circumstances.
	Direct Testimony of Bryan J. Scott	Page 5 of 7
	Cause No. PUD 202100164