OGE Energy : PUD 2021-00164 - Direct Testimony of James Fenno

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

James G. Fenno

on behalf of

Oklahoma Gas and Electric Company

December 30, 2021

Direct Testimony of James G. Fenno	Page 1 of 9
Cause No. PUD 202100164

James G. Fenno

Direct Testimony

1. Q. Please state your name and business address.
2. A. My name is James G. Fenno. My business address is 321 North Harvey Avenue, Oklahoma

3	City, Oklahoma 73102.
4

1. Q. Please summarize your educational background and professional qualifications.
2. A. I earned a Bachelor of Science in Accounting from the University of Central Oklahoma. I

7	joined OG&E in August 2009 as a Property Accountant, since then I have worked in several
8	roles within the Company. During my time at OG&E, I have been involved in multiple
9	rate cases and rider applications in both Oklahoma and Arkansas jurisdictions. I have
10	prepared work papers and schedules for these applications. Currently, I am a Senior
11	Regulatory Accountant in the Regulatory Affairs group.
12

1. Q. Have you testified previously before this Commission?
2. A. No. I ask that the Commission accept my credentials.
3. Q. What is the purpose of your testimony?
4. A. The purpose of my testimony is to sponsor the pro forma adjustments to the test year rate

17	base in this Cause and explain why these adjustments are appropriate. The Company
18	utilized a historical test year ending September 2021 with pro forma adjustments through
19	March 2022.
20

1. Q. What is the importance of the rate base pro forma adjustments in this proceeding?
2. A. The pro forma adjusted level of rate base is necessary to allow the Company to earn a rate

23	of return on an adequate level of rate base.
24

1. Q. Why are rate base pro forma adjustments to a test year necessary?
2. A. The Company makes adjustments to the test year books to design rates which reflect the
3. appropriate level of rate base the utility expects to experience, prospectively. The

28	Company utilizes a historic test year with pro forma adjustments reflecting reasonably
	Direct Testimony of James G. Fenno	Page 2 of 9
	Cause No. PUD 202100164

1	known and measurable changes. Some of these adjustments include the removal of
2	expenditures that are recovered elsewhere or the addition of expenditures that did not occur
3	during the test year but will occur during the pro forma period.
4
5	PRO FORMA ADJUSTMENTS TO RATE BASE

6 Q. What section of the Minimum Filing Requirements contains the adjustments made to

7		rate base?
8	A.	Section B contains schedules and the supporting workpapers which present the elements
9		of the rate base for the test year and adjustments to the test year rate base. Table 1 below
10		shows the rate base adjustments and gives a description of each one. The rate base
11		essentially represents the investment in facilities, equipment and other equipment used to
12		provide service. The largest component of the rate base is plant in service. The pro forma
13		adjusted rate base is multiplied by a proposed rate of return to arrive at the return
14		requirement for capital investment. This return requirement represents a portion of the
15		overall revenue requirement.

				Table 1 - Pro Forma Adjustments to Rate Base
	Pro Forma			Rate Base Description
	Adjustment
WP B 3-1		Arkansas AFUDC Adjustment
WP B 3-3		Adjusts Test Year End CWIP balance for projects with completion after
				March 2022
WP B 3-4		Fuel Inventories
WP B 3-5		Gas in Storage
WP B 3-6		Adjusts CWIP for projects transferred to Plant in Service completed by
				March 2022
WP B 3-7		Adjusts Test Year Plant in Service for New Projects started after Test Year
				End and completed by March 2022
WP B 3-8		Materials and Supplies
WP B 3-9		Cash Working Capital
WP B 3-10		Prepayments
Direct Testimony of James G. Fenno	Page 3 of 9
Cause No. PUD 202100164

WP B 3-11	Plant Held for Future Use
WP B 3-12	Transmission Investments Recovered from Other Load Serving Entities
WP B 3-13	Adjust Accumulated Depreciation through March 2022
WP B 3-14	Accumulated Deferred Income Tax through March 2022
WP B 3-15	Regulatory Assets & Liabilities
WP B 3-16	Accumulated Depreciation Differential between FERC and Oklahoma
	Approved rates

1 Q. Please explain WP B 3-1,pro forma adjustment to Arkansas Allowance for Funds

2		Used During Construction ("AFUDC").
3	A.	There is a difference between how the Arkansas Public Service Commission and the
4		Oklahoma Corporation Commission calculate AFUDC. Arkansas placed a jurisdictional
5		cap on AFUDC that does not apply to Oklahoma. In order to accurately reflect the AFUDC
6		calculated and booked for the Oklahoma jurisdiction, an adjustment must be made to add
7		back plant in service. This adjustment increases plant in service by $4,837,011 and
8		increases accumulated depreciation by $643,553 resulting in an increase to Net Plant of
9		$4,193,458.

10

11 Q. Please explain WP B 3-3,pro forma adjustment to remove certain project construction

12		costs.
13	A.	This adjustment removes costs for construction projects that will not be completed by the
14		end of the six months post-test year or are reimbursable by a third party. This adjustment
15		is a reduction of $83,974,203 to construction work in progress ("CWIP").
16

1. Q. Please explain WP B 3-4,pro forma adjustment to Coal and Oil Inventory.
2. A. The Company is requesting a 13-month average for coal inventory because it reflects the

19	variable nature of the inventory balance during the test year. The total adjustment increases
20	coal inventory by $5,515,633 resulting in an ending balance of $36,184,091. Additionally,
21	OG&E recommends a 13-month average of the oil inventory account balance. This
22	adjustment decreases oil inventory by $484,511 resulting in an ending balance of $947,227.
23	The total adjustment increases rate base by $5,031,122.
	Direct Testimony of James G. Fenno	Page 4 of 9
	Cause No. PUD 202100164

1. Q. Please explain WP B 3-5,pro forma adjustment to Gas in Storage Inventory.
2. A. OG&E recommends a 13-month average which will result in a decrease to Gas in Storage

3	inventory of $1,276,770 and an ending balance of $1,575,415.
4

5 Q. Does the Company request fuel inventory levels to be updated at the end of six months

6		post-test year?
7	A.	Yes, the Company will update coal, oil, and natural gas inventory levels at that time, using
8		the 13-month average ending March 31, 2022 for each.
9

10 Q. Please explain WP B 3-6 and WP B 3-7,pro forma adjustments to increase plant in

11		service.
12	A.	The Company analyzed certain projects that were budgeted for the pro forma test year
13		period and determined which projects would likely be in service by March 31, 2022, which
14		is within six months of the test year end. Adjustment B 3-6 first removes the balance of
15		CWIP related to uncompleted projects from the pro forma test year (which reduces CWIP
16		by $165,305,903) and then adds back in CWIP for projects that were not completed by the
17		end of the test year but will be completed by the end of the pro forma year ending March
18		31, 2022 and transferred to plant (which increases plant in service by $283,152,306).
19		Adjustment B 3-7 adjusts plant in service for new projects that started after the test year
20		end and will be completed by the end of the pro forma period. WP B 3-7 increases plant
21		in service by $134,725,891. The total adjustment for WP B 3-6 and B 3-7 increases rate
22		base by $252,572,294. During this proceeding the Company will update this pro forma to
23		reflect actual costs for plant completed and in service as of March 31, 2022.
24

1. Q. Please explain WP B 3-8,pro forma adjustment to materials and supplies.
2. A. This adjustment is made to account for the fluctuating cost of materials and supplies. The
3. Company proposes adjusting materials and supplies to a 13-month average, which

28	represents an appropriate level on an ongoing basis. This adjustment results in an increase
29	to rate base of $2,040,361.

Direct Testimony of James G. Fenno	Page 5 of 9
Cause No. PUD 202100164