1 THE PUBLIC UTILITIES COMMISSION OF OHIO 2 - - - 3 In the Matter of the : Application of Ohio Edison : 4 Company, The Cleveland : Electric Illuminating : 5 Company, and The Toledo : Edison Company for : Case No. 16-0743-EL-POR 6 Approval of Their Energy : Efficiency and Peak Demand : 7 Reduction Program Portfolio: Plans for 2017 through 2019: 8 9 - - - 10 PROCEEDINGS 11 before Mr. Richard Bulgrin, Attorney Examiner, at the 12 Public Utilities Commission of Ohio, 180 East Broad 13 Street, Room 11-D, Columbus, Ohio, called at 14 10:00 a.m. on Tuesday, January 24, 2017. 15 - - - 16 VOLUME II 17 - - - 18 19 20 21 22 ARMSTRONG & OKEY, INC. 222 East Town Street, Second Floor 23 Columbus, Ohio 43215-5201 (614) 224-9481 - (800) 223-9481 24 Fax - (614) 224-5724 25 - - - 174 1 APPEARANCES: 2 FirstEnergy Service Company By Ms. Erika Ostrowski 3 Ms. Carrie M. Dunn 76 South Main Street 4 Akron, Ohio 44308 5 Kolich & Associates, LLC By Ms. Kathy J. Kolich 6 1521 Hightower Drive Uniontown, Ohio 44685 7 Jones Day 8 By Mr. Michael R. Gladman 325 John H. McConnell Boulevard, Suite 600 9 Columbus, Ohio 43215 10 On behalf of Ohio Edison Company, The Cleveland Electric Illuminating Company, 11 and The Toledo Edison Company. 12 Bruce J. Weston, Consumers' Counsel By Mr. Christopher Healey 13 Assistant Consumers' Counsel 10 West Broad Street, Suite 1800 14 Columbus, Ohio 43215-3485 15 Bricker & Eckler, LLP By Mr. Dane Stinson 16 100 South Third Street Columbus, Ohio 43215 17 On behalf of the Residential Customers 18 of Ohio Edison Company, Toledo Edison Company, and The Cleveland Electric 19 Illuminating Company. 20 Ohio Partners for Affordable Energy By Ms. Colleen L. Mooney 21 231 West Lima Street P.O. Box 1793 22 Findlay, Ohio 45839 23 On behalf of the Ohio Partners for Affordable Energy. 24 25 175 1 APPEARANCES (Continued): 2 Mike DeWine, Ohio Attorney General By Mr. William L. Wright, 3 Section Chief By Mr. John H. Jones 4 Ms. Natalia Messenger Assistant Attorneys General 5 Public Utilities Section 30 East Broad Street, 16th floor 6 Columbus, Ohio 43215 7 On behalf of the Public Utilities Commission of Ohio. 8 Environmental Law & Policy Center 9 By Ms. Madeline Fleisher 21 West Broad Street, Suite 500 10 Columbus, Ohio 43215 11 Environmental Law & Policy Center By Mr. Robert Kelter 12 35 East Wacker Drive, Suite 1600 Chicago, Illinois 60601 13 On behalf of the Environmental Law & 14 Policy Center. 15 IGS Energy By Mr. Joseph Oliker 16 6100 Emerald Parkway Dublin, Ohio 43016 17 On behalf of IGS Energy. 18 Carpenter Lipps & Leland LLP 19 By Ms. Angela M. Paul Whitfield 280 North High Street, Suite 1300 20 Columbus, Ohio 43215 21 On behalf of The Kroger Co. 22 Ohio Environmental Council By Ms. Miranda Leppla 23 1145 Chesapeake Avenue, Suite I Columbus, Ohio 43212 24 On behalf of the Ohio Environmental 25 Council and Environmental Defense Fund. 176 1 APPEARANCES (Continued): 2 Carpenter Lipps & Leland LLP By Ms. Kimberly W. Bojko 3 and Mr. James D. Perko, Jr. 280 North High Street, Suite 1300 4 Columbus, Ohio 43215 5 On behalf of The Ohio Manufacturers' Association Energy Group. 6 McNees, Wallace & Nurick LLC 7 By Mr. Matthew Pritchard 21 East State Street, 17th Floor 8 Columbus, Ohio 43215 9 On behalf of the Industrial Energy Users of Ohio. 10 Law Office of Robert Dove 11 Mr. Robert Dove P.O. Box 13442 12 Columbus, Ohio 43213 13 Natural Resources Defense Council Samantha Williams 14 Staff Attorney 20 North Wacker Drive, Suite 1600 15 Chicago, Illinois 60606 16 On behalf of the Natural Resources Defense Council. 17 - - - 18 19 20 21 22 23 24 25 177 1 INDEX 2 - - - 3 WITNESSES PAGE 4 Richard F. Spellman Direct Examination by Mr. Stinson 179 5 Cross-Examination by Ms. Kolich 181 Cross-Examination by Mr. Oliker 292 6 Cross-Examination by Ms. Fleisher 297 Cross-Examination by Ms. Williams 299 7 Cross-Examination by Ms. Mooney 304 Redirect Examination by Mr. Stinson 308 8 Patrick Donlon 9 Direct Examination by Mr. Jones 312 Cross-Examination by Mr. Gladman 315 10 - - - 11 COMPANIES EXHIBITS IDENTIFIED ADMITTED 12 7 "Energy Efficiency 232 -- 13 Accomplishments of Texas Investor-Owned Utilities 14 Calendar Year 2015" 15 8 Pennsylvania Public Utility 251 310 Commission, Implementation 16 Order, Docket No. M-2014-2424864 17 9 Efficiency Maine 258 310 18 FY 2015 Annual Report 19 10 Legal Notices 372 373 20 - - - 21 STAFF EXHIBIT IDENTIFIED ADMITTED 22 1 Amended Testimony of 311 -- Patrick Donlon 23 - - - 24 25 178 1 INDEX (Continued) 2 - - - 3 OCC EXHIBITS IDENTIFIED ADMITTED 4 9A Direct Testimony of 181 310 Richard F. Spellman 5 9B Supplemental Direct Testimony 181 310 6 of Richard F. Spellman 7 9C Corrections to the 181 310 Supplemental Direct Testimony 8 of Richard F. Spellman 9 - - - 10 IGS EXHIBIT IDENTIFIED ADMITTED 11 1 Consumers' Fact Sheet 295 310 "Easy Ways to Save Energy 12 & Money" 13 - - - 14 15 16 17 18 19 20 21 22 23 24 25 179 1 Tuesday Morning Session, 2 January 24, 2017. 3 - - - 4 EXAMINER BULGRIN: Let's go back on the 5 record. 6 Good morning, ladies and gentlemen. This 7 is day two of Case No. 16-743-EL-POR. And I believe 8 we begin with OCC's witness this morning. 9 MR. STINSON: Yes, your Honor. The 10 Office of the Ohio Consumers' Counsel would call 11 Richard Spellman. 12 (Witness sworn.) 13 EXAMINER BULGRIN: Please be seated. 14 Thank you. 15 MR. STINSON: May I approach, your Honor? 16 EXAMINER BULGRIN: Yes. 17 - - - 18 RICHARD F. SPELLMAN 19 being first duly sworn, as prescribed by law, was 20 examined and testified as follows: 21 DIRECT EXAMINATION 22 By Mr. Stinson: 23 Q. Good morning, Mr. Spellman. 24 A. Good morning. 25 Q. Could you please state your full name and 180 1 business address for the record. 2 A. Richard F. Spellman, 1850 Parkway Place, 3 Marietta, Georgia. 4 Q. I placed in front of you what's been 5 marked as OCC Exhibit Nos. 9A, 9B, and 9C. Can you 6 identify Exhibit 9A, please. 7 A. Yes. This would be my direct testimony 8 filed on behalf of the Ohio Consumers' Counsel in 9 this docket on September 13. 10 Q. And could you identify Exhibit 9B, 11 please. 12 A. Yes. This would be my supplemental 13 direct testimony filed on behalf of the Office of the 14 Ohio Consumers' Counsel on January 10, 2017. 15 Q. And were those two testimonies prepared 16 by you or under your direct supervision? 17 A. Yes, they were. 18 Q. Do you have any revisions or 19 modifications to OCC Exhibits 9A or 9B? 20 A. Yes. I have revisions to my supplemental 21 direct testimony and Exhibit 9C presents a list of 22 those revisions. 23 Q. Thank you. If I would -- if I were to 24 ask you the questions in your testimonies, would your 25 answers be the same as revised? 181 1 A. Yes. 2 Q. And are those answers true and accurate 3 to the best of your knowledge? 4 A. Yes, they are. 5 MR. STINSON: At this point, your Honor, 6 I would tender the exhibits for admission and tender 7 Mr. Spellman for cross-examination. 8 EXAMINER BULGRIN: Okay. Just so I'm 9 clear, OCC Exhibit 9A is the direct, 9B is the 10 supplemental, and 9C is a list of -- that has not 11 been filed in this case. 12 MR. STINSON: It's not been filed. 13 EXAMINER BULGRIN: Is a list of changes. 14 All righty. They will be so marked. 15 (EXHIBITS MARKED FOR IDENTIFICATION.) 16 EXAMINER BULGRIN: And who's up for 17 cross? Ms. Kolich. 18 MS. KOLICH: Thank you, your Honor. 19 - - - 20 CROSS-EXAMINATION 21 By Ms. Kolich: 22 Q. Good morning, Mr. Spellman. 23 A. Good morning. 24 Q. My name is Kathy Kolich and I represent 25 the companies in this case and I will be asking you 182 1 some questions this morning, so if at any time you 2 don't understand the question, feel free to ask me to 3 rephrase it. I will be more than happy to do so. 4 Otherwise, I will assume you understood the question. 5 A. Okay. 6 Q. Now, you've got 9A -- OCC 9A and 9B in 7 front of you? 8 A. Yes. 9 Q. And those are your direct and 10 supplemental testimonies respectively, correct? 11 A. Yes. 12 Q. And I believe they -- you were asked 13 whether they were prepared at your direction or under 14 your supervision. 15 A. Yes. 16 Q. Did you draft your testimony? 17 A. Yes. 18 Q. So the views reflected in your 19 testimonies are yours. 20 A. Yes. 21 Q. Now, I have got some general housekeeping 22 issues to take care of. On page 12, line 13 of your 23 direct testimony which is 9A. 24 EXAMINER BULGRIN: What was that again? 25 MS. KOLICH: Page 12, line 13. 183 1 EXAMINER BULGRIN: Thank you. 2 Q. Are you there? 3 A. Yes, I am. 4 Q. You use the term "exemplary utility 5 performance." Do you see that? 6 A. Yes, I do. 7 Q. And how would you define that term? 8 A. I would define it two ways. One, if you 9 look at the footnote, I've provided a citation to the 10 "National Action Plan for Energy Efficiency" and 11 it -- that report talks about in general what our 12 exemplary performance would be. 13 And then the other criteria I had in mind 14 are the ones that are listed in the "Green Rules" and 15 that lists all the criteria that programs should 16 have. I believe there are 13 or so criteria in the 17 rules. And those, I would say that if you follow or 18 exceed all of those criteria that that would be 19 exemplary. 20 Q. Okay. Now, you and I, in deposition, 21 agreed to call those the "Green Rules." When you 22 refer to the "Green Rules," you are talking about the 23 Ohio Administrative Code, specifically the 24 regulations the Commission has related to energy 25 efficiency with a citation of 4901:1-39-01 in 184 1 sequence? 2 A. Yes. 3 Q. And you've got two sets of testimony, 4 some of which is repeated -- some of your testimony 5 is identical in both sets. So when you use the term 6 "exemplary performance" in your original testimony, 7 and you use that same term in your supplemental 8 testimony, you mean the same thing? 9 A. Yes. 10 Q. Now, you also refer to profits in the 11 context of shared savings. When used in the context 12 of shared savings, are you referring to the money 13 that the companies would receive through the shared 14 savings mechanism? 15 A. Yes. 16 Q. And then if you could turn to page 53 of 17 your supplemental testimony. 18 MR. STINSON: What page was that, 19 Counsel? 20 MS. KOLICH: 53. I am jumping around 21 here a little bit to get the housekeeping things 22 done. 23 Q. And line 23 -- 22 actually down there at 24 the bottom. 25 A. I'm there. 185 1 Q. Okay. You state that "The Commission has 2 never allowed shared savings for programs like the 3 historic mercantile customer program...." Do you see 4 that? 5 A. Yes. 6 Q. Okay. And then up above on line 19 of 7 page 53, you refer to the ESID program and the 8 mercantile customer programs. Do you see that? 9 A. Yes. 10 Q. And I believe in your deposition I asked 11 you the same question. When you are talking about 12 the mercantile customer program and the historic 13 mercantile historic programs, you are using those 14 terms interchangeably? 15 A. Yes. 16 Q. Now, the companies' baselines, I didn't 17 get a chance to look at your corrections, but I 18 believe the OCC Exhibit 9C -- 19 A. Yes. 20 Q. -- deals with issues related to the 21 companies' calculation of the baselines? 22 A. Yes. 23 Q. And, again, I haven't had a chance to 24 compare this, but are you just updating these numbers 25 to reflect the changes made in Ms. Mullins's Exhibit 186 1 DJM-A2? 2 A. Yes. 3 Q. And with that update, do you have any 4 reason to dispute the calculations that Ms. Mullins 5 made? 6 A. No, no. 7 Q. Now, "customer opt-outs," are you 8 familiar with that term? 9 A. Yes, I am. 10 Q. All righty. And you would have no way of 11 knowing how many of the companies' customers will 12 elect to opt out of the companies' revised plans, 13 would you? 14 A. No. I would agree with you that I 15 wouldn't. 16 Q. Okay. And on page 9, line 15 of your 17 original testimony, you indicate "FirstEnergy failed 18 to achieve the amount of energy savings required by 19 statute." Do you see that? 20 A. Yes. 21 Q. And when I deposed you in December, you 22 indicated you did not know the reason the companies 23 failed to achieve those targets; is that right? 24 A. That is correct. 25 Q. And when I deposed you last week, I asked 187 1 you if you still didn't know why the companies failed 2 to achieve their targets in 2010. Do you recall 3 that? 4 A. I do. 5 Q. And you indicated you still didn't know; 6 is that correct? 7 A. I did. 8 Q. And if I asked you that today, do you 9 know today why the companies failed to achieve those 10 targets in 2010? 11 A. No, no. 12 Q. And I believe you indicated during your 13 deposition that you were retained by OCC on May 19, 14 2016; is that right? 15 A. Yes. 16 Q. Are you familiar with the OCC objections 17 that were filed in this case? 18 A. Yes. 19 Q. And as I understand it, you actually -- 20 you didn't actually draft the objections; is that 21 right? 22 A. That's correct. 23 Q. Do you know who did? 24 A. OCC Counsel. 25 Q. As I understand it, you provided 188 1 technical support related to the shared savings 2 mechanism; is that right? 3 A. Correct. 4 Q. Did you provide any other support on any 5 other issues? 6 MR. STINSON: Objection, your Honor. The 7 objections are not a part of the record in this case. 8 They have not been introduced. 9 MS. KOLICH: If you recall yesterday, 10 questions were presented to Mr. Miller regarding 11 whether he considered the objections when designing 12 the plan. So I am just trying to understand. 13 EXAMINER BULGRIN: I'll overrule. You 14 can answer. 15 A. I provided technical support to the OCC 16 that included reviewing the companies' application, 17 identification of key issues, information on how 18 other states are addressing the same issues, data 19 analysis. I would say those are the four main 20 categories of my technical support. 21 Q. Did you provide any tables or analyses, 22 tables that would show up in the objections? 23 MR. STINSON: I am going to object, your 24 Honor, as well on the basis of attorney-client 25 privilege to the extent we are getting into 189 1 conversations between Mr. Spellman and Counsel. 2 MS. KOLICH: I didn't ask about the 3 content of conversations. I just asked if he 4 provided any tables for the objections. 5 EXAMINER BULGRIN: Perhaps you could 6 rephrase. 7 MS. KOLICH: Sure. 8 Q. (By Ms. Kolich) Mr. Spellman, did you 9 perform any analyses that resulted in tables that 10 were included in the OCC objections? 11 MR. STINSON: Same objection, continuing 12 objection, your Honor, on this line of questioning 13 with respect to what Mr. Spellman provided Counsel. 14 EXAMINER BULGRIN: I am going to overrule 15 that. You can answer if you know. 16 A. No. I honestly don't recall. 17 Q. Okay. I'm moving on now. 18 A. Okay. 19 Q. Now, on your résumé included in RFS-1 20 that's attached to your testimony, you indicate on 21 page 2 that you are the Program Manager, the 22 Statewide Evaluator in Pennsylvania; is that right? 23 A. That's correct. 24 Q. And you actually are still the Statewide 25 Evaluator until the end of February; is that correct? 190 1 A. That's correct. 2 Q. And as I recall, you described some of 3 your roles as the Statewide Evaluator and one of them 4 was to review all aspects of program implementation; 5 is that right? 6 A. Let me ask to clarify that. Are you 7 referring to my -- to my résumé that's in my 8 supplemental? Or my direct? 9 Q. Are they different? 10 A. I don't know. I don't know. I just want 11 to know which one you are referring to. Usually I 12 update my résumés, so I just want to make sure. 13 Q. I am not sure which one I looked at. 14 A. I want to look at the same one you are 15 looking at. 16 Q. I would have been looking at your 17 supplemental testimony, page 2, your No. 1 item under 18 President, GDS Associates. 19 A. I'm there. 20 Q. Okay. So according to your resume you 21 were the program -- were and still are the Program 22 Manager for -- 23 A. Correct. 24 Q. Thank you. Let me finish the sentence 25 for the record. 191 1 A. Sorry. 2 Q. -- the Pennsylvania SWE. 3 A. Yes. 4 Q. And if I recall, you explained to me 5 during deposition that one of your roles as the SWE 6 was to review all aspects of program implementation 7 related to the EE programs in Pennsylvania; is that 8 correct? 9 A. I think that's a fair characterization. 10 Q. And another role was to make 11 recommendations to the Pennsylvania Public Utilities 12 Commission for any improvements or modifications to 13 the utilities' PDR programs before the Commission. 14 Is that another role? 15 A. Yes. 16 Q. And did you also provide technical 17 support to the Commission on -- and provide various 18 analyses related to the utilities' EE and PDR 19 programs? 20 A. Yes. In fact, I have been doing that 21 since 2009. 22 Q. Now, start-up costs, in your original 23 testimony on page 61, line 13, could you pull that 24 up? 25 A. Uh-huh. I'm there. 192 1 Q. On line 13 you state the programs will 2 cost -- collectively the programs will cost consumers 3 over $115 million during 2017 to 2019. Do you see 4 that? 5 A. Yes. 6 Q. And that estimate of program costs was 7 related to the plans as originally filed in this 8 case; is that right? 9 RICHARD F. SPELLMAN 10 being previously duly sworn, as prescribed by law, 11 was examined and testified further as follows: 12 DIRECT EXAMINATION 13 By Ms. Kolich: 14 A. Yes. 15 Q. And then you go on to say this is an 16 increase of over $10 million as compared to the 17 previous portfolio plan. Do you see that? 18 A. Correct. Adjusted for inflation. 19 Q. Right. So if I do my math right, the 20 prior -- or the previous portfolio plan's estimated 21 costs would have been $105 million; is that right? 22 A. Well, I remember I provided an exhibit on 23 this and I don't have that in front of me. I mean I 24 provided a data response. And I recall that the 25 Excel spreadsheet that I provided showed the costs 193 1 adjusted for inflation and then took the difference 2 between the two and I just don't remember what the 3 inflation adjusted number was for the prior period. 4 Q. Right. 5 A. So I just don't have that with me, but my 6 understanding -- my recollection from that workpaper 7 was that when you took the difference of the two, it 8 was 10 million. 9 Q. Okay. Which is fine. 10 A. Okay. 11 Q. That's close enough for purposes of what 12 I need to ask you. So you are aware that the revised 13 plans have lower budgets than what were originally 14 filed -- than were included in the plans as 15 originally filed. 16 A. Yes, I am. 17 Q. And do you know how much that is? 18 A. You mean what the difference is? 19 Q. Do you know approximately what the total 20 budget for the revised plans are? 21 A. It's in the appendix to the settlement to 22 the stipulation, the numbers. I don't remember what 23 the number is off the top of my head. 24 Q. Would you agree with me, subject to 25 check, that it's approximately 90 million per area? 194 1 A. So you're talking about just the -- 2 subject to check, sure. 3 Q. Okay. So your methodology for 4 calculating the start-up costs, value of $10 million, 5 would no longer be valid given the changes in the 6 budget calculations; is that right? 7 A. That's right. In fact, we talked about 8 that during my deposition. And what I said, that 9 whole issue would have to be reconsidered if it were 10 talking about the -- the revised filing. 11 Q. Right. That was going to be my next 12 question. And you haven't done that analysis. 13 A. I have not. 14 Q. Okay. If you'll turn to page 4, line 15 15 of your supplemental testimony. 16 A. I'm there. 17 Q. Where you talk about the three-prong 18 test. And on line 20 -- actually on page 5, line 20, 19 you refer to a three-prong test for evaluating the 20 reasonableness of the proposed settlement. Do you 21 see that? 22 A. Well, I think you lost me there. 23 Q. Did I give you the wrong page? Page 4. 24 A. Aha, that makes more sense. 25 Q. My apologies. 195 1 A. Well, actually, line 20 doesn't say 2 anything about the three-prong test. 3 Q. Wait a minute. 4 MR. KELTER: Is this supplemental? 5 THE WITNESS: Yeah, I am in my 6 supplemental. 7 MR. KELTER: Page 4, line 20. I have 8 one. 9 Q. Right. 10 A. Well, mine says "The shared savings 11 mechanism should only be approved." 12 EXAMINER BULGRIN: Take a look at this. 13 THE WITNESS: I guess the page numbering 14 on mine is different. This one looks better. 15 MR. STINSON: Your Honor, can I approach 16 and make sure he has the correct -- 17 THE WITNESS: I have the right -- 18 MS. FLEISHER: Mr. Spellman, I think that 19 was your direct. 20 THE WITNESS: I was in the wrong one. 21 I'm sorry about that. 22 EXAMINER BULGRIN: I will take that one 23 back then. 24 A. Okay. Now, I see where you are at. I'm 25 there. Yes, to answer your question. 196 1 Q. Okay. And now I need the question 2 reread, please. 3 A. Hopefully my "yes" was the right answer 4 to the question. 5 (Record read.) 6 A. Yes. 7 Q. Okay. But I need to refer you back to 8 page 4 because I misspoke. So let's get it straight. 9 On the bottom of page 4, line 20, where you refer to 10 the three-prong test, you have a footnote notation, 11 No. 2, and you cite to the Consumers' Counsel versus 12 PUC. Do you see that? 13 A. Yes. 14 Q. And you didn't read the entire case that 15 you cite there, did you? 16 A. No. As I said in my deposition, I did 17 not. 18 Q. And you don't know what the Court said 19 about the three-prong test, do you? 20 A. Only to the extent that these are the 21 three prongs. Other than that, I don't have any 22 additional information. 23 Q. And these -- your reference to these are 24 the three prongs are the items listed on lines 1 25 through 6 of page 5? 197 1 A. Right. 2 Q. Okay. Let's go to the first prong at the 3 top of page 5. And according to your testimony, the 4 three-prong test requires that in the first prong the 5 settlement be the product of serious bargaining among 6 capable, knowledgeable parties; is that correct? 7 A. Correct. 8 Q. You don't know if the Commission has 9 provided any guidance as to what criteria they use 10 when determining whether there's been serious 11 bargaining among capable parties? 12 A. Correct. 13 Q. And do you believe this prong has been 14 met with regard to serious bargaining? 15 A. No. 16 Q. You were not privy to any of the 17 settlement conversations, were you? 18 A. No. 19 Q. And your Counsel did not reveal the 20 specifics -- specific nature of the settlement 21 discussions with you, did he? 22 MR. STINSON: Objection, your Honor. 23 Attorney-client privilege. 24 EXAMINER BULGRIN: Sustained. You don't 25 have to answer that. 198 1 MS. KOLICH: I didn't hear the ruling. 2 EXAMINER BULGRIN: Sustain the objection. 3 Q. Did you talk to any of the other parties 4 that were in the settlement discussions? 5 A. No. 6 Q. So prong 2, that one says that the 7 settlement, as a package, must benefit customers and 8 the public interest. Do you see that? 9 A. Yes, I do. 10 Q. And what are the guidelines the Ohio 11 Supreme Court uses to determine whether prong 2 has 12 been met? 13 A. I don't know. 14 Q. How about the guidelines the Commission 15 uses to evaluate that prong? 16 A. I don't know what the Commission says, 17 but I know what my testimony lays out, why I believe 18 it -- that the settlement is not in the public 19 interest. 20 Q. Do you have a copy of the settlement 21 stipulation? 22 A. I do. 23 Q. Could you get that out, please. 24 A. I've got it. 25 Q. You are ahead of me. 199 1 A. For once. 2 Q. And if you could turn to page 4 of the 3 settlement stipulation, it would be Roman V, "Terms 4 and Conditions." 5 MS. KOLICH: And for the record, this 6 document has been identified and admitted as Joint 7 Exhibit 1. 8 A. I'm there. 9 Q. And you've read this document; is that 10 correct? 11 A. I read the part -- I've reviewed the 12 whole document, but I focused on the portion of it on 13 page 9 that dealt with the shared savings mechanism. 14 Q. Okay. Would you agree with me that 15 sections -- subsections A through T set forth and 16 summarize the terms and conditions that the parties 17 agreed to in the settlement? 18 A. Yes. 19 Q. And as I understand it, a review of these 20 terms and conditions to determine whether they are 21 beneficial to customers or in the public interest was 22 beyond the scope of your contract; is that right? 23 A. Correct. 24 Q. So you have done no analysis along those 25 lines; is that correct? 200 1 A. Correct. 2 Q. And you have no opinion on whether, for 3 example, prioritizing the LED lights versus the CFL 4 lights listed in subparagraph A is good or bad for 5 customers? 6 A. Correct. 7 Q. If you look at prong 3 of your testimony 8 on page 5 of the supplemental testimony. 9 A. Thank you. 10 Q. It would be line 5. Yes? 11 A. Yes. 12 Q. And that one requires an analysis of 13 whether the settlement package violates any important 14 regulatory principle or practice; is that right? 15 A. Correct. 16 Q. Now, in your deposition you indicated 17 that you believed that the principal violation -- or 18 the key violation from a regulatory standpoint in 19 your opinion was that the settlement violates the 20 equity-among-classes principle; is that correct? 21 A. That's correct. 22 Q. And the only other principle you 23 identified was that it violated the principle of cost 24 effectiveness -- excuse me, cost effectiveness; is 25 that right? 201 1 A. Correct. 2 Q. Do you have a copy of the company's 3 revised plans with you? 4 A. Yes. That's attached to the Settlement 5 Agreement. 6 Q. Yes, it would be at Exhibit B, I believe. 7 A. Yes, so I do have that with me. 8 Q. Okay. Bear with me one minute. In the 9 interest of time I'll come back to that. We'll come 10 back to that. I just need to direct you to a certain 11 table in there and I thought I had it with me. So 12 we'll come back to prong 3. 13 So let's go on to line 8, right there 14 below that where you state, "In addition to these 15 criteria," with the three prongs we just discussed, 16 "the PUCO sometimes considers whether the signatory 17 parties to the settlement represent a diversity of 18 interests." Do you see that? 19 A. I do. 20 Q. Okay. And in support of that statement, 21 you cite to the Columbus Southern Power order issued 22 by the Commission in Case No. 11-351-EL-AIR, correct? 23 A. Correct. 24 Q. You didn't read that case at all, did 25 you? 202 1 A. Correct. 2 Q. And you state that sometimes the PUCO 3 requires this criteria to be met; the diversity of 4 interest. Do you know when the Commission requires 5 it? 6 A. No. 7 Q. And you don't know what factors the 8 Commission considers when determining whether a 9 diversity of interests exists, do you? 10 A. Well, we actually talked about that 11 during my deposition. And I gave examples of what 12 diversity would be, and the primary example I gave, 13 if you had 10 parties to a case and you only had one 14 sign and nine didn't, that would indicate to me you 15 didn't have a diversity of interest. 16 So, you know, I believe, sure, there are 17 lots of other examples, but I think that, you know, 18 the Commission would look at whether there was broad 19 support from a number of parties and various 20 interests and perspectives and would take that into 21 account in its decision whether to approve the 22 stipulation or settlement. 23 Q. But as far as Commission entries and 24 orders dealing with the issue of diversity of 25 interest, you don't know if they actually indicated 203 1 in one of their orders what criteria the Commission 2 uses. 3 A. I have not done any cataloging of past 4 orders to track that. 5 Q. Okay. Now, if you could turn to page 70, 6 line 20 of your supplemental testimony. 7 A. Was that line 7? 8 Q. 70. 7-0. 9 A. I am on page 70. You said page 70? 10 Q. I am having trouble hearing you. 11 A. Page 70. 12 MR. STINSON: Can we have the reference 13 again, please, page. 14 MS. KOLICH: Page 70, line 20. 15 A. On 20, okay. 16 Q. Okay. 17 A. I'm there. 18 Q. Okay. And the question asks, up on that 19 line 18, "Is the settlement supported by parties with 20 diverse interests?" Do you see that? 21 A. Yes, yes, I do. 22 Q. And you indicated "No" on line 20; is 23 that right? 24 A. That's correct. 25 Q. Now, you indicate that several 204 1 environmental parties and others signed the 2 settlement. And the Environmental Law and Policy 3 Center, when I asked you about that in deposition, 4 you indicated that you had never heard of the ELPC; 5 is that right? 6 A. Correct. 7 Q. And you didn't know what ELPC's mission 8 statement was. 9 A. Yeah. I hadn't heard of them until I 10 read the stipulation. And I said I would like to 11 know more about them. 12 Q. Did you read the stipulation after our 13 deposition? 14 A. Well, I think you showed it to me. I 15 think you showed me the signatory. 16 Q. Oh, the signature page. I got you. 17 A. Yeah, I got it from you. 18 Q. I gotcha. So other than hearing their 19 name on the signature -- 20 A. Right. 21 Q. -- when I went over the signature page, 22 you had never heard of ELPC. 23 A. Correct. 24 Q. Okay. And you had never seen any 25 information on ELPC. 205 1 A. Correct. 2 Q. And if I recall, you never heard of Ohio 3 Environmental Council either. 4 A. Correct. 5 Q. And you are not familiar with what they 6 do. 7 A. No. 8 Q. And you don't know who, at the time I 9 asked you, you didn't know who the Ohio Power -- Ohio 10 Partners for Affordable Energy was, did you? 11 A. Correct. 12 Q. And you don't know who they help. 13 A. Correct. 14 Q. And I also asked you about IGS, and you 15 indicated that you didn't know anything about IGS at 16 the time either, did you? 17 A. Right. But I also indicated I did know 18 about Environmental Defense Fund, Natural Resources 19 Defense Council, EnerNOC, Kroger, the FirstEnergy 20 companies. So some of them I'm familiar with; some 21 of them I am not. It doesn't surprise me. 22 Q. Right. And another one you didn't know 23 about was Energy Management Solutions; isn't that 24 right? 25 A. That's correct. 206 1 Q. And on the top of page 71, line 2 -- 2 well, start at the end of line 1, you indicate the 3 Industrial Energy Users - Ohio did not sign the 4 settlement. Do you see that? 5 A. Right. And then -- let's see, right. I 6 see that. 7 Q. Right. Is that still your opinion today? 8 A. Well, I remember you showed me the 9 revised signature page so -- and I am looking at the 10 signature page right now. The signature page has a 11 list of signatory parties and then it has a list of 12 non-opposing parties who signed that they weren't 13 opposing, but not signing to support, so it wasn't a 14 signatory. 15 And then the only parties -- it's my 16 understanding the only parties that haven't signed 17 one way or the other are the Office of Consumers' 18 Counsel, the PUCO staff, and the Ohio Hospital 19 Association. 20 Q. So just to make sure we're clear, you 21 agree with me that Industrial Energy Users of Ohio 22 signed the stipulation as a non-opposing party? 23 A. I believe that's the case. I believe 24 that's the case based upon the revised signatory page 25 you showed me. 207 1 Q. Okay. Now back to page 5, line 8 of your 2 supplemental testimony. And we are going to go back 3 up to the first prong, kind of have a prong A -- 1A 4 and 1B. We talked about 1A. But if you will see 5 there, in addition to the settlement being a product 6 of serious bargaining, the bargaining has to be among 7 capable, knowledgeable parties. Is that your 8 understanding? 9 A. Yes. 10 Q. And do you have any reason to believe 11 that the parties involved in the settlement 12 discussions were not knowledgeable and capable? 13 A. Well, I only can speak obviously to the 14 parties that I know, and I would say all of the 15 parties that I know that I've listed are very 16 knowledgeable and very capable. 17 Q. You listed the companies too, right? 18 A. I did. 19 Q. Yes? 20 A. In fact, I have a good-working 21 relationship with them as a -- as an evaluator 22 overseeing them in Pennsylvania. 23 Q. Good. Okay. Let's switch gears -- 24 before we switch, I have got what I need to finish up 25 the three-prong test. So if you recall when you were 208 1 talking about the violation of important regulatory 2 principles, the -- you list two of them; the second 3 of which was dealing with you felt it violated the 4 cost-effectiveness principle. Is that a fair 5 characterization? 6 A. Right. From the perspective of using the 7 Market Potential Study. 8 Q. Using the Market Potential Study for what 9 purpose? 10 A. We talked about this in my deposition. 11 The companies' original filing that I examined didn't 12 have the level of detail we needed to figure out 13 which programs were cost-effective or not 14 cost-effective. So we went back to use the 15 companies' Market Potential Study which I did have 16 that detail. And my original testimony from 17 September identifies the programs that weren't 18 cost-effective. And my new -- the January testimony 19 talks about that issue as well. So the 20 identification of, you know, which programs aren't 21 cost-effective was based upon the Market Potential 22 Study. 23 Q. Okay. And we are going to get to the 24 program level analysis of whether it's cost-effective 25 a little later. But just to make sure I understand, 209 1 you're not claiming that the -- the companies' plans 2 at a portfolio level are not cost-effective. 3 A. Correct. 4 Q. They all have TRCs above 1? 5 A. Yeah. And I think the main issue with 6 respect to the shared savings mechanism is that, you 7 know, I find the concept that the company has 8 proposed of including all programs for the purposes 9 of counting kilowatt-hour savings, on the one hand, 10 not consistent with their application of the 11 calculation of the shared savings mechanism where 12 they exclude non-cost-effective programs. 13 And so when I talk about violating the 14 principle of cost effectiveness is that there ought 15 to be symmetry in the shared savings mechanism. If 16 you are going to count the savings from those 17 programs, then they should be included in the shared 18 savings mechanism because to do otherwise is not 19 symmetrical. So it's from that point of view that I 20 bring up the cost-effectiveness issue. 21 Q. Okay. 22 MS. KOLICH: Your Honor, I move to strike 23 everything beyond the answer to my original question 24 which was you're not claiming that the plans are not 25 cost-effective in a portfolio level -- portfolio 210 1 level. 2 MR. STINSON: Your Honor, I believe 3 that's a broad question. 4 EXAMINER BULGRIN: I am going to deny it. 5 Q. Okay. Shifting gears to the stakeholder 6 process. On page 64 of your original testimony, you 7 discuss stakeholders. 8 EXAMINER BULGRIN: I'm sorry. 64 of the 9 original? 10 MS. KOLICH: Original. 11 A. I'm there. 12 Q. Okay. Now, in the stakeholder process, 13 you didn't attend any of the stakeholder meetings 14 personally, did you? 15 A. That's correct. 16 Q. And do you know if the companies held any 17 technical conferences related to the plans when they 18 were originally -- prior to them being originally 19 filed? 20 A. My understanding -- and this is discussed 21 on page 64 of my testimony -- is they presented 22 presentations on their plans to stakeholders on 23 February 9 and March 22. 24 Q. Okay. And those are the only two you are 25 aware of. 211 1 A. Those are the only two that I am aware 2 of. 3 Q. Okay. Now, you were retained after the 4 plans were -- the original plans were filed, but did 5 you make any recommendations for modifications to the 6 revised plans before they were filed? 7 A. I did not. 8 Q. And as you just indicated, you noted 9 there were two -- at least two meetings; the February 10 meeting and the March meeting. Were there handouts 11 provided in those meetings? 12 A. Hold on just a second. I want to go back 13 to the prior question just for a second. When you 14 asked that question, did you say did we make -- did I 15 make any recommendations before the plans were filed 16 or the revised plans were filed? 17 Q. Before the revised plans were filed. 18 A. Ah, okay. And the revised plans were 19 filed in December? 20 Q. Yes. 21 MR. STINSON: If I could have a 22 clarification as to made recommendations to whom or? 23 MS. KOLICH: Made recommendations to 24 company personnel. 25 Q. Did you have any conversations with the 212 1 companies and make recommendations as to how you 2 might make changes to the plans outside of the -- 3 outside of the testimony you already filed? 4 A. There is three questions there. I guess 5 the first one is did I make any recommendations and I 6 would say, yes. 7 Q. I tell you what, I'll strike all of that 8 and ask one question at a time. 9 EXAMINER BULGRIN: Thank you. 10 A. Thank you. 11 Q. Okay. My question is, did you make -- 12 did you have any conversations with company personnel 13 and make any recommendations to company personnel? 14 A. I didn't have any conversations. The 15 only recommendations would be in my September 16 testimony. 17 MS. KOLICH: Your Honor, I move to strike 18 everything beyond I didn't make any recommendations. 19 A. You said the company personnel. 20 EXAMINER BULGRIN: I am going to overrule 21 that. But can we move on? Go ahead and finish your 22 statement. 23 THE WITNESS: I'm done. 24 EXAMINER BULGRIN: Okay. 25 Q. Now, on page 64, line 15, you indicate 213 1 that you reviewed two presentations that FirstEnergy 2 prepared. Do you see that? 3 A. Yes. 4 Q. One was dated February 9 and the other 5 March 22, correct? 6 A. Correct. 7 Q. Okay. Now, do you know if the members of 8 the stakeholder group received those presentations 9 prior to the meetings? 10 A. I don't know. 11 Q. And on page 65, you describe the 12 March 22 -- page 65, line 11, you describe the 13 March 22 presentation. Do you see that? 14 A. Yes. Yes. 15 Q. And you state that the program 16 descriptions remained brief and the info in the 17 presentation is substantially less detailed than the 18 info in the -- the information in the application. 19 Do you see that? 20 A. Yes. 21 Q. Now, since you didn't participate in the 22 share -- the stakeholder meetings, you wouldn't know 23 the level of detail that the companies provided 24 verbally in the stakeholder meetings, would you? 25 A. I would agree with that. 214 1 Q. Now, would you please turn to your 2 testimony at page 64, line 20. 3 A. And I assume we are in my September? 4 Q. We are still in the same testimony that 5 we were just referring to. 6 A. Okay. 7 Q. Now, I am going to start with the word 8 "basic." Make sure I have this right. So starting 9 with the word "basic" on line 11 of page 65 -- wait, 10 wait, wait. I'm a little fuzzy today. I'm sorry. 11 Page 64, line 20. 12 A. Okay. 13 Q. I want to make sure I have got your 14 testimony right here. "...basic information on 15 potential aspects of the 2017 to 2019 Portfolio, 16 including (a) identifying the 800,000 megawatt-hour 17 target, (b) deadlines, (c) a list of best practices, 18 (d) several bullet points describing what the MPS 19 would accomplish, (e) 12 pages of charts with brief 20 descriptions (some as short as one sentence) of 21 potential sub-programs, and (f) 11 pages of charts 22 listing measures, without any description, from 23 FirstEnergy's previous portfolio and some measures 24 that FirstEnergy was considering for its 2017 to 2019 25 Portfolio." Is that correct so far? 215 1 A. Yes. 2 Q. And then -- it goes on to say, "The 3 presentation does not include material information on 4 proposed costs, program design, or cost recovery 5 mechanisms. Furthermore, as FirstEnergy acknowledged 6 at the beginning of the presentation, the information 7 contained therein was 'preliminary,' "intended to 8 provide generally descriptive information," and 9 "subject to change." Is that an accurate read of 10 your testimony? 11 A. I think it's a verbatim read. 12 Q. Yes. And I would note for the record 13 that -- and this is a publicly-filed document that I 14 was not reading from his testimony. I was reading 15 from page 40 of the OCC objections. So if I recall, 16 I asked you at the beginning of your cross, whether 17 you drafted your testimony. Do you recall that 18 question? 19 A. I do. 20 Q. And you answered that you did. And when 21 I asked you who drafted the objections, you indicated 22 that Counsel for OCC drafted the objections. Do you 23 recall that? 24 A. Yes, I do. 25 Q. So who drafted what's found in your 216 1 testimony that I just read? 2 A. I drafted that description because I had 3 the presentation and I reviewed it and made a summary 4 of what was in the presentation. 5 Q. When was your testimony -- original 6 testimony filed? 7 MR. STINSON: Objection. The document 8 speaks for itself, your Honor. 9 EXAMINER BULGRIN: You can answer if you 10 know what the date is it was filed. 11 A. It looks like it was filed on 12 September 13. 13 Q. Okay. And it's your testimony that 14 your -- and it's your testimony here today that your 15 prefiled testimony filed in September was drafted by 16 you, but is verbatim with the objections filed by OCC 17 in June. 18 MR. STINSON: Objection. Asked and 19 answered. 20 EXAMINER BULGRIN: Sustained. 21 Q. Let's move on to cost cap. On -- these 22 will all be -- these references will all be to your 23 supplemental testimony. 24 A. Okay. 25 Q. On page 6, line 5. You indicate that the 217 1 settlement in this case should include a cost cap; is 2 that right? 3 A. Which? This is the new testimony. 4 Sorry. 5 Q. It gets confusing, I know. 6 A. Can you give me that page number again? 7 Q. Sure. It's page 6, line 5. 8 A. Okay. "Yes" is the answer to that 9 question. 10 Q. Okay. Now, if you are going to have a 11 cost cap, do you believe that the cap should be 12 developed at the same time the targets are 13 established; the energy efficiency targets that the 14 company's projecting? 15 A. I think that's one way that it could be 16 done. It doesn't have to be done that way, but it is 17 certainly one way that it could be done. 18 Q. And as far as you know, Ohio has no 19 statutory requirement for a cost cap; is that right? 20 A. That's my understanding. 21 Q. But are you aware -- do you know if the 22 statute creates the energy efficiency and peak-demand 23 reduction targets that the companies are required to 24 achieve? 25 A. The statute does state what those 218 1 reductions should be. 2 Q. And they are set out for a number of 3 years in advance; is that right? 4 A. That's correct. 5 Q. And on page 14 of your testimony, 6 line 19. 7 EXAMINER BULGRIN: Supplemental 8 testimony? 9 MS. KOLICH: Everything related to cost 10 cap will be supplemental. 11 Q. On line 19, you indicate that except for 12 the use of the 2015 data for all three years of the 13 plan period, you agree with staff's proposed formula 14 for determining the cost cap; is that right? 15 A. I do. 16 Q. Okay. Now, you haven't spoken to 17 Mr. Donlon about the cost cap. 18 A. I have not. 19 Q. And have you spoken to anybody else at 20 the Commission about this issue? 21 A. I have not. 22 Q. And on page 15, line 16, you indicate 23 "rate stability has been a key principle for rate 24 design over the long-term." Do you see that? 25 A. Yes, I do. 219 1 Q. Okay. Now, how do you define "rate 2 stability"? 3 A. Well, you know, actually the footnote I 4 provided, the "Bonbright" gives a long description of 5 rate stability, but it's basically to keep rates 6 stable over time without a lot of volatility. So I 7 would say, you know, to avoid large swings, 8 percentage increases, or decreases in rates over the 9 long term. That's how I would define it. 10 Q. Okay. Do you know if the companies are 11 currently in a rate freeze? 12 A. I do not. 13 Q. Do you know what the overall residential 14 rate is for customers in Ohio Edison's service 15 territory? 16 A. I have that information, but I couldn't 17 tell you what it is off the top of my head. 18 Q. Do you know approximately? 19 A. No. 20 Q. Okay. How about CEI? 21 A. No. 22 Q. Toledo Edison? 23 A. No. 24 Q. Do you know those rates for those 25 companies for either the industrial or commercial 220 1 customers? 2 A. No. I did look at those in that EIA 3 database we discussed during my deposition. I have 4 all that information. I just don't recall the 5 numbers. 6 Q. Okay. Would you happen to know what the 7 current level of rider DSC is for any of the three 8 companies? 9 A. No. I looked for it, but couldn't easily 10 find it. It's -- apparently, if you Google "Ohio 11 Edison DSC rate rider" it doesn't come up in the 12 first 100 responses. So I made an effort to find it, 13 but I haven't located it yet. 14 Q. So would that be for all three classes of 15 customers? You didn't find it for any of the 16 customer classes? 17 A. It didn't pop up. 18 Q. Okay. So I assume you wouldn't know what 19 the rider DSC was back in 2012. 20 A. No, no. 21 Q. Or in 2014? 22 A. Oh, no, no. I don't know what the DSC 23 rider is in any year. 24 Q. Okay. Do you know if only energy 25 efficiency and peak demand reduction costs flow 221 1 through rider DSC? 2 A. No. 3 Q. So you don't know anything about the 4 structure of rider DSC. 5 A. No. 6 Q. And in Ohio you didn't do any trend 7 analysis on the company -- the levels of rider DSC 8 over the years, have you? 9 A. No. The only information I looked at was 10 from Witness Donlon of the companies' -- of the PUC 11 staff where he talks about trends in the DSM rider 12 and that it had been -- was the largest rider of all 13 riders and he was concerned about the rate of 14 increase. Other -- that's the only information I've 15 seen. 16 Q. Okay. So you are basically relying on 17 Mr. Donlon's testimony related to impacts on rates. 18 A. Well, in terms of the rate of increase in 19 the rider, I think that was what he was concerned 20 about that it's been growing and becoming larger and 21 larger and was now the largest riders. So my 22 understanding was he was concerned about the size of 23 the rider and as well as the rate impacts. So, yeah, 24 I am relying on his -- his testimony. 25 Q. Okay. Now, are you aware that the 222 1 companies have estimated what they believe the 2 acquisition costs are under the revised plans? 3 A. Yes. 4 Q. And do you know what that value is? 5 A. 16 cents, I think it was about 16 cents. 6 Q. Would you happen to know what the 7 estimated acquisition costs are for AEP? 8 A. Well -- oh, estimated, no. 9 Q. Duke Ohio? 10 A. No. 11 Q. Dayton? 12 A. No. 13 Q. And did you happen to review the 14 companies' estimates -- estimated costs of the 15 various programs included in the revised plans for 16 reasonableness? 17 A. I didn't perform any detailed analysis of 18 the components of the costs in each program. 19 Q. And you have no opinion on what the cost 20 of the plan proposed by the companies should cost, do 21 you? 22 A. Well, my answer is the same as in my 23 deposition in terms of is that -- is the 16 -- is 24 your question is the 16-cent acquisition cost 25 proposed by the company -- do I have an opinion on 223 1 that? Is that your question? 2 Q. No. 3 A. Maybe you can ask your question again. 4 Q. Sure. Do you have any opinion on what 5 you believe the companies' revised plans should cost 6 as proposed? 7 A. I haven't done any detailed analysis, but 8 the number that they are proposing of 16 cents in my 9 opinion, without having done a detailed analysis, is 10 a reasonable number and well within the ballpark of 11 other utilities in the region. 12 Q. On page 15, line 18, you indicate that 13 you believe that staff's proposal provides for a 14 reasonable relief valve. 15 A. Yes. 16 Q. And that relief valve would trigger 17 should the companies find that they can't -- they 18 don't believe they will be able to hit their 19 statutory targets; is that right? 20 A. Right. If they believe they can't meet 21 their statutory savings requirements, the companies' 22 proposal provides a reasonable relief valve, yeah, I 23 agree with that. Is that what you asked me? 24 Q. The companies' proposal -- 25 A. I'm sorry. The staff -- if the -- my -- 224 1 my testimony says that if the company finds that they 2 would not be able to meet the statutory savings 3 requirements within the annual cost cap, that the 4 staff's proposal provides a reasonable relief valve. 5 Q. Okay. And that relief valve would be to 6 come to the Commission and ask for an amendment of 7 their statutory targets. 8 A. Correct. 9 Q. So if the companies find that they cannot 10 hit their targets with the amount of money allocated 11 to them or capped out under the staff's cap which is 12 80.1 million, correct? 13 A. Correct. 14 Q. Okay. So if the companies, let's say, in 15 2017 find that they cannot hit their statutory 16 targets, say, in October of this year, and if they 17 continue to spend to try to hit those targets, is it 18 your understanding that the companies will not 19 recover that amount that's above the $80 million? 20 A. Well, my -- I am going to give an answer 21 identical to the deposition in that that situation 22 will not happen and this is why -- 23 Q. That was a different scenario but. 24 A. Well, I don't think that that's a 25 realistic scenario and I said that during my 225 1 deposition and I am going to stick with that because 2 what I said in my deposition was that the companies 3 and the interested parties and the Commission follow 4 the progress of the spending and savings on a daily 5 basis. The company has data on this and in many 6 cases real time. So there's no reason that they 7 should get to October, oops, you know, we are going 8 to run out of money. 9 I think based on my experience around the 10 country that utilities, interested parties, and 11 commissions, they follow these things very closely. 12 Because of the technology we have, they won't get 13 into a situation like that because people are doing 14 their job and they are prudent and they are acting in 15 the best interest of their customers. 16 They are going to know well before 17 October whether there is a problem. I think that 18 it's an unrealistic scenario to say, well, we are in 19 October and we messed up. That's -- that is a 20 worst-case scenario. I guess the only thing worse is 21 if they came in December 30, but I truly believe that 22 is a -- one of these improbable scenarios and that 23 there are many mechanisms that exist to deal with 24 those. And there are examples from other states that 25 have these mechanisms and the parties work very 226 1 closely together so you don't end up in a situation 2 like that. 3 MS. KOLICH: Your Honor, I move to strike 4 that entire response as nonresponsive. First of all, 5 the scenario he described was not a scenario I 6 presented to him, specifically. He is referring to 7 one that he discussed in his deposition that was 8 different. 9 EXAMINER BULGRIN: I am going to 10 overrule. 11 MS. KOLICH: Overruled? 12 EXAMINER BULGRIN: Yes. 13 MS. KOLICH: Okay. 14 Q. Well, why don't we get back to the 15 scenario I asked, regardless whether you believe it 16 could happen or not. If the companies spend more 17 money than they are allowed under the rate cap, 18 whether they can hit their targets or not, but they 19 have to spend money more so than is allocated under 20 the rate cap. Do you understand that scenario? 21 MR. STINSON: I am going to object to 22 that scenario, your Honor. It assumes facts not in 23 evidence. 24 MR. OLIKER: It's a hypothetical. 25 EXAMINER BULGRIN: Yeah, I am going to 227 1 overrule the objection. Had you finished? I am not 2 sure. 3 MS. KOLICH: No. So we are going to just 4 strike that and I am going to start over. 5 EXAMINER BULGRIN: Thank you. 6 Q. Okay. Whether you believe it's a -- 7 whether you believe this could happen or not, and I 8 am not even going to say they can't hit their targets 9 and they discover in October. Let's say they are 10 allocated $80.1 million, and in October they are out 11 of money, and they are going to spend more money and 12 try to continue the programs. 13 Is it your understanding that the 14 differential between what the Commission -- what the 15 cost cap is and what the actual spend is above that, 16 that differential, is it your understanding that the 17 companies will not be able to recover that? Or -- 18 will the companies, under your proposal, be able to 19 recover that differential? 20 A. No. And this is a hypothetical, right? 21 Q. Yes. 22 A. Okay. In this hypothetical, my 23 hypothetical response is that -- two sentences. If 24 the company takes no action and to request, you know, 25 relief from the Commission and that would include 228 1 emergency rate relief, the company takes no action 2 and it decides that, and it goes forth with the 3 programs and doesn't ask for relief from the 4 Commission, then, yes, it wouldn't -- it would not 5 get -- be able to recover. 6 Second sentence is that of course any 7 prudent company or utility would ask for either 8 emergency rate relief or a relief under this 9 provision of the shareholder incentive. 10 Q. On page 16, line 16, you state staff's -- 11 are you there? 12 A. Yes. 13 Q. Sorry. You state that staff's 3 percent 14 cost cap would likely give FE ample opportunity to 15 achieve its statutory minimum savings. Do you see 16 that? 17 A. Yes. 18 Q. But you don't know for a fact that the 19 companies will be able to hit that target with the 20 staff's proposed cost cap, do you? 21 A. I don't know with 100 percent certainty, 22 but I have done more research on that issue since we 23 last talked. 24 Q. And I have no questions about your 25 additional research before you. 229 1 A. Okay. 2 MR. STINSON: Well, your Honor, I think 3 he can finish the question -- finish his answer. 4 MS. KOLICH: You can ask him on redirect, 5 but I have no questions about additional research 6 done. 7 EXAMINER BULGRIN: That's fair. 8 MR. STINSON: I don't think he should be 9 cut off, your Honor. He can finish. She can make 10 your -- 11 MS. KOLICH: If I don't, I am going to 12 have a record that's going to be padded quite a bit. 13 EXAMINER BULGRIN: You can ask on 14 redirect if you feel it's necessary. 15 Q. (By Ms. Kolich) Let's go to your 16 testimony where you discuss your state comparisons. 17 I believe it starts on page 18 of your supplemental 18 testimony. And, actually, we'll take them a little 19 out of order, so we will start with Texas on page 19, 20 line 5. 21 A. Hold on. Okay. 22 Q. All right. So on line 5 you indicate 23 that during the calendar year 2015, the 10 24 investor-owned utilities in Texas saved a total 25 564,689,053 kilowatt-hours on an annual basis. Do 230 1 you see that? 2 A. Yes, I do. 3 Q. And in support of that, you cite to 4 footnote 18 which is a report prepared by Tetratech; 5 is that correct? 6 A. That's correct. 7 Q. Okay. Now, were you involved in the 8 development of that report with Tetratech? 9 A. No. 10 Q. Do you know the source of the data that 11 Tetratech used when accumulating and reporting these 12 numbers? 13 A. All I know is that Tetratech is the 14 statewide evaluator, so I don't know the precise 15 source, but it would be from their evaluations. They 16 do the evaluations for the utilities, those 10 17 utilities in Texas. So I assume it's from their 18 evaluation work that they did for that particular 19 year, 2015. 20 Q. But that's an assumption on your part. 21 A. That's right. 22 Q. So basically you are just relying on the 23 information you read in the Tetratech report. 24 A. That's correct. 25 MS. KOLICH: Your Honor, I would move to 231 1 strike lines 4 through 10 of his testimony on the 2 grounds that it's hearsay. I have no opportunity to 3 cross-examine the witnesses who prepared that report. 4 I have no idea what assumptions they made. I have no 5 idea whether the -- the comparison between what they 6 did from a TRM standpoint or other standpoint is 7 comparable to what we do in Ohio and I have no way of 8 asking questions about it. 9 MR. STINSON: Your Honor, that's a 10 publicly-available report before the Texas 11 Commission. It's entitled to weight in his 12 testimony. 13 MS. KOLICH: I couldn't find it. Did you 14 say it was a public report? 15 EXAMINER BULGRIN: This is a 16 publicly-filed report? 17 THE WITNESS: Yes. It's available on the 18 internet. 19 EXAMINER BULGRIN: Okay. 20 THE WITNESS: That's where I got it. 21 EXAMINER BULGRIN: Off a Texas website? 22 THE WITNESS: Boy, I would have to go see 23 whose it was, but it's -- I found it on the internet. 24 I don't remember the website link off the top my 25 head. 232 1 MS. KOLICH: Well, your Honor, where is 2 the cite to the -- where is the citation to the 3 internet? Because I looked all over for this report 4 and I could not find it. 5 THE WITNESS: I would be glad to take 6 that as a Data Request and provide that. 7 EXAMINER BULGRIN: Yeah, I was going to 8 have you, say, have Counsel file whatever is the 9 appropriate link is for that report. So I am going 10 to overrule your motion. 11 MS. KOLICH: Okay. 12 Q. (By Ms. Kolich) Mr. Spellman, are you 13 familiar with Frontier Associates, LLC? 14 A. I am -- I am familiar with that firm. 15 Q. You are? 16 MS. KOLICH: I have a document, your 17 Honor, it's a 14 -- 14-page document entitled "Energy 18 Efficiency Accomplishments of Texas Investor-Owned 19 Utilities Calendar Year 2015" that I would like -- 20 that I would like marked as Company Exhibit 7. May 21 we approach the witness? 22 EXAMINER BULGRIN: Yes. Okay. This will 23 be marked Company Exhibit 7. 24 (EXHIBIT MARKED FOR IDENTIFICATION.) 25 A. I'm there. Sorry, I didn't realize you 233 1 were waiting on me. 2 Q. I wanted to make sure you had time to 3 look at the report and be -- have you seen this 4 report? 5 A. I have not. 6 Q. Mr. Spellman, would you look at page 5 -- 7 MR. STINSON: Your Honor, I object to 8 further questions on this. There was not a proper 9 foundation laid for examination and the witness has 10 stated he hasn't seen the report. 11 MS. KOLICH: Your Honor, I am using it 12 strictly for impeachment purposes and it's just a 13 demonstration that there's another report out there 14 that is not consistent with the report that I have 15 yet to see from Tetratech. 16 MR. STINSON: Your Honor -- 17 EXAMINER BULGRIN: Could we at least know 18 where this report came from? 19 MS. KOLICH: From Frontier Associates, 20 LLC. I would have to -- could we take a 5-minute 21 break and I'll check with the people who found it for 22 me? 23 MR. STINSON: Your Honor, it's still 24 irrelevant because the witness has testified he does 25 not have knowledge of it. There is no foundation for 234 1 this document. 2 EXAMINER BULGRIN: I think if we allow 3 one report, we need to allow the parts on both sides. 4 MR. STINSON: The difference, 5 Mr. Spellman is familiar with the report in his 6 testimony. If FirstEnergy wanted to admit a document 7 into this record, they can do this through their own 8 witness rather than through my witness who has no 9 knowledge of the report. 10 MS. KOLICH: I haven't moved for its 11 admission, and it is used strictly to impeach an 12 expert witness with another -- with a report that 13 other experts may rely on. 14 MR. STINSON: It's the same issue with 15 respect to me addressing questions with Mr. Spellman 16 on cross-examination; once it's in the record, it's 17 in the record. I object to further questions on the 18 report for lack of foundation. 19 EXAMINER BULGRIN: I will tell you what, 20 let's take about 5 minutes here. How much more time? 21 MS. KOLICH: I have got quite a bit. 22 EXAMINER BULGRIN: Okay. So we will 23 probably end up breaking for lunch at some point 24 then? 25 MS. KOLICH: Yeah. 235 1 EXAMINER BULGRIN: All right. 5 minutes. 2 (Recess taken.) 3 EXAMINER BULGRIN: Okay. Let's go back 4 on the record. 5 And I believe there is a pending motion 6 regarding Company Exhibit 7. Ms. Kolich, do you want 7 to explain where this came from? You're seeking only 8 to use this -- 9 MS. KOLICH: For impeachment purposes. 10 EXAMINER BULGRIN: For impeachment 11 purposes only. So I am going to allow you to do that 12 if you can kind of give us -- let us know where this 13 came from. 14 MS. KOLICH: Sure. During the break I 15 was informed that this Company Exhibit 7 is publicly 16 available on the internet at www.Texasefficiency.com. 17 MR. STINSON: And if I could be heard 18 just a last time, your Honor. 19 EXAMINER BULGRIN: Sure. 20 MR. STINSON: This is a proper document 21 to consider in rebuttal, not now, so I continue my 22 objection. 23 EXAMINER BULGRIN: Duly noted. 24 MS. KOLICH: I didn't hear that. 25 EXAMINER BULGRIN: I noted his objection 236 1 and I am overruling it. 2 MR. STINSON: My objection, Kathy, this 3 is a proper document for rebuttal and I want to 4 continue my objection. 5 MS. KOLICH: I have a response, but since 6 you overruled him, I will stop. 7 EXAMINER BULGRIN: Let's move forward. 8 MS. KOLICH: Okay. 9 Q. (By Ms. Kolich) Mr. Spellman, do you have 10 what's been marked as Company Exhibit 7? 11 A. Well, mine isn't marked, but yes, I 12 believe I have. 13 Q. It's the "Energy Efficiency 14 Accomplishments of Texas Investor-Owned Utilities." 15 A. Yes. 16 Q. Okay. If I could have you turn to page 5 17 of that report. 18 A. I'm on page 5. 19 Q. Okay. And on the far left column there 20 is a list of 10 utilities. Are those the same 10 21 utilities that you referred to in your testimony? 22 A. Subject to check. 23 Q. Okay. And looking at that table on 24 page 5, the second column says "Funds Expended." 25 That would be the costs incurred by the applicable 237 1 utility; would that be right? 2 A. Could you clarify that and tell me funds 3 expended for what? 4 Q. This would be, as Table 3 says, "Program 5 Expenditures and Reported/Verified Savings for 2015" 6 with a footnote that says it's provided in each 7 utility's energy efficiency plan and report for 8 calendar year 2015. So all savings are reported at 9 the meter. So I'm asking you if you would agree with 10 me the second column, "Funds Expended," would be the 11 costs incurred by the indicated utility for energy 12 efficiency programs. 13 A. I would not agree with that. 14 Q. What do you think it is? 15 A. If you read carefully on page 5, it 16 describes that these are for standard offer programs. 17 And the type -- it says that the utilities offer 18 different types of standard offer programs. And it 19 talks about how the following sections describe the 20 different types. 21 And if you turn to page 6, it gives the 22 breakdown of the different types, and you will notice 23 in the top, Figure 4, it says demand reduction 24 programs. This would be for kW savings. 68 percent 25 of it comes from load management, not energy 238 1 efficiency. 2 So the part of the chart that's for 3 residential standard offer programs, commercial, I 4 don't know what "HTR SOP" is, but low-income 5 weatherization, those would be energy efficiency. 6 Solar photovoltaics, I am not sure if that's energy 7 efficiency or generation. But I guess the problem I 8 see is that I think the expenditures are -- some of 9 them are for energy efficiency, but it's obvious that 10 some of them are for load management programs. 11 Q. So in your testimony where you refer to 12 your values of .114 on line 9. 13 A. That's only for the energy efficiency 14 piece. So what I did was I segregated out the things 15 that were load management. I excluded load 16 management in the kW reductions from load management 17 from my calculation. I only included the energy 18 efficiency. So what you have here is an 19 apples-and-oranges comparison. 20 Your report includes energy efficiency 21 and demand -- and load management, and the report 22 that I used only looked at energy efficiency. So you 23 really can't compare the two. 24 Q. When comparing, apples to apples, between 25 the costs incurred in Texas and the costs that would 239 1 be incurred in Ohio, in Ohio we have peak-demand 2 reduction requirements; is that right? 3 A. Well, I would have to go back to the 4 statute. My understanding of the statute is there -- 5 you have that 1 percent reduction, and I have been 6 thinking that we have been talking about energy 7 efficiency. But I guess I would have to look at the 8 statute to make sure. 9 Q. Well, if you are going to compare 10 acquisition costs by state, you should include the 11 same components, shouldn't you? 12 A. Yes. 13 Q. Okay. So if Ohio -- if Ohio has a 14 peak-demand reduction requirement and -- well, the 15 total -- the plan that's before the Commission and 16 the budgets include peak-demand reduction; is that 17 right? 18 A. Yes, because the title of the application 19 is "Energy Efficiency and Peak Demand Reduction 20 Programs." 21 Q. Right. So if you are going to compare 22 the acquisition costs by state or compared to the 16 23 cents that Mr. Miller has estimated, you would 24 include the peak-demand reduction costs. 25 A. Well, I guess what you asked me was 240 1 should the comparison be done consistently and my 2 answer was yes. So that if you're only looking at 3 the acquisition costs for energy efficiency, it 4 should be done the same -- your calculation should be 5 done the same way. And typically in doing 6 comparisons across states or utilities, those -- the 7 energy efficiency is compared on a cost per 8 first-year kilowatt-hour savings and the demand 9 response is compared on a dollars per kilowatt basis. 10 Q. I understand that, but when you are 11 looking at -- strike that. 12 MS. KOLICH: Your Honor, given that we've 13 not seen the Tetratech report and it is a 14 publicly-available document, I would ask that the 15 Commission take administrative notice of it. 16 EXAMINER BULGRIN: Sure. 17 Q. Okay. In your testimony, line 4, let me 18 find the page number for you. Texas, so it would be 19 on page 19. 20 A. Okay. 21 Q. Okay. We're there. In your analysis you 22 don't know how the Texas PUC determines the cost of 23 the O&M, do you? 24 A. Give me a second here. No. 25 Q. And you also don't know if there is a -- 241 1 if the ceiling includes any values for peak-demand 2 reduction, do you? 3 A. No. 4 Q. And you don't know if it includes any 5 provisions for shared shavings incentive payments? 6 A. No. 7 Q. And on -- of your 564 million 8 kilowatt-hour number on line 7, you don't know what 9 percentage of annual sales that equates to, do you? 10 A. No. 11 Q. And the data you are providing is for 12 calendar year 2015; is that correct? 13 A. That's correct. 14 Q. And you have no projected costs for the 15 savings for the period 2016 through 2019, do you? 16 A. Correct. 17 Q. And you did no such analysis, did you? 18 A. Correct. 19 Q. Okay. Let's go to Wisconsin on page 20. 20 Do you know if the State of Wisconsin has deregulated 21 its generation service? 22 A. I believe that it has. 23 Q. And do you have -- do you have any 24 knowledge as to what the average rate the residential 25 customer pays in Wisconsin? 242 1 A. No. 2 Q. Do you know the wholesale auction 3 clearing prices for generation that would be 4 delivered into Wisconsin? 5 A. No. 6 Q. On page 20, line 15 you make reference to 7 "Focus on Energy." Do you see that? 8 A. Yes. 9 Q. This -- that's a statewide public 10 benefits program that is run by a quasi-governmental 11 agency; isn't that right? 12 A. Correct. 13 Q. And that program is not run by Wisconsin 14 utilities. 15 A. Funded by them but implemented through 16 the quasi-governmental agency. 17 Q. Right. Do you know if the only funding 18 for "Focus on Energy" is provided by the utilities? 19 A. To the best of my knowledge, that's the 20 only source of funding is the utilities. 21 Q. Do you know that for certain? 22 A. 90 percent certainty. 23 Q. Do you have a copy of your deposition 24 transcript? It would be your second one. 25 A. I do. 243 1 Q. Would you pull up page 284. 2 A. Okay. 3 Q. Okay. Starting on line 4, it reads: 4 "And do you know if the 'Focus on Energy' programs 5 are funded solely by the utilities or do they have 6 other sources of funding for that program?" And your 7 answer on line 8 was? 8 A. Oh. At that time I didn't know. 9 Q. Okay. And you don't know if the 10 Wisconsin utilities have a mandatory EE target, do 11 you? 12 A. I have to look that up. Find the right 13 volume. I don't know. 14 Q. When you -- when you did your analysis 15 regarding Wisconsin, I guess it's actually on page 21 16 where you talk about the numbers, was that based on 17 an assumption that Wisconsin's generation was 18 regulated or deregulated? 19 A. It wasn't based on any assumption with 20 respect to that. 21 Q. Wouldn't whether they are regulated or 22 deregulated have any impact on your analysis? 23 A. Well, let me think this through. I think 24 the point I was trying to make is here is a utility 25 that had saved .8 percent of statewide electricity 244 1 sales at a cost less than 1.2 percent of electric 2 utility annual operating revenues. So I don't see 3 why that assumption would matter one way or the 4 other. 5 MS. KOLICH: Okay. So could you just 6 have that question reread, please. Or the answer. 7 (Record read.) 8 Q. Okay. That "less than 1.2 percent" 9 estimate that you referred to, that would be only if 10 the utilities were the sole source of funding for 11 "Focus on Energy," wouldn't it? 12 A. Let's see, can you repeat that question? 13 Q. Sure. You stated that the utilities 14 were -- or the focus on utilities program -- "Focus 15 on Energy" program was able to achieve a certain 16 level of savings at 1.2 percent of revenues, total 17 sales; is that right? 18 A. Okay. So -- give me a second on that 19 one. I don't think so, and this is why, the law -- 20 the act says that you only can spend 1.2 percent of 21 electric utility annual operating at the maximum. So 22 let's just take an example where -- where the "Focus" 23 program gets that amount of money from the utilities, 24 spends it, and savings, .8 percent, if let's say 25 there was another source of funding, another source 245 1 of fundings, I don't know, from the Federal 2 Government, and, I don't know, $100 million, then 3 what the utility -- I mean the -- they still would 4 have spent 1.2 percent of electric utility annual 5 operating revenues to cover the utility's share of 6 the cost of those programs. 7 So I don't think that you are correct. I 8 think that the -- if they are allowed 1.2 percent and 9 they spend 1.2 percent, it stays 1.2 percent even if 10 there is $100 million put in by the Federal 11 Government. 12 Q. Do you know if Wisconsin has mandatory 13 peak-demand reduction targets? 14 A. I don't know off the top of my head. 15 Q. And do you know if any of the costs 16 related to -- well, do you know if they have a shared 17 savings incentive mechanism in place in Wisconsin? 18 A. I actually have that data, so let me look 19 it up. I printed out the table this time so I could 20 read it. For the programs that are proposed and run 21 by the utilities, which there are some, they do have 22 a shared savings. Well, I will call it a performance 23 and they can earn a rate of return equivalent to new 24 capital investments or propose other shared savings 25 mechanisms such as decoupling, lost revenue, 246 1 recovery, et cetera. That's in the -- the AC -- one 2 of the ACEEE reports we provided in a data response. 3 So the utilities can propose such shared savings 4 mechanisms. 5 Q. And the shared savings mechanism you 6 described for Wisconsin is different from that 7 included in the revised plans; isn't that right? 8 A. Well, the ones I mentioned, but my 9 understanding they can propose any shared savings 10 mechanism, so they could propose coupling, they could 11 propose a mechanism like you have here in Ohio. They 12 could propose one like exists in other states. So it 13 doesn't limit them to any specific type of shared 14 savings. 15 Q. Right. Do you know which one is in 16 effect today? 17 A. No, I don't. 18 Q. So let's switch to Pennsylvania on 19 page 18. Now, correct me if I am wrong, but I 20 believe PA is into their Phase III of their EE 21 program; is that correct? 22 A. Yes. 23 Q. And Phase III covers June 1, '16 through 24 5-31-20; is that right? 25 A. Let me think about that. I think it's 247 1 through '21, it's a five-year, five-year phase. 2 Q. And Phase II just ended at the end of 3 '16; is that correct? 4 A. It ended May 31st of 2016. 5 Q. Oh, that's right. 6 A. And the final reports will be completed 7 by February 28. 8 Q. Okay. And Phase I was the period June 1 9 '09 to May 31, '12. 10 A. '13. 11 Q. '13. Oh, yeah. And except for Phase I 12 where the utilities' targets were established by 13 statute; is that right? 14 A. Yes. 15 Q. Except for Phase I, the Commission now 16 establishes the statute -- or the energy efficiency 17 targets and peak-demand reduction targets for the 18 utilities; is that right? 19 A. Correct. 20 Q. And, in fact, as the SWE, you would have 21 had a lot of involvement in the development of those 22 targets, wouldn't you? 23 A. Yes. 24 Q. And when establishing those targets, I 25 believe in your deposition you told me you did a 248 1 rigorous analysis to take into account the 2 characteristics of each service area; is that right? 3 A. Yes. 4 Q. And you created EE baseline studies for 5 each utility? 6 A. Yes. 7 Q. And you performed on-site visits to a 8 random sample of residential and commercial 9 customers? 10 A. Yes. 11 Q. And you performed EE potential studies 12 and demand response potential studies for each 13 utility? 14 A. Yes. 15 Q. And you collected a tremendous amount of 16 data on measures, cost savings, and useful lives; is 17 that right? 18 A. Yes. 19 Q. And you did technical analysis of what 20 utility costs had been in the past and what they 21 would be likely to be going forward; is that right? 22 A. Yes. 23 Q. And all of this took you about a year; is 24 that right? 25 A. Yes. 249 1 Q. Now, do you know if the Ohio staff did a 2 similar analysis in Ohio before establishing the cost 3 caps being proposed in -- in Ohio? 4 A. I think we talked about this in my 5 deposition last week. And my answer would be similar 6 to last week is that my understanding is they didn't 7 do that full-blown type of analysis, that they did a 8 less substantial data analysis of data they had for 9 the programs here in Ohio, reviewed information -- 10 energy efficiency and demand response demand savings 11 information from the companies. 12 And Mr. Donlon's testimony says based 13 upon a review at sort of that level of analysis, they 14 felt comfortable with their -- that the utilities 15 here in Ohio -- or at least FirstEnergy utilities 16 could achieve the statutory savings benchmarks within 17 a 3 percent cap. So that's my understanding of what 18 the staff did. 19 Q. Now, besides -- and are -- are you 20 familiar with Mr. Donlon's most-recent testimony? 21 A. Yes. 22 Q. And besides him indicating in his 23 testimony that he looked at a prior status report, I 24 didn't see any reference to reviewing all of the data 25 you just talked about, so could you point me to where 250 1 Mr. Donlon says that? Because if I recall, you said 2 you relied on his testimony and had not spoken to 3 him. 4 A. I have to find the right volume. 5 EXAMINER BULGRIN: Let's go off the 6 record for a minute. 7 (Discussion off the record.) 8 EXAMINER BULGRIN: Mr. Stinson, we are 9 back on. 10 MR. STINSON: Yes, your Honor. I was 11 just going to raise the objection, the 12 cross-examination is beyond the scope of 13 Mr. Spellman's direct testimony when he is being 14 asked questions about Mr. Donlon's testimony and 15 analyses. 16 MS. KOLICH: Your Honor, I will withdraw 17 the question. 18 EXAMINER BULGRIN: Thank you. 19 MS. KOLICH: We'll move on. 20 Q. (By Ms. Kolich) Now, on line 13 -- I'm 21 sorry, give me a second here. Yes, on line 13, 22 page 18, you state that during the period 2009 to 23 2013, utilities in Pennsylvania were able to achieve 24 the kilowatt-hours savings of approximately 1 percent 25 while spending less than 2 percent of sales statutory 251 1 spending cap. Do you see that? 2 A. Yes. 3 MS. KOLICH: Your Honor, I would like to 4 have marked as an exhibit Company Exhibit 8. 5 EXAMINER BULGRIN: Company 8, yes. 6 MS. KOLICH: Yes. Company Exhibit 8. 7 It's the cover page of the Pennsylvania 8 Implementation Order in case docket number 9 M-2014-2424864. Public meeting held June 11, 2015. 10 It's a multi-page document that includes the cover 11 page, the table of contents of the full order, and 12 then the relevant portions of that order in its 13 entirety on the subject that I will be asking 14 questions about. 15 EXAMINER BULGRIN: Okay. 16 Q. And when you get the document, 17 Mr. Spellman, would you turn to page 57, and I am 18 going to be talking about the chart that's on the top 19 of page 57. 20 EXAMINER BULGRIN: Okay. This is marked 21 Company Exhibit 8. 22 (EXHIBIT MARKED FOR IDENTIFICATION.) 23 MS. KOLICH: Yes. 24 MR. STINSON: Your Honor, at this point, 25 too, I would object on the basis of only having a 252 1 partial document here. We should have a full 2 document for him to be reviewing. 3 MS. KOLICH: Your Honor, I kept in the 4 relevant portions of the order, but we have a full 5 copy for the witness and OCC, if they desire to have 6 one, but it's a very voluminous report and to make 20 7 copies of something where I am going to cross on two 8 pages. 9 EXAMINER BULGRIN: Yeah, I agree. 10 MS. KOLICH: We tried to save money. 11 MR. STINSON: If they have the whole 12 document, I prefer the whole document be included as 13 part of the record then. 14 EXAMINER BULGRIN: Well, I will take 15 administrative notice of the entire document; how's 16 that? This is publicly filed and available. 17 MS. KOLICH: It's a Commission order. 18 EXAMINER BULGRIN: Thank you. 19 MR. KELTER: It's a final order, right? 20 MS. KOLICH: Yes. Well, Implementation 21 Order. Yes, it's the Implementation Order. 22 Q. Okay. Mr. Spellman, are you on page 57? 23 A. Yes, I am on page 57. 24 Q. Okay. Do you recognize this table 25 included in the Commission order? 253 1 A. Yes, because we talked about it during 2 the deposition last week. 3 Q. And as the SWE, did you have any input 4 into the data that's included on this table? 5 A. Yes. 6 Q. And just so I understand the table and we 7 are on the same page, the far left column is a list 8 of the Pennsylvania utility -- electric utilities, 9 also known as electric distribution companies, EDCs, 10 that -- that have more than 100,000 customers in the 11 state; is that correct? 12 A. Yes. 13 Q. And column 2 is the spending cap for each 14 of those EDCs; is that right? 15 A. Yes. 16 Q. And PECO's budget cap is significantly 17 higher than the others, and I recall during 18 deposition you explained that that was because PECO's 19 rates are quite a bit higher than the other 20 utilities? 21 A. Yes, that's correct. 22 Q. And column 3, "Program Acquisition Costs 23 First Year Saved," that would be the estimated 24 acquisition costs for each of the respective EDCs; is 25 that right? 254 1 A. Yes. 2 Q. And what is column 4? 3 A. Those 2020, my understanding -- my 4 recollection is that would be what you could save -- 5 what you will have saved on a cumulative annual basis 6 by the end of year five of what they call Phase III. 7 So that would be the amount of savings on an 8 annualized basis from all the installations of energy 9 efficiency projects that have been completed through 10 May 31st of 20 -- it says 2020, but it's actually 11 May 31st of 2021, I believe. But it's a five-year 12 period. 13 Q. And the final column on the far right, 14 what does that portray? 15 A. That is column 4 -- let's see, column 4 16 divided by the forecast that existed for a 12-month 17 period. It's not quite calendar year 2010, but it's 18 what they are required to use as the baseline. It's 19 essentially a forecast for the year that was done for 20 the year 2010 back in 2009. 21 Q. Okay. So if I wanted to determine the 22 average percentage of savings achieved on an annual 23 basis, since the data is over a five-year period, I 24 would have to divide the number in the far right 25 column by 5; is that right? 255 1 A. Right. I want to point out this would be 2 for that forecast period. So this would be going 3 forward over that five-year period. 4 Q. Right. And if I did the math right and 5 if you agree with me, subject to check, if I divided 6 each of those percentages in the far right side by 5, 7 West Penn Power would be .52, PPL would be .76, Penn 8 Power would be .66, PECO -- I'm sorry, Penelec would 9 be .78, PECO would be 1, and Met-Ed would be .8 and 10 Duquesne would be .62? 11 A. Subject to check, yes. 12 Q. So except for PECO, all of the other EDCs 13 achieved less than 1 percent savings under the 14 Pennsylvania statutory caps; is that correct? 15 A. No, because you used past tense. You 16 said "achieved." They're forecasted to achieve less 17 than 1 percent. 18 Q. Okay. With that correction. 19 MR. STINSON: Could I have the question 20 reread, please. 21 (Record read.) 22 MR. STINSON: Asked and answered, your 23 Honor. 24 EXAMINER BULGRIN: Overruled. I think he 25 has already answered it. 256 1 MS. KOLICH: Do you want to break, or 2 should I go on to the next state? 3 EXAMINER BULGRIN: If this is a good 4 place to break, let's do it now. An hour? Hour and 5 a half? Let's be back at 1:00. 6 (Thereupon, at 12:01 p.m., a lunch recess 7 was taken.) 8 - - - 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 257 1 Tuesday Afternoon Session, 2 January 24, 2017. 3 - - - 4 EXAMINER BULGRIN: Let's go back on the 5 record then. 6 Ms. Kolich. 7 MS. KOLICH: Thank you, your Honor. 8 Could you read back the last question I 9 asked. I believe it was regarding Pennsylvania. 10 (Record read.) 11 - - - 12 RICHARD F. SPELLMAN 13 being previously duly sworn, as prescribed by law, 14 was examined and testified further as follows: 15 CROSS-EXAMINATION 16 By Ms. Kolich: 17 Q. Mr. Spellman, if you could go to page 21, 18 line 12, where we talk about Maine. 19 A. I'm there. 20 Q. You beat me again. In your testimony on 21 page 21 regarding Maine, you reference the Maine 22 Trust and that's a public benefits organization 23 which, like in Wisconsin, is run by a 24 quasi-governmental organization? 25 A. Yes. 258 1 Q. And it runs the EE programs for the State 2 of Maine; is that correct? 3 A. Yes. 4 Q. And the state utilities have no 5 energy-efficiency targets, do they? 6 A. Correct. 7 Q. Is the Trust funded by the state 8 utilities? 9 A. Yes. 10 Q. Does the Trust receive funding from any 11 other sources? 12 A. Yes. As I mentioned in my deposition, I 13 know that they also get funding at least from the 14 Regional Greenhouse Gas Initiative also known as 15 RGGI. There may be other sources as well. 16 Q. Okay. 17 MS. KOLICH: Your Honor, I have a 18 document, it's a multi-page document; actually, it is 19 84 pages long. It's captioned "Efficiency Maine 20 Fiscal Year 2015 Annual Report" that I would like 21 marked as Company Exhibit? 22 EXAMINER BULGRIN: 9. 23 MS. KOLICH: 9. May we approach? 24 EXAMINER BULGRIN: Yes. 25 (EXHIBIT MARKED FOR IDENTIFICATION.) 259 1 A. I've got it. 2 Q. Okay. Mr. Spellman, do you recognize 3 this document? 4 A. Yes. In fact, it's -- it looks like -- 5 it's the fiscal year 2015 annual report from the 6 efficiency Maine Trust. The same as my -- as noted 7 in my footnote 27 on page 22 of my testimony. 8 Q. Okay. And I would ask that you turn to 9 page 9 of that report. And specifically Table 2, 10 "program Funding Sources." 11 A. I'm -- Table 2, correct? 12 Q. And if you see at the top there's a 13 column named -- labeled "Program" and then several 14 other columns across to the right. "Electric System 15 Benefits Charge," do you see that one? 16 A. Yes, I do. 17 Q. And that's the source at that 18 utilities -- the funding from the utilities? 19 A. I think column 1 is the funding from the 20 utilities. Well, okay. Column 1 -- well, there is 21 several columns, right? So column 1 has the funding 22 provided by the Electric System Benefits Charge, and 23 then there are 1, 2, 3, 4, 5, 7, 8 other columns with 24 other funding sources, including the Regional Green 25 House Gas Initiative. 260 1 Q. So you would agree with me that all of 2 those categories at the top of -- at the top of 3 Table 2 are funding sources for the -- for the Maine 4 Trust? 5 A. Yes, but not -- not all of them are 6 funding sources for the electric energy efficiency 7 programs. 8 Q. Do you know which ones are not? 9 A. Well, I know that, for example, column 3 10 is Natural Gas Conservation Fund and those are only 11 used for natural gas programs. So the -- under the 12 first column, the Electric System Benefit Charge 13 funds the funding that comes from electric utilities. 14 My understanding those only go for programs that save 15 electricity and then there is a separate fund 16 provided by the natural gas companies for programs 17 that are directed at natural gas agencies. 18 Q. Okay. Let's look at Table 3 on page 11 19 of that report. 20 A. Okay. 21 Q. In column 1 there is a list of programs. 22 Do you see that? 23 A. Yes, I do. 24 Q. And are those programs that are offered 25 by the Maine Trust? 261 1 A. Well, let me see what it -- I didn't 2 write this, so let me see what it says. I guess 3 there's no statement that introduces the table. 4 Okay. Here it is. Table 3, underneath 5 Table 3 there is a paragraph that describes what the 6 table presents. So it says Tables 3 and 4 apply -- I 7 guess, you know, illustrate the total energy savings 8 and lifetime avoided costs associated with each of 9 the programs administered by the Trust in fiscal year 10 2015. So those -- those are the costs for each of 11 the programs. It's not clear to me, I guess, if 12 those are just for the -- I guess those are for the 13 electric programs, okay. So those costs are for the 14 electric programs. 15 Q. Okay. And looking at your line 2 on 16 page 22, you reference "electric energy efficiency 17 programs save 224,341,112 kilowatt-hours...." Do you 18 see that? 19 A. Right. And that -- let's see, is my 20 testimony. 21 Q. Yes. 22 A. And I reference Table 3. 23 Q. First column at the bottom. 24 A. So my testimony number and the number on 25 Table 3 are the same. 262 1 Q. So the programs that you are referring to 2 as far as generating the savings are the same as 3 those set forth in this report we are looking at? 4 A. Yes. 5 Q. Okay. And in the next column, that would 6 represent the one we were just talking about, that's 7 the annual kilowatt-hours savings for each of those 8 programs individually; is that right? 9 A. In column 2. 10 Q. On the individual. 11 A. Correct. I assume those are incremental 12 annual kilowatt-hours savings for fiscal year 2015. 13 Q. Okay. And if you look down at the 14 bottom, we just discussed that that would be the 15 total kilowatt-hours savings and that matches what 16 you've referred to in your testimony. 17 A. Yes. 18 Q. Okay. Now, if you look at column 4 which 19 is "Efficiency Maine Costs," do you see that? 20 A. Yes. 21 Q. And those are the costs related to the 22 programs listed there; is that right? 23 A. Well, let's see what it says. So those 24 are the Trust's costs. There is a lot of definitions 25 here. So as far as I know based upon this report, it 263 1 says those are the Trust's costs, not necessarily the 2 utility's costs. So those -- it says those are the 3 costs to the Efficiency Maine Trust. Okay? 4 Q. Right. But they are listed related to 5 the programs, are they not? 6 A. Yeah, I think -- yes, the difference is 7 that the numbers in that column apparently include 8 all sources of funding, not just what the utilities 9 contributed. As far as I know, the utilities only 10 contributed $15.2 million. 11 Q. And where do you -- where did you get 12 that number? 13 A. It's on Table 26 in the same report. So 14 Table 26. Is just further on in the report. 15 MS. FLEISHER: Page 60. 16 THE WITNESS: Okay. Thank you. 17 A. First line in Table 26, "Systems Benefits 18 Charge" and it says 15,189,657, and I rounded it in 19 my testimony to 15.2 million. 20 Q. Right. And that's the amount paid 21 through the System Benefits Charges; is that right? 22 A. By electric utilities. 23 Q. Right. That does not necessarily 24 correlate to the total costs of the programs though, 25 does it? 264 1 A. Sure. I agree with that. 2 Q. So assuming -- strike that. 3 Okay. So if you will now -- if you would 4 now go to page 19 of your testimony. 5 A. Okay. 6 Q. We are going to discuss Illinois. Now, 7 are you there? 8 A. I'm almost there. 9 Q. Okay. I beat you this time. 10 A. I'm there. 11 Q. You don't know if the Illinois statute 12 establishes the targets for the state's utilities, do 13 you? 14 A. Well, give me a second here. No, and the 15 reason I don't know that is because a new law was 16 just passed within the past 60 days and I have not 17 had an opportunity to read that whole statute. 18 Q. How about the old law? 19 A. I wouldn't know that either. 20 Q. Okay. And you don't know if the cost 21 caps include a provision for shared savings, do you? 22 A. Give me a second. No, I don't. 23 Q. And that -- would your answer be the same 24 with regard to whether it includes PDR cost, 25 peak-demand reduction cost? 265 1 A. That would be correct. 2 Q. On the top of 20 you talk about 3 2.015 percent of retail electric rate. Let me see if 4 I can find you a page reference. 5 A. Page 20? 6 Q. Oh, line 2, sorry. Do you see that? 7 A. Yes, yeah. 8 Q. Now, do you know if we are talking about 9 2.015 percent of a retail base rate or a -- rates 10 including riders? 11 A. I don't know. Whatever it says in the 12 statute. 13 Q. Okay. And on line 8, page 20, you 14 indicate that Ameren expended 16.6 cents to achieve 15 1.1 percent of total annual kilowatt-hour sales. Do 16 you see that? 17 A. Yes, I do. 18 Q. But as I understand, you do not calculate 19 what the acquisition costs would be for 1 percent, 20 did you? 21 A. That's correct. 22 Q. On line 6 you indicate that Ameren saved 23 385,286 megawatt-hours? 24 A. Yes, I do. 25 Q. Do you see that? 266 1 A. Yes. 2 Q. And that's during the period June 1, 3 2014, through May 31, 2015; is that right? 4 A. Correct. 5 Q. Okay. And on line 8 you state that 6 that -- this represents 1.1 percent of 2015 actual 7 kilowatt-hours sales; is that right? 8 A. Yes. 9 Q. Now, and then you have a footnote 22; is 10 that right? 11 A. That's right. 12 Q. And that's based on Ameren Illinois 2015 13 calendar year sales? 14 A. That's correct. 15 Q. Okay. So you're comparing -- you're 16 comparing the amount of megawatt-hours saved during a 17 fiscal year ending in May of '15, May 31, '15, to 18 sales revenues for a period that ends calendar year 19 2015; is that right? 20 A. Well, not sales revenues, but 21 kilowatt-hours, kilowatt-hours sales. Yeah, so one 22 set of data is for the 12 months ending May 31, 2015. 23 And then your retail sales that are mentioned in the 24 footnote for the 12 months ending December, 2015. 25 Q. Okay. If you would go to RFS-4, 267 1 specifically page 2 of 3. 2 A. I'm there. 3 Q. Now, down at the bottom you reference 4 Michigan in your narrative. Do you see that? 5 A. Oh, give me a second here. You asked me 6 about Illinois, but then does it reference Michigan 7 or do you want me to go to Michigan? 8 Q. No, no, I'm sorry. I want you to go to 9 RFS-4. 10 A. I'm there. 11 Q. And on page 2 down at the bottom you have 12 got a state listed as Michigan. 13 A. Okay. 14 Q. Okay. 15 A. Yeah. 16 Q. The state up north. 17 A. I'm sorry. I thought you were still in 18 Illinois. 19 MR. KELTER: It's not a real state. 20 A. Actually, we are in Ohio. Go ahead. I'm 21 with you now. 22 Q. And as you state in your first sentence, 23 "This section describes cost caps in effect...before 24 new legislation was enacted during late 2016," is 25 that right? 268 1 A. Yes. 2 Q. So after 2016, your description set forth 3 for Michigan, as you describe the law, is no longer 4 applicable; is that right? 5 A. Right, because it changed, and I just 6 didn't have time to put in the new -- whatever the 7 new provision is. So I wanted to make sure this 8 exhibit was updated to reflect there was a new law in 9 place and that the description I was providing was in 10 effect prior to late 2016. 11 Q. Okay. And on the top of page 23 of your 12 testimony, you talk -- well, actually on page 23 you 13 talk about the States of Florida and New York; is 14 that right? 15 A. That's correct. 16 Q. And both of those states are listed as 17 states that have implemented cost caps through 18 regulatory commission, regulations, or rules; is that 19 right? 20 A. Yes. 21 Q. Okay. Now, in Florida on page 23, you 22 indicate -- in Florida the Commission establishes 23 both the goals and budgets; is that correct? 24 A. That's my -- I mean, yeah, and that's 25 from the Florida Energy Efficiency Conservation Act. 269 1 Q. Okay. But in Ohio, statutes establish 2 the EE targets, right? 3 A. That's correct. 4 Q. So the scenario in Florida is different 5 from that in Ohio. 6 A. That's right. In fact, my testimony, I 7 tried to make that clear that the first five examples 8 I provide are for states with cost caps. Let's see 9 what do they call that, that were enacted through 10 legislation. And then my Question 18 says can you 11 provide examples of states that have done it through 12 regulatory commission regulations. 13 Q. Okay. 14 A. So it was intended just to show that this 15 has been done a number of times in different ways in 16 different states. 17 Q. Okay. And you don't know if Florida 18 utilities are currently under a cost cap, do you? 19 A. I don't. 20 Q. And you have no knowledge as to how 21 Florida determined -- Florida determines either the 22 cost cap or the targets, do you? 23 A. Well, other than what's written in the 24 Florida energy conserve -- Energy Efficiency 25 Conservation Act that's still in effect, I haven't 270 1 been involved recently in those proceedings. I think 2 I mentioned in my deposition it was five years ago, 3 so I'm not aware of what may have been decided in the 4 latest round of proceedings. 5 MS. KOLICH: Could I have my question 6 reread, please. 7 (Record read.) 8 Q. And your answer there was you have no 9 knowledge of that? 10 A. No. Let me say it again. I have 11 knowledge of how it's been done in the past up 12 through the most-recent proceedings that I wasn't 13 involved in. So from, like I would have to look at 14 the dates, but two-thousand -- you know, the prior 15 five-year period I was directly involved with 16 consulting to the Commission, so I had direct 17 knowledge of exactly how it was done. But then they 18 had new hearings within the last I would estimate 18 19 months and I was not involved in that. So I have 20 knowledge of how it has been done in the past. 21 Q. But you don't know how it's done today. 22 A. That's correct. 23 Q. And you don't know what the average 24 acquisition cost is for the Florida utilities, do 25 you? 271 1 A. Well, other than the -- than through the 2 information -- I'm familiar with what they have filed 3 with the Energy Information Administration for 4 calendar year 2015. I prepared an exhibit and that's 5 been provided. Other -- other than the data they 6 report to EIA for calendar year 2015, I don't. So I 7 am not aware of what they are forecasting, for 8 example. 9 Q. Are you aware of what they are today? 10 A. No. I am only aware of what they were in 11 calendar year 2015. 12 Q. At the bottom of 23 you talk about the 13 State of New York. And on line 10 you indicate that 14 the New York Public Service Commission issued an 15 order establishing explicit energy efficiency budgets 16 and targets for 2016. Do you see that? 17 A. Yes. 18 Q. But you don't know what those targets 19 are, do you? 20 A. Correct. 21 Q. And you don't know the level of the caps, 22 do you? 23 A. Correct. 24 Q. So you have no idea what the acquisition 25 costs are, correct? 272 1 A. I only have knowledge of the acquisition 2 costs for calendar year 2015. 3 Q. And nothing forecasted for the period 4 that the plans here will be in effect? 5 A. Correct. 6 Q. Do you know if New York has a peak-demand 7 reduction target? 8 A. I don't know. 9 Q. Do you know if New York allows for shared 10 savings incentive payments? 11 A. I actually do, so let me pull that out. 12 Yeah, that's in my Exhibit RFS-2, page 1, the third 13 state down is New York and it explains at least there 14 have been in effect shared savings incentives and it 15 explains what the incentive pool is. So I'm aware 16 that at least 2012 to 2015 they were going forward. 17 The Commission did not vote to require those, so 18 there's no requirement for shared savings incentives 19 going forward. 20 Q. After 2015? 21 A. Well, yes, after 2015. 22 Q. On page -- 23 A. Yeah. 24 Q. I'm sorry. I didn't mean to cut you off. 25 A. No. I'm done. 273 1 Q. On page 68 of your testimony -- wait a 2 minute. 3 MR. STINSON: I'm sorry, can I have that 4 page, please? 5 MS. KOLICH: Yeah. I want to make sure 6 I'm in the right testimony. Hang on. 7 Q. Yes. On page 68, line 11 of your 8 supplemental testimony. 9 A. I'm there. 10 Q. You indicate that there are two 11 low-income programs included in the companies' 12 revised plans; the "Community Connections" and the 13 "Low-income New Homes." Do you see that? 14 A. Yes. 15 Q. And Community Connections on line 13, you 16 note this program is administered by Ohio Partners 17 for Affordable Energy. Do you see that? 18 A. Correct. 19 Q. Are you aware of how OPAE, Ohio Partners 20 for Affordable Energy, was awarded the contract in 21 the Community Connections program? 22 A. No. 23 Q. And just to make sure we're on the same 24 page, you are not proposing that the low-income 25 programs included in the revised plans be rejected by 274 1 the Commission, are you? 2 A. No. 3 Q. On page 70 -- page 70, line 9. 4 A. Okay. 5 Q. You indicate that low-income programs 6 should be reevaluated and approved so as to reach 7 more low-income customers. Do you see that? 8 A. Yes. 9 Q. In your opinion, what areas of the 10 programs need to be improved? 11 A. Well, my recollection is fundamentally in 12 their reach so that they would be redesigned so they 13 would -- you would get more participation. 14 Q. Right. So which aspects of the programs? 15 A. I didn't come up with that. I think I 16 was proposing that as an effort that should be 17 undertaken by the company. So I didn't make -- you 18 know, in fact, my testimony goes on in lines 10 19 through 13 to recommend that the company would work 20 with the collaborative group to develop the programs 21 so that would reach substantially more low-income 22 customers. 23 So I didn't, in my testimony, say here is 24 the answer and this is what they should do. I said 25 they ought to get together with a collaborative and 275 1 come up with those solutions. 2 Q. Okay. On page 65 of your supplemental 3 testimony, line 18, you indicate that you believe 4 that the following residential programs are not 5 cost-effective under the TRC test and you list them 6 as the "Direct Load Control, Behavioral, Audits and 7 Education, School Education, HVAC, and Smart 8 Thermostat." Let's exclude low income for now. Do 9 you see that? 10 A. Yes, I do. 11 Q. Now, as I understand it, you define 12 programs differently from how the companies do; is 13 that correct? 14 A. Yes. And we covered that in the first 15 deposition. 16 Q. Right. And just to make the distinction, 17 the companies sometimes call programs "subprograms" 18 that you refer to as "programs." 19 A. Correct. 20 Q. Is that right? 21 A. Yes. 22 Q. Okay. For purposes of this discussion I 23 am not going to make the distinction. I am going to 24 just use the word -- the term generically as 25 "programs." 276 1 A. Okay. 2 Q. Unless I otherwise specifically say so. 3 A. Okay. 4 Q. Now, can we agree that the Commission 5 rules could not require individual measures to be 6 cost-effective? 7 A. Well, let me -- we went through this in 8 my deposition too. You said the Commission rules? 9 Q. Commission rules. 10 A. Okay. Okay. Total resource costs, I am 11 just reading from the rules. Page 3, "'Total 12 resource cost test' means an analysis to determine 13 if, for an investment in energy efficiency or 14 peak-demand reduction measure or program...the 15 present value of the avoid...." It gives the 16 definition of the TRC. 17 Now, we have to see if you have to have 18 the TRC -- does every measure or program of TRC. So 19 you probably can refer me to that faster than I can 20 get there, but, okay. Here we go. Okay. Then under 21 "Program Portfolio Plan" it says that each utility 22 has to design a comprehensive energy efficiency and 23 peak-demand reduction portfolio, including a range of 24 programs to encourage their cost effectiveness. 25 Okay. So it's under Section (B). 277 1 "...each program proposed within a program portfolio 2 plan must...be cost-effective, although each measure 3 within a program need not be cost-effective. 4 However, an electric utility may include a program 5 within its program portfolio plan that is not 6 cost-effective when that program provides substantial 7 nonenergy benefits." 8 So the answer to your question is that 9 every program has to be cost-effective, although each 10 measure within the program need not be 11 cost-effective. 12 Q. Okay. Now, I'm not saying that you agree 13 with the way the companies define "programs" and I 14 know we have talked about this in your deposition as 15 well, but if you assume the companies' definition of 16 "programs," all programs, except for the low-income 17 programs, included in the portfolio plans pass the 18 TRC test; is that right? 19 A. Well, you know, I don't know off the top 20 of my head except subject to check. 21 Q. Now, you list school education as one of 22 the programs that you believe is not cost-effective. 23 But you are not recommending the companies not spend 24 any money on customer education, are you? 25 A. Well, no. Let me make clear my answer on 278 1 this. All I am saying is that if the company is 2 going to include something that's non-cost-effective, 3 in its calculation of whether it meets the statutory 4 benchmark, then it shouldn't exclude that from the 5 shared savings calculation. It ought -- they ought 6 to be symmetrical. 7 So I don't think -- I guess I would have 8 to look, find, review my testimony, but I think I am 9 saying if you are going to include non-cost-effective 10 programs in your calculation of the savings, then it 11 ought to be included in the shared savings mechanism. 12 And then if you are going to exclude it from the 13 calculation of the savings, then you ought to exclude 14 it from the shared savings mechanism. 15 But you shouldn't -- the company 16 shouldn't be allowed to include the 17 non-cost-effective programs for the purposes of the 18 shared -- of the savings calculation and then 19 cherrypick and exclude it in shared savings. 20 Q. Understood. I wasn't talking in terms of 21 shared savings. I was just talking in terms of 22 portfolio. 23 A. You were asking me if I was recommending 24 that the schools program appears to be not 25 cost-effective, should not be run, and I want to make 279 1 a very clear answer that we're just saying if it is 2 going to be included and it's not cost-effective, 3 that it ought to be included in shared savings too. 4 My whole testimony deals with that issue, not -- you 5 shouldn't do the school education program. So it's a 6 very fine point and I think that -- that that's an 7 important distinction. 8 MS. KOLICH: I'm sorry? What was it? 9 Could that last part of his answer be reread, please. 10 (Record read.) 11 A. I just want to clarify that response 12 because I do say further on that actually I do say 13 that the direct load control, behavioral, audits and 14 education, HVAC, and smart thermostat programs are 15 not cost-effective and do not provide substantial 16 nonenergy benefits and should be removed from the 17 portfolio. So I guess I should correct my former 18 response because of, in the end, I did come down on 19 them, they shouldn't be required to pay for those 20 programs. 21 Q. Okay. So, but you don't include school 22 education in that list; is that right? 23 A. Well, let me look at this. Let's see, 24 give me just a second. I think that's correct if 25 audits and education is different, yes, that's right. 280 1 So the list that I would recommend not be continued, 2 including direct load control, behavioral, audits and 3 education, HVAC, and smart thermostats are the ones 4 that are not cost-effective and should not -- and 5 should be removed. 6 Q. Okay. In fact, with regard to education, 7 you believe that education and outreach should be an 8 integral part of an utility-administered EE program, 9 don't you? 10 A. Yes. And, in fact, I said that in my 11 deposition, and the point I made there that they 12 ought to be an integral part of every plan and that 13 they can be included -- let's say you are doing a 14 commercial and industrial prescriptive -- 15 commercial/industrial prescriptive and custom program 16 and education and outreach would make perfect sense 17 to have that as a component of such a program. 18 Q. And would you agree with me that HVAC 19 energy efficiency programs have been around for 20 decades? 21 A. I would. 22 Q. And would HVAC programs -- and it is a 23 moving target these days because the baselines are 24 changing and you have no federal standards? 25 A. I guess you would have to show me the 281 1 evidence for that. 2 Q. Do you have your first deposition 3 transcript? 4 A. I do. 5 Q. Would you pull up page 106, line 13. 6 A. Okay. Let's see, 106. 7 Q. Are you there? 8 A. Yes, I am. 9 Q. Okay. And as part of your response you 10 say, "And I realize it's a moving target because the 11 baselines are changing, and you have new federal 12 standards." And in response you are referring to the 13 HVAC program as indicated on line 10; is that right? 14 A. Yeah. I just want to see what I was 15 saying -- what the context was. 16 Q. Sure. 17 A. Well, I think the context was -- let's 18 see. There was a question and I gave an answer. The 19 question was have I seen, you know, direct load 20 control programs, behavioral programs, education, 21 school education, HVAC, smart thermostats, have I 22 seen those types of offerings in other portfolio 23 plans. And my answer was yes. 24 Q. Right. 25 A. And then I guess your question was, well, 282 1 which programs had I seen, and I gave the answer of 2 I've seen HVAC programs, I've seen audit programs. 3 So yes, I agree, I said -- let's see, HVAC programs 4 have been around for decades and can be run cost 5 effectively. And it's a bit of a moving target 6 because the baselines are changing and you have no 7 federal standards. So I agree that -- I still agree 8 with that. 9 Q. And in fact, on the bottom of page 105, 10 line 25, you start a sentence and say, carrying over 11 to 106, "You see audits and education usually as a 12 component integrated into program delivery"; is that 13 right? 14 A. That's right, yep. 15 Q. Now, as the SWE in Pennsylvania, you are 16 pretty familiar with the various utilities' EE 17 programs? 18 A. Yes. 19 Q. Before the Commission? 20 A. Correct. 21 Q. Do you know if the FirstEnergy 22 Pennsylvania companies included an HVAC subprogram in 23 their most-recently approved Pennsylvania plans? 24 A. No, because I wasn't involved in 25 reviewing it. The most-recently approved were for 283 1 Phase III, and I have had no involvement in reviewing 2 the plans that were submitted by the FirstEnergy 3 companies for Phase III. 4 Q. Did you review the FirstEnergy companies' 5 Phase II plans? 6 A. Yes. 7 Q. And do you know if they included HVAC 8 program -- subprogram in those programs? 9 A. I don't recall. 10 MS. KOLICH: Your Honor, the Phase II 11 plans are public documents on the docket of the 12 Pennsylvania Public Utilities Commission and they are 13 readily available, and I am trying to get the docket 14 number for it, but I would ask the Commission take 15 administrative notice of that plan as approved by the 16 Commission in the Pennsylvania case. 17 EXAMINER BULGRIN: Okay. 18 MS. KOLICH: I will produce for the 19 record that case number. 20 EXAMINER BULGRIN: Good. 21 Q. And as the SWE, you indicated that one of 22 your roles was to make recommendations to the 23 Commission, the Pennsylvania Commission, for 24 improvements or modifications to the PA utilities' 25 energy efficiency plans; is that right? 284 1 A. Yes. 2 Q. And as the SWE, did you recommend the 3 removal of the HVAC program in any of the 4 Pennsylvania utilities' plans that may have had them, 5 if you remember? 6 A. No, because those programs were 7 cost-effective. 8 Q. Okay. Now, moving on to shared savings. 9 In your testimony you've made a number of suggested 10 changes to the companies' proposed shared savings 11 mechanism, haven't you? 12 A. Yes. 13 Q. Okay. And in each one of the components 14 of those -- each one of those individual changes, the 15 result to the amount of savings the companies can 16 earn would be lower than if not adopted; is that 17 right? 18 A. In each one? 19 Q. Yes. 20 A. I don't think that's correct. But let 21 me -- let me just give you the example and then we 22 can discuss it. Well, I guess my recommendation 23 where I say that the cap ought to be -- I am trying 24 to find where I allocated the cap to the companies. 25 So the companies -- the cap is 10 million and, let's 285 1 see, I guess the recommendation -- the one aspect of 2 the change that I recommended were the cap be 3 allocated to the three companies by customer class 4 wouldn't necessarily change incentive amount. It 5 would make sure that it's distributed equitably 6 across the companies, but the companies would still 7 have an opportunity to achieve the 10 million. 8 So it's not clear to me that that 9 recommendation would necessarily lower what they 10 could earn. They would still have the opportunity to 11 earn 10 million, but they would have to meet the 12 targets by utility by customer class. So I don't 13 agree with that characterization. I would say some 14 other things have lowered it. I think the -- but so 15 my answer to your question would be no. 16 Q. On page 28, line 17 of your supplemental 17 testimony. 18 A. Okay. 19 Q. You indicate that the -- the companies' 20 incentive schedule violates the core principle of 21 customer class equity found in 4901:1-39-03 of the 22 Ohio Administrative Code. Do you see that? 23 A. Yes. 24 Q. Do you have that provision in front of 25 you? 286 1 A. Yes, I do. 2 Q. And looking at that regulation, it 3 provides, when developing programs for inclusion in 4 its program portfolio plan, an electric utility shall 5 consider the following criteria, and down further I 6 believe in No. 6 it includes equitable among all 7 classes; is that the provision you are referring to? 8 A. Yes, it is. 9 Q. And is it your testimony that a shared 10 savings mechanism is a program? 11 A. No. My testimony is that it's part of 12 the program portfolio plan. 13 Q. Dealing with the recommendation that you 14 mentioned earlier about the determination of 15 incentive tiers on a class basis, you don't know if 16 AEP calculates its incentive tiers on a class basis, 17 do you? 18 A. I don't. 19 Q. And how about Duke Ohio, do you know if 20 they do? 21 A. I don't. 22 Q. How about Dayton? 23 A. I don't. 24 Q. Now, regarding your proposed maximum 25 percentage in the tier for the incentive, you 287 1 recommended 8 percent max; is that right? 2 A. That's correct. 3 Q. Now, you would agree with me the amount 4 of incentives in shared savings mechanisms varies 5 widely across the country, doesn't it? 6 A. I would say I agree it varies. 7 Q. Widely? 8 A. I guess it depends on your definition of 9 "widely," but I would say this, that it's clear that 10 the percentages can be nothing, but I agree they 11 vary. 12 Q. You asked about the definition of 13 "widely." If you look on your deposition, first one, 14 page 70, line 5, you -- it's a direct quote, so you 15 indicated the shared savings program varies widely, 16 so I would ask you how you defined it. 17 A. You know, if you look at my Exhibit 18 RFS-2, you'll see that in some states there are no 19 incentives, like Pennsylvania. There are incentives 20 that are based on different mechanisms like as a 21 percent of program costs that might be 3 to 4 percent 22 of program costs like in Vermont. In Connecticut 23 they can earn up to like 8 percent of program costs. 24 So in -- and for shared savings 25 mechanisms like what's being proposed here in Ohio, 288 1 let's see, you know, I have information I guess in 2 the -- in Exhibit RFS-2, it gives examples of what 3 has been in place for AEP Ohio, Duke, and 4 FirstEnergy. So, you know, you can see that these 5 percentages for shared savings incentives can be as 6 high as I guess for Duke it's been maybe 15 percent 7 if they get 110 to 115 percent. 8 So they vary, but the variance isn't like 9 between 8 percent in one utility and 150 percent. 10 It's like 8 percent, 10 percent, 12 percent. It's 11 that magnitude. It's not like a factor of 10 or 12 something. 13 Q. Understood. Your metrics on RFS-2, I 14 believe you were just looking at that. 15 A. Yeah. 16 Q. Would you agree with me the shared 17 savings mechanism descriptions for each of the states 18 is quite lengthy? 19 A. You mean in the -- 20 Q. If you looked at them in their entirety. 21 A. Yeah. What I would say is if you -- like 22 I give a summary description here. But if you 23 actually went to the website and looked up the 24 document, it could be pages and pages and pages so, 25 yes. 289 1 Q. On page 56, line 10, of your testimony, 2 you state that the actual savings from behavioral 3 programs are hard to measure. Do you see that? 4 A. Yes. 5 Q. So you would agree with me behavioral 6 programs do, in fact, generate savings. 7 A. Yes. 8 MS. KOLICH: Your Honor, could we take a 9 5-minute break to make sure I covered everything? 10 EXAMINER BULGRIN: Sure. 11 (Recess taken.) 12 EXAMINER BULGRIN: Okay. Let's go back 13 on the record. 14 Ms. Kolich. 15 MS. KOLICH: Thank you, your Honor. As 16 an administrative matter, I have those citations for 17 the administrative notice of the Pennsylvania 18 companies and their energy efficiency cases. Each 19 utility is required to have a separate docket number. 20 So the docket numbers for the FE companies will be 21 for Met-Ed, M as in -- all of these are "M" as in 22 Mary, -2012-233-4387; Penelec, M-2012-233-4392, Penn 23 Power is M-20122334395; and West Penn Power is 24 M-2012-233-4398. 25 EXAMINER BULGRIN: Thank you. 290 1 Q. And Mr. Spellman, we had a little 2 confusion talking about shared savings and 3 non-cost-effective programs and you gave me an 4 explanation as to what your position was on how 5 non-cost-effective programs should be dealt with in 6 the -- when dealing with the shared savings 7 mechanism. 8 Do you know if the overall program is 9 cost-effective as defined by the companies, but the 10 subprograms, for example, such as school education, 11 that may be as -- at the subprogram level 12 non-cost-effective, do you know if those -- those 13 subprogram cost-benefit results are netted when 14 calculating the TRC of the program? 15 A. Well, that was quite a question. I think 16 I already answered it. Well, I answered the first 17 part. And the first part of the question, if I got 18 it right, was do I know if the -- using the company's 19 definition of "program," are the programs 20 cost-effective. That was the first part and I think 21 I answered that already and I said subject to check, 22 right? 23 Q. Right. 24 A. And the next part of your question is, if 25 I understood correctly, would be if you dissect those 291 1 further and some things aren't cost-effective and 2 some things are, do they net against each other. Let 3 me make sure that was the question, the second part 4 of the question. 5 Q. Right. And actually, let me just ask it 6 again because it wasn't my intention to ask that same 7 question again that you referred to as your first 8 part. 9 If you've got -- if you have got several 10 subprograms and one happens to be below 1 in the TRC 11 calculation and another one happens to be above 1 in 12 the TRC calculation and both of those roll up to the 13 program level as defined by the companies. Do you 14 know if the results of the subprogram TRC -- TRCs are 15 netted as they roll up to the main program? 16 A. Well, as a general principle, if you roll 17 things together, the benefits roll together, the 18 costs roll together, what you end up with is like a 19 weighted average cost/benefit ratio. So the answer 20 would be if you roll things up, everything rolls, you 21 know, into -- you get a new sum of the benefits, new 22 sum of the costs, a new benefit/cost ratio and what 23 do you call it? Are things netted out? Yes. 24 MS. KOLICH: That's all I have, your 25 Honor. 292 1 EXAMINER BULGRIN: Thank you. No, no. 2 THE WITNESS: I have to get out of town 3 while I can. 4 MR. KELTER: You just started. 5 EXAMINER BULGRIN: I think there might be 6 an additional question or two. 7 - - - 8 CROSS-EXAMINATION 9 By Mr. Oliker: 10 Q. Good afternoon, Mr. Spellman. My name is 11 Joe Oliker. I represent IGS Energy or Interstate Gas 12 Supply, Inc. Just a few questions for you this 13 afternoon. I will try to keep it as short as I can. 14 I just want to talk about one specific 15 provision in your testimony. You discuss smart 16 thermostats, correct? 17 A. Maybe you can show me where I did. 18 Q. Specifically on page 65 and 66, you 19 recommend rejection of -- 20 EXAMINER BULGRIN: Of the supplemental? 21 MR. OLIKER: Yes, of the supplemental 22 testimony. 23 EXAMINER BULGRIN: Thank you. 24 Q. Am I correct that you recommend rejection 25 of provisions in the portfolio plan that pertain to 293 1 smart thermostats? 2 A. We may have talked about that. Yes, on 3 page 67 and 68 there is a Question and Answer that 4 deals with that and smart thermostats was one of the 5 programs that were determined to be not 6 cost-effective and should be removed from the 7 portfolio. 8 Q. Okay. And the basis for your 9 recommendation is that you allege that the smart 10 thermostat provisions failed the TRC test, correct? 11 A. Yeah, that was -- in fact, we give -- 12 yes. 13 Q. And your testimony is based upon 14 statistics in the Market Potential Study, correct? 15 A. Correct. 16 Q. And let me know if I read this correct. 17 On page 66, line 3, you state, "And nothing in the 18 Settlement suggests that these programs are now 19 cost-effective," correct? 20 A. 66, line 3? 21 Q. Yes. 22 A. Correct. 23 Q. And would you agree that the Market 24 Potential Study did not include in the calculation of 25 the TRC test for smart thermostats any related 294 1 natural gas savings? 2 A. I don't know. 3 Q. And would you agree that a point 4 contained in the stipulation and recommendation is 5 that the smart thermostat provision will be 6 recalculated to include related natural gas savings, 7 if you know? 8 A. You know, I didn't focus on that but, 9 subject to check, I'll agree to that. 10 Q. And would you agree that the approximate 11 rebate level for smart thermostats is around $100 per 12 unit? 13 A. I don't know. 14 MR. OLIKER: Could I have one minute? 15 EXAMINER BULGRIN: Sure. 16 MR. OLIKER: And may I approach the 17 witness, please? 18 EXAMINER BULGRIN: Sure. 19 MR. OLIKER: Make sure I don't give up my 20 copy. Make sure I keep my notes. I'm sorry that I 21 only have about nine or so copies. I was cognizant I 22 was sitting next to the environmental parties. 23 MS. WILLIAMS: Motion to strike from the 24 record. 25 MR. KELTER: Everything is my fault. 295 1 EXAMINER BULGRIN: Are we making this an 2 exhibit? 3 MR. OLIKER: We can. Let's mark it as 4 IGS Exhibit 1, your Honor. 5 EXAMINER BULGRIN: Okay. 6 (EXHIBIT MARKED FOR IDENTIFICATION.) 7 Q. When you have an opportunity, 8 Mr. Spellman, is the document that's been marked as 9 IGS Exhibit 1, recognizing yours don't have any 10 markings on it, would you agree it does have a 11 marking in the upper left-hand corner that says 12 "Office of the Ohio Consumers' Counsel"? 13 A. I would agree with that. 14 Q. And is it the "Consumers' Fact Sheet"? 15 A. Yes. 16 Q. And it says "Easy Ways to Save Energy and 17 Money," correct? 18 A. Yes, it does. 19 Q. And would you agree in the bottom of the 20 document it says, "A properly set programmable 21 thermostat can save homeowners $100 to $180 per year 22 if they maintain those settings"? 23 A. I also note, at least the version I have, 24 has a copyright of 2016, so I'm assuming it was 25 published during -- it looks like it was February 17, 296 1 2016, according to the last digits on page 2. So I'm 2 assuming that would be correct -- their estimate as 3 of about a year ago. 4 MR. STINSON: Well, your Honor, I am 5 going to object for foundational purposes. There is 6 a lack of foundation here that this witness is aware 7 of or seen this document before. 8 MR. OLIKER: Your Honor, I would first 9 note he is a little late. He has already answered 10 the question. But, in addition to that, this is a 11 public document, it is a statement against interest, 12 it is a party admission, it is readily verifiable. 13 EXAMINER BULGRIN: Enough. 14 MR. OLIKER: Thank you, your Honor. 15 EXAMINER BULGRIN: Overruled. 16 THE WITNESS: One more, one more. 17 MR. OLIKER: I had a long list. 18 Q. Just to close the loop on this, would you 19 agree that a programmable thermostat is effectively a 20 dumb version of a smart thermostat? 21 A. Yes. 22 Q. And so, a smart thermostat has all of the 23 optionality of a programmable thermostat except for 24 additional options such as demand response and 25 auto-away options and things of that nature? 297 1 A. Correct. 2 MR. OLIKER: And I think those are all 3 the questions I have. Thank you very much, 4 Mr. Spellman. 5 THE WITNESS: You're welcome. 6 EXAMINER BULGRIN: Not yet. 7 MS. FLEISHER: I have a few questions. I 8 just have three or four questions. 9 - - - 10 CROSS-EXAMINATION 11 By Ms. Fleisher: 12 Q. Mr. Spellman, is it okay if I am sitting 13 here? 14 A. Yes. 15 Q. I will make it quick. 16 A. I'll hold this up. 17 Q. Mr. Spellman, my name is Madeline 18 Fleisher. I represent the Environmental Law & Policy 19 Center. I'm excited, you know, that you want to find 20 out more about our organization. 21 A. I do. 22 MR. STINSON: Madeline, if you could 23 speak up. 24 MS. FLEISHER: Certainly. Happy to do 25 that. 298 1 Q. Mr. Spellman, I believe you have a copy 2 of the "Green Rules" with you. 3 A. Yes, I do. 4 Q. And can you turn to provision, just go 5 with 39-03 which is the program planning 6 requirements. 7 A. I am there. 8 Q. Okay. And going down to subpart (B), are 9 you familiar with the program design criteria listed 10 there? 11 A. Yes, I am. 12 Q. And there are 13 of them, correct? 13 A. That's right. 14 Q. And in your supplemental testimony you 15 reference criterion No. 6, equity among customer 16 classes, on page 28, correct? 17 A. Correct. 18 Q. And your supplemental testimony does not 19 address any of the other 12 listed criteria, correct? 20 A. Well, the only one that it does, 21 cost-effectiveness, I believe. 22 Q. Okay. With -- 23 A. Which is No. 1. 24 Q. With respect to program design? 25 A. Yes. 299 1 Q. Okay. And where is that in the -- 2 A. I think we just talked about it, that 3 the -- oh, page 65 and 66, for example. I talk about 4 the program -- the residential programs that are not 5 cost-effective. And then the other place, let's see, 6 on pages 67 and 68 I talk about programs that should 7 be removed because they are not cost-effective and 8 they do not provide substantial energy benefits, so 9 that's why I am saying my supplemental testimony also 10 addresses cost-effectiveness as well. 11 MS. FLEISHER: Okay. Fair enough. 12 That's all I have, your Honor. Thank you. 13 EXAMINER BULGRIN: Okay. Thank you. 14 Ms. Williams 15 MS. WILLIAMS: Thank you, your Honor. 16 - - - 17 CROSS-EXAMINATION 18 By Ms. Williams: 19 Q. Mr. Spellman, hi. Samantha Williams, 20 Natural Resource Defense Council. I just have a few 21 questions to follow-up on the cost cap conversation 22 you had with Counsel for the companies. 23 A. Okay. 24 Q. So just to clarify, and then I understand 25 your testimony, you are not aware, correct, you 300 1 testified you are not aware whether Florida utilities 2 are currently under a cost cap, correct? 3 A. Correct. 4 Q. You also testified that you had 5 previously been a consultant for the Florida Public 6 Service Commission, correct? 7 A. Yes. 8 Q. As a result, you have knowledge of how 9 programs were approved in the past? 10 A. In the past. 11 Q. Okay. Can you give the approximate years 12 when you were consultant? 13 A. Yeah. The -- let's see, it would have 14 been in the -- the round of the proceedings before 15 this one, so I think it was in the 2008, '9, '10 time 16 period. 17 Q. Okay. So in that 2008, '9, '10 period 18 when you were a consultant for the Florida PSC, are 19 you aware -- you are not aware, are you, of any 20 dockets in which the Florida PSC did, in fact, 21 establish a cost cap on efficiency spending programs? 22 A. They didn't separate any separate docket 23 on that. My recollection is they set the saving 24 targets for each of those utilities, and after they 25 did that, utilities had to come in with plans to meet 301 1 those targets. And as I recall, if I recall 2 correctly, the Commission had to approve those plans 3 and the budgets that were included. I don't recall 4 that there were -- there was a cost cap set other 5 than what they -- the utilities submitted in the 6 plans, so there wasn't a separate cost cap. 7 Q. Would -- would you characterize what you 8 are calling a -- I believe you said there is not a 9 separate cost cap for those program plans. Would it 10 be better to characterize that as a budget for those 11 portfolios? 12 A. Yes, yes. 13 Q. And you do agree there is a difference 14 between a budget on efficiency and a -- 15 A. Yes. 16 Q. -- program -- 17 A. Absolutely. 18 Q. -- versus a cost cap? 19 A. Yes. 20 Q. Moving to New York, I just want to 21 clarify your testimony on that. You had testified as 22 to the 2015 order that established programs for 2016, 23 correct? 24 A. Yeah. Maybe you can refer me to that 25 page. 302 1 Q. That's on page 23 of your supplemental 2 direct testimony. 3 A. I'm there. 4 Q. Thank you. So I just wanted to clarify 5 that in that New York Public Service -- 6 A. Hold on just a second. 7 Q. I will wait for you. 8 A. I thought I was there. 9 Q. That's page 23. 10 A. Right. 11 Q. So clarifying again to your knowledge, 12 you're testifying as to the 2015 docket. So in that 13 2015 docket, the New York Public Service Commission 14 did not, in fact, establish a cost cap on efficiency 15 programs for that 2016 year; is that right? 16 A. Well, hold on a second. You know 17 something, I guess my testimony on that page 23 18 doesn't address that. I mean it doesn't say one way 19 or the other, so I don't know. 20 Q. So just to make sure that the record is 21 clear on this then, Mr. Spellman, to your knowledge, 22 there is not, in fact, a cost cap in that 2015 PSC 23 order, correct? 24 A. I don't actually -- let's see. Well, 25 what I do know is there were exclusive energy 303 1 efficiency budgets and targets, that's what I said in 2 my testimony. What I don't know is if those budgets 3 were cost caps to -- so I don't know -- I don't know 4 if there were ramifications that the utilities spent 5 over that budget. 6 MS. WILLIAMS: Could I have my last 7 question reread. I just want to clarify whether the 8 response was indeed responsive. Thank you. 9 (Record read.) 10 A. I said I didn't know. 11 Q. Okay. Fair enough. And then one last 12 question for you, beyond that 2014 -- sorry, 2015 New 13 York PSC order, are you aware of any other New York 14 PSC dockets in which there was a particular 15 percentage cost cap applied to energy efficiency 16 portfolios? 17 A. Okay. Hold on a second. I don't know. 18 MS. WILLIAMS: Thank you. Nothing 19 further. 20 EXAMINER BULGRIN: Very good. 21 Redirect? 22 MR. STINSON: If we could have -- 23 EXAMINER BULGRIN: Oh, Ms. Mooney, sorry. 24 MS. MOONEY: I have just a few questions. 25 EXAMINER BULGRIN: Okay. 304 1 - - - 2 CROSS-EXAMINATION 3 By Ms. Mooney: 4 Q. Good afternoon, my name is Colleen 5 Mooney. I am an attorney for Ohio Partners for 6 Affordable Energy, and I am also glad you would like 7 to find out more about it. 8 I just want to ask you a few questions 9 from your page 69 of the supplemental testimony where 10 you're talking about the competitive bid for the 11 low-income program. And specifically where you have 12 the -- the Question 72, where you have the quote from 13 the PUCO staff testimony, and then you have that one 14 sentence in quotations from line 7 through line 9. 15 Do you see that? 16 A. Yes, I do. 17 Q. Okay. And then you have a sentence, 18 "Competitive bidding is the best way to achieve 19 maximum savings for customers at the lowest cost." 20 And that sentence is not in quotes. Are you 21 referring back to the testimony of Mr. Scheck or did 22 you just want to quote a cliche there at the end of 23 your sentence? 24 A. Well -- 25 MR. STINSON: Objection as to form, your 305 1 Honor. Could I have the question reread? I think 2 it's compound, as well. 3 MS. MOONEY: Well, I can split it up or I 4 can just reask it. 5 EXAMINER BULGRIN: Yes, if you would 6 rephrase. 7 Q. The sentence on line -- that starts on 8 line 9 and line 10, is that a continuation of 9 something that Mr. Scheck said? 10 A. Not to my knowledge. 11 Q. So that's your testimony -- 12 A. Yes. 13 Q. Without -- and what was the basis for you 14 to say that? 15 A. Well, there's several things. I guess my 16 experience working in the energy efficiency field 17 since 1977, that both working for a utility and as a 18 contractor, that the way to get the best ideas and 19 the best prices, the most innovation, is to bid 20 something out like that, so that you have 21 competition. 22 And I think that encourages people to 23 sharpen their pencils, give best prices, put their 24 best minds on the problem and provide a scope of work 25 that, you know, scopes of work that FirstEnergy can 306 1 review and score and pick the best of the best. 2 The second thing is I noticed, walking 3 through the halls here today, the PUC's mission 4 statement interestingly includes as part of its 5 mission statement that it wants to provide safe and 6 reliable electric rates to consumers in Ohio, but 7 also to provide it in a way that promotes a 8 competitive environment. So it seems to be included 9 in the mission statement out in the hallway that the 10 PUC has. 11 So I think there are a lot of things that 12 point to competitive bidding as the best way to do 13 business; to ensure you are getting high quality, the 14 best price, the best ideas, and innovation. 15 Q. And then -- and then you go further, the 16 next question you basically describe what you would 17 propose as the competitive bidding process? 18 A. Correct. 19 Q. And are you -- do you have information 20 regarding what potential bidders would be interested 21 in FirstEnergy's low-income program? 22 A. Well, I haven't looked into that myself, 23 but I'm aware of putting conservation service 24 providers that specialize in that type of work. And 25 I would be happy to provide a list of such firms if I 307 1 was asked to do so. 2 Q. Of conservation -- you're aware of 3 conservation providers that would provide low-income 4 program services in the FirstEnergy Service 5 territory? 6 A. Correct. 7 Q. You're aware of that? 8 A. I certainly -- well, let's put it -- make 9 myself clear here. I haven't done any independent 10 research on that. I know of firms across the United 11 States who do that type of work anywhere in the 12 United States. And I would be happy to provide that 13 information if I were asked to do so. 14 Q. Could you name, like, one firm or one 15 competitive bidder that you know of that would be 16 prepared to bid on a low-income program in 17 FirstEnergy Service's territory? 18 A. You know, what I would prefer to do is 19 provide a list, after I have had a chance to vet it 20 and think through it, and give a response that is 21 solid, and I mean I just haven't -- that wasn't in my 22 scope of work, but I think I would certainly want a 23 chance to put pen to paper and think of it a little 24 bit before I give you a snap response on that. 25 Q. So, but when you prepared this testimony, 308 1 you did not have any particular bidder in mind; is 2 that correct? 3 A. That's correct. And I didn't think I 4 needed to. 5 MS. MOONEY: Okay. That's all I have. 6 EXAMINER BULGRIN: Okay. Anything more? 7 Redirect? 8 MR. STINSON: If we could have a moment, 9 your Honor. 10 EXAMINER BULGRIN: Sure. 11 (Recess taken.) 12 EXAMINER BULGRIN: Let's go back on the 13 record. 14 Mr. Stinson. 15 MR. STINSON: Just one question. 16 - - - 17 REDIRECT EXAMINATION 18 By Mr. Stinson: 19 Q. Mr. Spellman, I think it was on page 67 20 of your testimony. 21 EXAMINER BULGRIN: The amended? 22 Q. Supplemental. 23 EXAMINER BULGRIN: Supplemental. 24 Q. And you were discussing I think in 25 response to questions by Ms. Kolich about which 309 1 non-cost-effective programs should be excluded. And 2 my recollection is you did not recommend that the 3 school programs be excluded. Can you give me the 4 reason why? 5 A. Right. You know, I think the schools 6 programs are very important. Educating young people, 7 you know, K through 12, about the importance of 8 energy efficiency and its benefits is an important 9 part of the energy-efficiency effort and it's the 10 best place to start is when people are young and 11 teaching them. Rather than give them a fish, you 12 want to teach them how to fish, and so that's why we 13 did not recommend that that be excluded. 14 MR. STINSON: Thank you. 15 Nothing further, your Honor. 16 EXAMINER BULGRIN: Very good. I think 17 you are excused. 18 THE WITNESS: All right. Thank you. 19 EXAMINER BULGRIN: And we have pending -- 20 MS. KOLICH: Your Honor, could I move for 21 the admission of Company Exhibits 8 and 9? 22 EXAMINER BULGRIN: Yes. One second. 23 Make sure I have these right. I believe we have to 24 admit OCC Exhibit 9A, B, and C. 25 THE WITNESS: Who do these go to? 310 1 EXAMINER BULGRIN: You can just leave 2 them right there. 3 THE WITNESS: Okay. 4 EXAMINER BULGRIN: Any objections to OCC 5 Exhibits 9A, 9B, 9C or the Company Exhibits 8 and 9? 6 And I think I already took administrative notice of 7 7, so. 8 MS. KOLICH: No. 7 I was using for 9 impeachment purposes only and I wasn't -- I had 10 committed to you I wouldn't, but I will be happy to 11 introduce it. 12 EXAMINER BULGRIN: No. 8 and 9, any 13 objections? They will be so admitted. 14 (EXHIBITS ADMITTED INTO EVIDENCE.) 15 EXAMINER BULGRIN: And IGS Exhibit 1. 16 MR. STINSON: Just for the reasons 17 already stated, your Honor. 18 EXAMINER BULGRIN: You are overruled. We 19 are going to admit this. 20 MR. OLIKER: Thank you, your Honor. 21 (EXHIBIT ADMITTED INTO EVIDENCE.) 22 MS. FLEISHER: FirstEnergy, the 23 Companies' Exhibit 7, is neither admitted nor is it 24 administrative notice taken? 25 EXAMINER BULGRIN: Right. 311 1 MS. FLEISHER: Okay. Thank you. 2 EXAMINER BULGRIN: We did take 3 administrative notice. 4 Okay. Staff, do you need additional 5 time? 6 MR. JONES: Yes, your Honor. If I could 7 just have a few minutes. 8 EXAMINER BULGRIN: Yeah. Let's take a 9 break to quarter to 3, I guess. Is that right? 10 3:45. 11 MR. HEALEY: 2:45. 12 EXAMINER BULGRIN: 2:45? 2:45. 13 (Recess taken.) 14 EXAMINER BULGRIN: Let's go back on the 15 record. 16 Mr. Jones. 17 MR. JONES: Yes, your Honor. Could I 18 have the amended testimony of Patrick Donlon marked 19 as Staff Exhibit 1, please for the record. 20 EXAMINER BULGRIN: It will be so marked. 21 (EXHIBIT MARKED FOR IDENTIFICATION.) 22 MR. JONES: Mr. Donlon, can you please 23 state your -- 24 EXAMINER BULGRIN: Mr. Donlon, will you 25 please stand and swear. 312 1 (Witness sworn.) 2 EXAMINER BULGRIN: Be seated. Thank you. 3 THE WITNESS: Do you want this OCC stuff 4 here? 5 - - - 6 PATRICK DONLON 7 being first duly sworn, as prescribed by law, was 8 examined and testified as follows: 9 DIRECT EXAMINATION 10 By Mr. Jones: 11 Q. Can you please state your name for the 12 record, please? 13 A. Patrick Donlon. 14 Q. Where are you employed? 15 A. The Public Utilities Commission of Ohio. 16 Q. And what is your job title and 17 responsibilities? 18 A. I'm the Director of the Rates and 19 Analysis -- Analysis Department within the PUCO and I 20 oversee all aspects of the Rate Analysis Department. 21 Q. And did you submit prefiled testimony in 22 this case? 23 A. I did. 24 Q. And would you please identify what's 25 before you marked as Staff Exhibit 1. 313 1 A. My amended testimony within this case. 2 Q. And was that testimony prepared by you or 3 at your supervision? 4 A. Yes. 5 Q. And do you have any changes or additions 6 to make to that testimony? 7 A. I do. 8 Q. And could you please direct us where? 9 A. Page 8. 10 Q. Okay. 11 A. Starting on line 159, the last sentence, 12 starting with, "The" and carries onto lines 160 to 13 161, removing that sentence that says "The table 14 below shows the amended shared savings trigger" and 15 deleting the table. 16 Q. Okay. 17 A. And then the same page, starting at 18 line 174, after "for" it should say "not exceeding." 19 And then it should be a period after "mandate." 20 Striking the rest of that sentence that continues 21 onto 17 -- line 175. 22 Q. Okay. 23 EXAMINER BULGRIN: Can you give me that 24 again? I'm sorry. 25 THE WITNESS: Do you want to see this? 314 1 Q. Okay. So just to be clear -- just to be 2 clear for the record for everyone, you're deleting, 3 on page 8, at line 159, beginning with "The table 4 below shows the amended shared savings trigger" and 5 you are deleting then the table below that, going 6 down to 161, all that is removed. 7 And then on line 174, after the word 8 "for" you're inserting the word "not" so it will 9 read: "For not exceeding the mandate." And then 10 deleting the remainder of that sentence. Is that 11 correct? 12 A. Correct. 13 Q. Okay. Now, with those changes in mind, 14 with the exception of those changes you just made, if 15 I were to ask you the same questions contained in 16 your prefiled testimony, would your answers be the 17 same? 18 A. Yes. 19 MR. JONES: Your Honor, I move for the 20 admission of Staff Exhibit 1, subject to 21 cross-examination, and offer Mr. Donlon for 22 cross-examination. 23 EXAMINER BULGRIN: All righty. Start 24 with the company then. 25 MR. GLADMAN: Thank you, your Honor. 315 1 Michael Gladman for the FirstEnergy 2 companies. 3 - - - 4 CROSS-EXAMINATION 5 By Mr. Gladman: 6 Q. Good afternoon, Mr. Donlon. 7 A. Good afternoon. 8 Q. Beyond the cost cap and reduced shared 9 savings trigger, you did not, in your testimony, 10 offer any criticism of the stipulation; is that 11 right? 12 A. There is, just clarifying, I think in 13 Question 28 on which program should not count towards 14 the shared savings calculation. But other than that, 15 no. 16 Q. And you do not, in your testimony, take 17 issue with the companies' individual energy 18 efficiency programs, correct? 19 A. We do not address it. Staff is not 20 taking a position on that, correct. 21 Q. And you do not, in your testimony, take 22 issue with the individual budgets that the companies 23 are proposing for any of the programs, correct? 24 A. Staff is not taking a position there. 25 Q. And also, in your testimony, you do not 316 1 indicate that staff did any analysis of the cost it 2 would take to actually implement the companies' 3 programs; is that right? 4 A. We do not state that in our testimony, 5 that is correct. 6 Q. Okay. And, in fact, you do not, in your 7 testimony, I believe, mention a single program that 8 is part of the companies' program portfolio plans; is 9 that right? 10 A. Again, we are not taking a position on 11 the individual programs. 12 Q. Fair enough. Is it accurate to say that 13 the Commission can only approve program portfolio 14 plans that are cost effective? 15 THE WITNESS: Can you restate that -- or 16 not restate it, I'm sorry, repeat that. 17 (Record read.) 18 A. That's my understanding of the rule, yes. 19 Q. And the programs within the program 20 portfolio plans -- bless you -- must also be 21 cost-effective unless they offer substantial 22 nonenergy benefits; is that also consistent with your 23 understanding? 24 A. Yes. Not all individual programs need to 25 be cost-effective, but as long as the program as a 317 1 total is, that's fine. 2 Q. Okay. 3 A. Is my understanding. 4 Q. Sure. And measures within the individual 5 programs, going down another layer, need not be 6 cost-effective; is that accurate? 7 A. I think that complies with Commission 8 precedent. 9 Q. Okay. And to determine whether program 10 portfolio plans in individual programs are 11 cost-effective, the Commission utilizes the TRC test? 12 A. Correct. 13 Q. And to be cost-effective under the TRC 14 test, a program portfolio plan or individual program 15 must save more in energy supply costs than the total 16 costs of implementing that plan or program; is that 17 accurate? 18 A. That sounds correct, yes. 19 Q. Okay. Fair to say that customers benefit 20 from cost-effective programs? 21 MR. HEALEY: I am going to object, your 22 Honor. That's vague as to "benefit." 23 EXAMINER BULGRIN: Well, you can answer. 24 A. What I would say is that, you know, for 25 the most part, staff does agree that there is a 318 1 benefit to energy efficiency programs, but that we 2 also must balance the risk of the costs. 3 Q. Sure. And I understand that's your 4 testimony. My question is a little bit different. 5 It's do you believe that customers benefit by the 6 implementation of a cost-effective energy efficiency 7 program? 8 A. And I would say that's dependent on the 9 bigger picture and as long as there is parameters 10 around it, then yes, but not solely. 11 Q. Okay. And when you say "parameters 12 around it," are you referring to things like cost? 13 A. Costs and cost cap, yes. 14 Q. Okay. Let me read this statement to you 15 and I am going to ask you if you agree with it. 16 "Because...energy savings must be cost-effective, by 17 definition, customers in the aggregate save money 18 when the Companies deliver energy savings 19 opportunities to their customers instead of energy. 20 To the extent the Companies accelerate the delivery 21 of cost-effective energy savings opportunities to 22 their customers, they will also accelerate the net 23 cost savings which customers enjoy. Thus every 24 kilowatt-hour of energy that can be displaced through 25 cost-effective energy efficiency programs is a 319 1 savings, not a cost, to the Companies' customers." 2 Do you agree with that statement? 3 MR. JONES: I object, your Honor. If he 4 can show where he is reading from that Mr. Donlon 5 could have an opportunity to read over that long 6 paragraph he just read from. 7 EXAMINER BULGRIN: Yeah. I'll sustain 8 that. 9 MR. GLADMAN: Okay. To address 10 Mr. Jones' objection, it's from the companies' ESP IV 11 March 31, 2016, Opinion and Order at 95, citing the 12 Companies' 09-1947 original portfolio plans case. So 13 with that clarification, would you agree with that 14 statement? 15 MR. JONES: I still -- the witness 16 doesn't have it before him. 17 MR. HEALEY: Can we read it to him again? 18 EXAMINER BULGRIN: Can we just take 19 administrative notice of that Opinion and Order? 20 MR. GLADMAN: And I am asking, your 21 Honor, if he agrees with that statement because it 22 goes to the question I just asked him. If it's a 23 reading problem, could I approach and show it to him? 24 EXAMINER BULGRIN: Sure. 25 MR. GLADMAN: I am glad to let him see 320 1 this page without my outline. 2 THE WITNESS: I will try not to read it. 3 Q. My team is apparently unconcerned that 4 you are going to see the next five questions, but 5 that's -- do you agree with that statement? 6 A. Not completely, no. 7 Q. Okay. The companies' filings in this 8 docket indicate that the program portfolio plans are 9 cost-effective on a portfolio basis, do they not? 10 THE WITNESS: I'm sorry. Can you reread 11 that, please? 12 (Record read.) 13 A. Yes. 14 Q. Okay. And your testimony does not 15 challenge the conclusion that the companies' program 16 portfolio plans are cost effective on that portfolio 17 basis, correct? 18 A. Staff is not taking a position there. 19 Q. And the companies' filings in this docket 20 also indicate, Mr. Donlon, that the individual 21 programs themselves within the plan are 22 cost-effective except for the low-income program; is 23 that correct? 24 A. Subject to check, sounds accurate. 25 Q. Okay. Your testimony does not challenge 321 1 that the companies low-income program offers, in 2 fact, substantial nonenergy benefits, does it. 3 A. Staff does not take a position on that. 4 Q. And, again, your testimony does not 5 challenge the conclusion that the companies' other 6 individual programs are cost-effective. 7 A. Correct. Staff does not take a position. 8 Q. Thank you. 9 Let's talk about your cost cap proposal. 10 Do you have your testimony in front of you? 11 A. I do. 12 Q. And again, we are referring only here, 13 just to make sure the record is clear, to your 14 amended testimony which replaced your original 15 testimony? 16 A. Correct. 17 Q. Take a look at page 3, lines 47 to 58 of 18 your testimony, please. I am going to read a portion 19 of it, ask if I have read it correctly, and then 20 follow-up on a few questions. You state, "The 21 Stipulation should include a methodology for the 22 Commission to use to control the costs of the energy 23 efficiency and peak demand reduction programs that 24 are developed and administered by the electric 25 distribution utilities (EDUs). Staff is therefore 322 1 proposing that the stipulation be modified to include 2 the implementation of an overall cost cap on the 3 program costs and shared savings incurred through the 4 Companies' energy efficiency portfolio plan." Did I 5 read that portion of your testimony correctly, 6 Mr. Donlon? 7 A. Yes, you did. 8 Q. Okay. And on page 3, lines 62 to 65, not 9 a quote, but you state in general that the overall 10 cost cap will be set at 3 percent of the figure 11 reported on the companies' FERC Form 1, page 300, 12 line 10; is that accurate? 13 A. Correct. 14 Q. Okay. And that 3 percent cap applies to 15 the sum of two components: First, all program costs; 16 and, two, pretax shared savings for a given plan 17 year; is that correct? 18 A. Yes. Just making sure the "pre" and 19 "after" were the correct way, so yes, it is. 20 And just to clarify the question before 21 that, I'm not sure if you said it or not, but it was 22 listed as the 2015 FERC Form 1, line 10. 23 Q. I appreciate that clarification. 24 On page 7, lines 139 through 141 of your 25 testimony, you also state that the revenues the 323 1 companies receive from PJM for bidding energy 2 efficiency resources in the RPM auction and credit 3 back to their customers will offset the cost cap; is 4 that correct? 5 A. Correct. 6 Q. So taken all together, the 3 percent cost 7 cap applies to, one, the sum of, one, all program 8 costs; two, pretax shared savings for a given program 9 year; minus PJM revenues that the companies receive 10 in credit back to the customers; did I get that 11 right? 12 A. Yes, you did. 13 Q. Are you aware that the companies are 14 committed to contributing $6 million a year to OPAE's 15 Community Connections program in their ESP IV case? 16 A. I don't remember the exact dollar amount, 17 but I do remember something to that effect. 18 Q. Okay. 19 A. From the ESP. 20 Q. And would that amount be included in your 21 cost cap calculation? 22 A. If that amount is within this program and 23 program cost, then, yes. 24 Q. Okay. And not to kind of -- I appreciate 25 that response. Do you think that that kind of 324 1 contribution to OPAE's Community Connections 2 qualifies as a program cost? Do you have enough 3 information to make that judgment? 4 A. What I would say is if they -- if the 5 company put it into the energy efficiency portfolio 6 program and is seeking recovery through that program 7 for it, then, yes. 8 Q. Okay. Mr. Donlon, you would agree there 9 is no direct link between staff's cost cap proposal, 10 the calculation, and the companies' statutory energy 11 efficiency benchmarks? 12 A. Could you expand on what you mean by 13 "direct link"? 14 Q. Sure. Let me ask it a different way. 15 The cap you proposed is not used to calculate the 16 benchmarks. 17 A. Correct. 18 Q. And the benchmarks are not used to 19 calculate the cap. 20 A. They are not used to calculate, but it 21 was taken into account. 22 Q. But the actual mathematical formula we 23 just walked through doesn't have a benchmark 24 component. 25 A. Correct. 325 1 Q. Are you aware some jurisdictions, with 2 energy efficiency cost caps, calculate the benchmark 3 after setting the cost cap? 4 A. I have no reason to dispute that. 5 Q. Okay. Is that something you are actually 6 aware of? I appreciate that, but is that something 7 you are aware of? Have you looked into those other 8 jurisdictions to see if that's something other 9 jurisdictions do? 10 A. My staff has looked into a lot of 11 different items, so -- and I have been briefed on a 12 lot of them, but which ones specific, I'm not sure. 13 Q. So fair to say as you are -- I appreciate 14 that. Fair to say, as you are sitting here today, 15 you are not aware whether or not there are other 16 jurisdictions with energy efficiency cost caps that 17 calculate their benchmarks after setting the cost cap 18 first? 19 A. I am pretty sure there are, I just don't 20 want to tie myself down to saying yes absolutely. 21 Q. Okay. I appreciate that. And you may 22 not know, but since you said you are pretty sure, let 23 me ask you this: Do you know how that would work in 24 those jurisdictions, those jurisdictions where they 25 set the benchmark after setting the cap, how would 326 1 that be done? 2 A. Not intimately, no. 3 Q. On page 5, lines 105 through 107. 4 A. Page 5, you say? 5 Q. Yes. 6 A. Yes. 7 Q. You state that "...costs have been 8 escalating to the point that the rider in which 9 energy efficiency costs are collected has become one 10 of the highest riders on residential customers' 11 bills." Did I read that correctly? 12 A. Yes. 13 Q. And you are referring to rider DSE2 for 14 the FirstEnergy companies? 15 A. Yes. 16 Q. As part of making your determination that 17 a cost cap was necessary, did staff do any historical 18 analysis of the FirstEnergy companies' annual rider 19 DSE2 revenues? 20 A. We have reviewed some of those costs and 21 it's a little bit difficult to really do a true rider 22 trend analysis because the company forecasts many of 23 their costs. So if the forecast is inaccurate, then 24 there is a true-up afterwards. So in some cases, in 25 some given times, FirstEnergy's cost, I am pretty 327 1 sure it's actually been negative due to 2 over-forecasting in prior years. 3 Q. Okay. So you are hitting a point I was 4 going to get to in a couple of questions, but I'll 5 jump to that now. So the way this works that the 6 company makes projections approximately eight months 7 in advance of what the rider DSE2 revenues will be, 8 and they later reconcile with actual results. Is 9 that essentially how that works? 10 A. Yeah. I forget if FirstEnergy is eight 11 months or what exactly the period in the true-up 12 period is, but at least an annual true-up, yes. 13 Q. Okay. And that can make the rider 14 volatile as you are making the projections and 15 true-ups? 16 A. I'm sorry. Yeah. Shaking my head. Yes. 17 Q. Did you do any forecasts, and "you" 18 meaning you or your staff or your team, do any 19 forecast of rider DSE2 looking forward in determining 20 that a cost cap was necessary? 21 A. We -- to determine the cap, we looked at 22 a lot of different scenarios and different options to 23 determine a cap. Because of the fluctuation of the 24 specific rider and also some of the other costs that 25 go into the rider, we decided the methodology of 328 1 actually determining a cost cap based on rider costs 2 was not the most appropriate. So we kind of stopped 3 that analysis and didn't go too far into it because 4 we realized it wasn't a fair way to judge -- judge 5 what was going on within the energy efficiency world. 6 Q. Are you aware that each of the 7 FirstEnergy companies' rider DSE2 revenues declined 8 from 2014 to '15 then again from 2015 to '16? 9 A. Seeing as the company chose not to 10 continue their energy efficiency program in '15 and 11 '16, I would expect that to be, but it's still -- 12 actually, right now -- as of October it was -- for 13 two of the utilities it was the fourth highest, and I 14 think Ohio Edison it was the fifth highest out of 16 15 riders. 16 Q. Okay. So just so I understand your 17 testimony, it is -- can you say that again? It's the 18 second-highest rider for one of the FirstEnergy 19 companies? 20 A. Fourth. 21 Q. Fourth highest? 22 A. Fourth for Toledo and Cleveland, and 23 fifth for OE. 24 Q. Okay. So when you said it's in your 25 testimony, lines 105 through 107 on page 5, you said 329 1 it's become one of the highest riders, that's the 2 reference to it's the fourth highest and the fifth 3 highest? 4 A. I would say top five. One of the 5 highest, yes. 6 Q. Fair enough. But to return to my 7 original question, are you aware actually that the 8 2014 to '15, they went down in '15 and '16, they 9 actually went down; you are not disputing that, are 10 you? 11 A. I would expect that seeing as the company 12 did not continue their energy efficiency portfolio 13 plan in '15 and '16. 14 Q. And that would make the FirstEnergy 15 companies different from, perhaps, AEP or Dayton 16 Power and Light in terms of the trends you might see 17 on their riders; is that fair to say? 18 A. Correct. 19 Q. Didn't the companies agree to a rate 20 freeze in the ESP IV case? Are you aware of that? 21 A. Base distribution rate freeze, yes. 22 Q. Okay. And does that freeze the overall 23 rates to standard customers at June 1, 2016, levels 24 for two years? 25 A. It freezes base rates, not over- -- not 330 1 overall rates to customers, no. 2 Q. Can we take -- let me ask you this: Did 3 the overall freeze that's agreed to in ESP IV also 4 impact the rider DSE2 revenues? 5 A. Not to my knowledge, no. 6 Q. Okay. So the freeze that was agreed to 7 in ESP IV would not have any impact on DSE2 to your 8 knowledge? 9 A. Not to my knowledge. 10 Q. Okay. Let's take a look at page 6, lines 11 113 to -14 of your testimony. Where you state that 12 "Staff reviewed many options for cost cap, searching 13 for the most appropriate percentage and baseline." 14 Did I read that portion of your testimony correctly, 15 Mr. Donlon? 16 A. Yes. 17 Q. Let's talk about the options that you 18 reviewed and the decisions you made. First, on 19 page 6, lines 115 to -16 of your testimony, you state 20 that "Staff evaluated that 3 percent would provide 21 price security for all ratepayers...." Did I read 22 that portion of your testimony correctly? 23 A. Yes. 24 Q. So fair to conclude that staff determined 25 that 3 percent was the most-appropriate percentage 331 1 for the cost cap? 2 A. Yes, we did. 3 Q. And did staff decide the percentage, the 4 3 percent, or the FERC baseline, the line 10 figure 5 that we'll talk about in a minute here, first? 6 A. I'm not sure necessarily what order. I 7 would -- I don't really remember which order it came 8 in through. There was a lot of discussions and 9 conversations, so. Might have determined one and 10 then came back to it and moved and changed. There is 11 a lot of discussion on how we would do this. So in 12 what order things happened -- 13 Q. You just don't recall. 14 A. Right. 15 Q. Did staff do any forecasting or modeling 16 to determine whether a 3 percent cost cap would 17 provide price security? 18 A. You said modeling or analysis? 19 Q. Modeling or forecasting. 20 A. Forecasting. We projected out and looked 21 at what the portfolio plans as submitted were, so 22 we -- in a way we were using what the companies 23 forecasted out to do that, but we did not do our own 24 independent forecasting. 25 Q. So you relied on the companies' 332 1 forecasting, that's fair to say? 2 A. Yes. 3 Q. And did staff conduct any market 4 potential analysis to determine which technologies 5 the companies could offer at a 3 percent cap to 6 achieve the statutory benchmark? 7 A. Again, by using the companies' market 8 potential of all the market companies and looking at 9 historical trends of the company between '12 and '14 10 underspending their budget by 21 percent and 11 overcomplying by 50 percent, we felt that with those 12 items, the 3 percent was appropriate. 13 Q. Now, I will get to your reference to the 14 '12 to '14 plans in a minute, but since you brought 15 it up there, you said underspending by 21 percent and 16 overcomplying by 50 percent? 17 A. Yes. 18 Q. I appreciate that. Did -- fair to say 19 then that staff was comfortable relying upon the 20 Market Potential Studies and the projections of the 21 companies in their application and revised plans? 22 A. Based on staff's own knowledge and 23 expertise and the Market Potential Studies to 24 determine where we agreed, where we disagreed, yes, I 25 do. 333 1 Q. Okay. Any place in the Market Potential 2 Study where staff disagreed that you can recall? 3 A. Not off the top of my head. 4 Q. And, again, just to make sure the record 5 is clear, did staff project or model the companies' 6 future revenues, future energy efficiency costs or 7 future rider DSE2 charges beyond the companies' own 8 projections? 9 MR. JONES: Objection, asked and 10 answered. 11 MR. GLADMAN: I think it's a little bit 12 different question. 13 EXAMINER BULGRIN: I will overrule. You 14 can answer. 15 A. No, we did not. 16 Q. Did staff evaluate, Mr. Donlon, whether a 17 4 percent overall cost cap would also provide the 18 price security you refer to in lines 115 to -16 of 19 your testimony on page 7? 20 A. We reviewed various percentages. 21 However, we decided in this case that 3 percent was 22 by far the best. 23 Q. Okay. And fair to say, again, that staff 24 did not do any forecasting or modeling to determine 25 whether a 4 percent cost cap for the FirstEnergy 334 1 companies would provide price security? 2 A. I would caveat the exact same answer for 3 the 3 percent. 4 Q. Okay. So you relied upon the companies' 5 own submissions and filings and Market Potential 6 Study? 7 A. And staff's knowledge and historical 8 analysis. 9 Q. Okay. But no independent analysis beyond 10 that, fair to say? 11 A. Yes. 12 Q. Same question, if I were to ask you the 13 same question about a potential 5 percent cost cap 14 and whether it would provide price security, did 15 staff do any evaluation of that? 16 A. Same answer as the 3 and the 4. 17 Q. Mr. Donlon, let's talk about staff's 18 decision to use FERC Form 1 in its proposed cost cap 19 calculation, okay? 20 A. Okay. 21 Q. Is it fair to say that staff determined 22 that FERC Form 1, page 300, line 10, was the 23 most-appropriate baseline? 24 A. Yes. 25 Q. And if I say "line 10," will we know what 335 1 we are talking about here? 2 A. Yes. 3 Q. Okay. Thank you. 4 On page 4, lines 81 through 89 of your 5 testimony, you state that staff chose FERC Form 1, 6 page 300, line 10, because that number is, one, 7 publicly-available; and, two, expressed in total 8 dollars; and, three, represents a single number; and, 9 four, because using FERC reporting allows for 10 consistency among all the utilities in Ohio; is that 11 correct? 12 A. Yes, it is. 13 Q. And line 10 on FERC Form 1, page 300, 14 represents "total sales to ultimate customers" for 15 utilities; is that correct? 16 A. Yes. 17 Q. Would you agree with me there is 18 currently no law in Ohio that states that a utility's 19 EE/PDR plans cannot exceed a certain percentage of 20 that utility's total sales to ultimate consumers as 21 reported on FERC line 10? 22 MR. JONES: I would object, your Honor. 23 The witness is not an attorney. He is asking a legal 24 question. 25 MR. GLADMAN: Your Honor, he is being 336 1 offered as a regulatory expert. I am just asking if 2 he is aware of any law in the State of Ohio that says 3 this can't be done. 4 EXAMINER BULGRIN: You can answer. 5 THE WITNESS: Can you repeat the 6 question, please? 7 (Record read.) 8 A. I would say there is no law that requires 9 it or doesn't allow it. 10 Q. Okay. Are you aware of any other state 11 that uses FERC line 10 as part of a cost cap 12 calculation for energy efficiency portfolio plans? 13 A. I am not. 14 Q. Did staff consider any other annual 15 publicly-available figures expressed in total dollars 16 as the baseline for the cap other than FERC line 10? 17 A. Yes, we did. 18 Q. Okay. Which ones? 19 A. Off the top of my head, I don't remember. 20 We discussed many, many options over many weeks and 21 many meetings, so the specifics on ones we didn't 22 choose, I don't really remember. 23 Q. Not to press you too much, but can you 24 remember even one alternative for the baseline you 25 considered and rejected? 337 1 A. On a line like that, one would be total 2 bill, is one that I -- not total bill, but total cost 3 is one I know we discussed and decided it wasn't. As 4 for numbers in which lines, no, I don't. 5 Q. Total rider cost was rejected for the 6 reasons you explained a few minutes ago when we were 7 talking about rider DSE2? 8 A. Correct. 9 Q. Did staff have a predetermined spending 10 level or range in mind for the cost cap prior to 11 selecting FERC line 10 as the baseline? 12 A. I am not sure "predetermined" is a -- is 13 the right word, but I think we had some thoughts and 14 then we were trying to see what's reasonable, what's 15 not. So, yes and no, which is a bad answer for this, 16 but it's just kind of how the collaborative process 17 worked and brainstorming. 18 Q. Sure. And I understand there is a lot of 19 questions where "yes and no" is the answer. I 20 appreciate that honesty. You said you had some 21 thoughts. Again, this sort of goes back to where I 22 started again. How did this come together in an 23 order, but my question is really driving towards not 24 a specific number, but staff had some thoughts, this 25 is in the range of where we think this cost cap 338 1 should be, and then you guys found a way how this 2 formula makes sense to hit this kind of number; is 3 that the way it went? 4 MR. JONES: Objection. Asked and 5 answered. We covered this. 6 MR. GLADMAN: I don't think I have gotten 7 quite an answer. 8 EXAMINER BULGRIN: Yeah. I'll overrule. 9 You can answer. 10 A. I think that can be a very simplistic way 11 of describing it. Obviously there's a lot of nuance 12 to that, but I am not going to argue with you on 13 that. 14 Q. Okay. Just to be clear, you said that 15 could be a simplistic way of -- and I don't want to 16 misstate your testimony -- simplistic way of 17 describing the process that staff engaged in. 18 A. Relatively, yes. 19 Q. Mr. Donlon, on page 5, lines 96 through 20 100 of your testimony, you conclude that the 21 Companies can run their energy efficiency portfolio 22 and meet or exceed their statutory benchmark if 23 staff's proposed 3 percent overall cost cap is 24 implemented, correct? 25 A. Yes. 339 1 Q. And your conclusion for that is based 2 upon the companies' 2012 through 2014 annual status 3 reports for compliance under their prior plans, 4 correct? 5 A. Yes. 6 Q. And this was the reference you made a few 7 minutes ago to 2012 through '14? 8 A. Correct. 9 Q. Let's talk about how you use those 2012 10 to '14 plans. Fair to say you looked at the cost of 11 the old plans? 12 A. Yes. 13 Q. And including shared savings? 14 A. Actually, we did not take shared savings 15 into account in this. 16 Q. And did you look at the energy savings 17 under the old plans? 18 A. Yes. 19 Q. Did you calculate acquisition costs for 20 energy efficiency savings under the old plans? 21 A. Some of my staff may have. I think we 22 did. I think that's one of the ones that we looked 23 at from a "should we evaluate the cap on that" and we 24 decided that that wasn't the methodology we wanted to 25 use, so we moved away from it, so I don't remember 340 1 any specifics on that analysis. 2 Q. And just to be clear when we are talking 3 about acquisition costs, that's dollars spent per 4 kilowatt-hour saved? That's the metric known as 5 acquisition costs? 6 A. In this setting. 7 Q. Yes. And sometimes you see references to 8 "first-year acquisition costs"; are you familiar with 9 that as well? 10 A. I assume that would be the first year of 11 your program. 12 Q. And that's something you have heard of 13 before? 14 A. Yes. 15 Q. Did staff apply 3 percent to the 16 companies' old FERC line 10s from 2012 to '14 and 17 compare those to the companies' plan costs for those 18 years? 19 A. I am pretty sure my staff did, yes. 20 Q. And that analysis would tell you whether 21 the companies would have met the 3 percent cost cap 22 under prior plans, correct? 23 A. Yes. 24 Q. And that doesn't tell you specifically 25 whether or not the FirstEnergy companies could or 341 1 will meet the 3 percent cost cap under the 2017 to 2 '19 plans, correct? 3 A. It's a barometer to if they can, and the 4 biggest piece that stood out for staff was the 5 overcompliance in those years and where they fell in 6 the cost cap. So they did some barometer tests if 7 they could or not, yes. 8 Q. Mr. Donlon, did you perform or your team 9 perform any analysis of the companies' ability to 10 meet or exceed their statutory benchmarks for the 11 2017 through '19 plan period beyond assuming that the 12 companies' 2012 to through '14 results would prove to 13 be an accurate barometer? 14 THE WITNESS: Could you repeat that 15 question, please. 16 (Record read.) 17 A. Yes. 18 Q. What analysis did you perform? 19 A. Yeah, I am not sure exactly the 20 specifics, but we analyzed what some of the programs 21 were, and this was more of my staff than necessarily 22 me, and used our expertise in determining if we 23 thought they could -- the company could or not. 24 Q. Okay. You say you analyzed some of the 25 programs. Which ones did your staff analyze? 342 1 A. It was the overall portfolio and what 2 their assumptions were. 3 Q. And again, is this what you referenced 4 before that you looked at the companies' own 5 projections for the savings and costs under the 6 revised portfolio plans? 7 A. I'm sure that's similar to what they did, 8 yes. 9 Q. And I don't want to split hairs with you. 10 So you are sure that that's what they did? I want to 11 get your testimony here to the extent of your -- best 12 of your recollection. Do you know if that's what 13 they did or is that a supposition on your part? 14 MR. JONES: Objection, asked and 15 answered. 16 EXAMINER BULGRIN: Overruled. You can 17 answer. 18 A. I know they evaluated the portfolio plan 19 and used their expertise in determining if they could 20 do it; the exact specifics of what and how they did 21 that, I don't know; I can't speak to. 22 Q. As part of your analysis of determining 23 whether or not the 2012 through '14 compliance or 24 overcompliance was an accurate barometer, was to 25 assume the conditions in the 2012 to '14 plan would 343 1 continue? 2 A. I think when you take and look at what's 3 happening across the state in all the portfolio plans 4 in that most of the utilities are underspending on 5 their budget and overcomplying, then yes, I think it 6 is a good barometer. And I think, again, with 21 7 percent under -- going dollar-wise 21 percent under 8 the budget and 50 percent overcompliance for those 9 three years, and technology continuing and costs 10 coming down on many projects, yes, I think they 11 can -- the company can achieve the mandate. 12 MR. GLADMAN: Okay. Can I have my 13 question read back? I appreciate the response. I am 14 not sure it's quite the question I asked. 15 (Record read.) 16 Q. What's your answer to that question? 17 Yes, you believe that? 18 A. I would say what I said -- 19 MR. JONES: Objection. He answered that 20 question, your Honor. 21 MR. GLADMAN: I don't remember that I 22 quite got an answer to that one. 23 EXAMINER BULGRIN: Can you ask it one 24 more time? 25 Q. Let me try it a little bit different way. 344 1 Is it fair to say, Mr. Donlon, that you 2 assumed in concluding that the 2012 to through '14 3 plan period was a useful barometer for you, in your 4 language, that you concluded that the conditions that 5 existed during 2012 to '14 would either continue or 6 get better in terms of what it would cost to comply 7 with energy efficiency benchmarks? 8 A. I would say it's one of the major 9 components to our decision, yes. 10 Q. Is it possible that if a company 11 overcomplied in the past, it could reduce future 12 energy efficiency savings opportunities? 13 A. It is possible, but I do not believe we 14 are there yet. 15 Q. Okay. And have you done any analysis to 16 determine whether we've hit that tipping point in 17 terms of things getting more expensive and more 18 difficult to achieve in terms of energy efficiency 19 savings? 20 A. The staff relies on, you know, their 21 knowledge, their expertise, and the Market Potential 22 Studies, and staff does not believe we are at that 23 tipping point. 24 Q. Anything more specific you could point to 25 that influences staff's conclusion in that regard? 345 1 A. I think there is many things. I mean you 2 can take the example of why -- it's not an energy 3 efficiency thing, but just something most of us know 4 about. You look at T.V.s over time, you know they 5 are getting bigger and cheaper every single year. As 6 technology and items move up, often they become more 7 mainstream, costs come down. So I think it's just 8 the economic cycle. 9 Q. Mr. Donlon, are you aware that the 10 statutory benchmarks for the FirstEnergy companies 11 and the other utilities in Ohio doubled in 2021? 12 A. Subject to check, 2021, I believe is the 13 year that it goes to 2 percent, yes. 14 Q. And is that something that staff 15 considered in preparing its proposed cost cap; the 16 fact that the benchmarks would double in 4 years? 17 MR. JONES: Objection, your Honor. Not 18 relevant. We are talking about a plan year, '17 to 19 '19. He is talking about '21-'22. 20 MR. GLADMAN: I don't believe that the 21 cost cap is limited in duration unless I have 22 misunderstood Mr. Donlon's testimony. 23 MR. JONES: The plan is, your Honor, '17 24 to '19. 25 EXAMINER BULGRIN: I will overrule the 346 1 objection. You can answer. 2 A. Yes, we took that into account. 3 Q. And that would suggest at least a higher 4 cost cap if, assuming all else being equal, that is 5 if the benchmarks were going to double in 2021, the 6 cost cap might have been reduced; fair to say? 7 MR. JONES: I want to continue my 8 objection, your Honor, for the record. 9 Q. Let me ask that question a different way. 10 That wasn't a great question. 11 You said staff considered the doubling of 12 the benchmarks in '21 in terms of coming up with its 13 cost cap proposal. How did you consider that? 14 A. We knew it was out there and we 15 understand that the 2 percent mandate -- well, at the 16 time it was still a little bit -- when we were 17 discussing the cost cap, the legislation was actually 18 still out there being changed. It might have even 19 been approved before, I don't quite remember all the 20 timing, but we took that into consideration when we 21 were doing that. 22 However, this plan is for 3 years, so the 23 cost cap and the mechanism, you know, six year -- or 24 four years from now you wouldn't want to be using the 25 2015 FERC Form 1. So it's going to be, again, 347 1 analyzed in the next portfolio case of what the cost 2 cap would be and if 3 percent is still the right 3 percentage. 4 Q. Okay. So let me make sure I understand. 5 Is it staff's intention that the cost cap, as 6 proposed in this plan, would terminate at the end of 7 2019? 8 MR. JONES: Objection, your Honor. Calls 9 for speculation. We don't know, we're not in 2019 to 10 know what's going to go forward. 11 MR. GLADMAN: I am asking him if this 12 proposal terminates on its own terms in three years. 13 EXAMINER BULGRIN: Yeah. You can answer. 14 A. Well, as in my understanding -- staff's 15 understanding or maybe it's just mine, there wouldn't 16 be a portfolio plan at that time without a new 17 filing. So if you don't have a portfolio plan, why 18 would you have a cap? So I mean, I am not sure -- if 19 you have another portfolio plan, staff would 20 recommend that there still be another -- there be an 21 overall cap, but that would be another case and 22 another hearing. 23 Q. Okay. That's helpful. That gets me 24 closer to where I was trying to go with this. So 25 it's staff's intention to propose a new cost cap each 348 1 time that a utility files a new EE/PDR plan? 2 MR. JONES: I would object, your Honor. 3 We are beyond the scope here of his testimony, this 4 plan, this case. 5 EXAMINER BULGRIN: Okay. I'll sustain 6 that. 7 MR. GLADMAN: Okay. I'll move on. 8 Q. Would you agree, Mr. Donlon, that, over 9 time, achieving energy efficiency becomes more 10 difficult for a utility because prior programs and 11 measures have already captured much of the 12 easy-to-achieve energy efficiency? 13 A. I don't necessarily agree with that 14 premise. And, again, I will kind of go back to kind 15 of T.Vs. You bought a T.V. in 2007 that was a 16 47-inch flat screen for like $2,000. Now you can buy 17 a 65-inch ultra HD for $800. So, you know, 18 technology is moving. There is, you know, a claim 19 out there that there is a proverbial wall that you 20 will hit, but as technology and costs come on, and 21 costs go down, then maybe that wall doesn't hit. 22 That wall is always moving, so when that wall is hit 23 and when it isn't, is difficult to determine. 24 Q. Let me ask you this, would you agree that 25 the costs of lighting programs have gone up as the 349 1 standard energy efficiency has moved from CFLs to 2 LEDs? 3 A. I think that's debatable too. 4 Q. And what's debatable about that? You 5 don't know if the pricing has gone up from CFLs to 6 LEDs? 7 A. In particular, the current-draft TRM is 8 still out there that is a safe haven or safe harbor, 9 so that hasn't changed in a few years. 10 Q. So, yeah, TRM, as I understand, it has to 11 do with the amount of energy savings you can count, 12 correct? 13 A. Yes. 14 Q. But I am talking about the costs of that, 15 achieving that energy savings, and my question is, do 16 you know whether or not the costs of achieving 17 efficiency in lighting programs has gone up as the 18 standard has moved from CFLs to LEDs? 19 A. My understanding is LED costs have 20 drastically come down over the years. 21 Q. And are they still higher than CFLs? 22 A. That I do not know. 23 Q. Have you done any trend analysis as to 24 whether acquisition costs for energy efficiency are 25 trending up? 350 1 A. Again, we decided to not really use the 2 acquisition costs in our cost cap. So while some of 3 that analysis may have been -- may have been done by 4 staff, it wasn't into my testimony and in the cost 5 cap. 6 Q. Let's shift topics here. Let's take a 7 look at page 6, lines 124 through 127 of your 8 testimony. And there you state the companies may 9 request an amendment to their applicable benchmarks 10 under section 4128.66(A)(2)(b) of the Ohio Revised 11 Code if they are unable to meet the statutory 12 requirements within their projected budgets after 13 making "all possible adjustments." Does that 14 accurately state your testimony? 15 A. Yes, it does. 16 Q. Okay. And what adjustments are you 17 referring to when you say "all possible adjustments"? 18 A. Well, first of all, it would be the 19 banking. The company has significant banked energy 20 savings allowance. So before this provision was 21 enacted, staff would assume that the bank -- the 22 company would use their bank first. 23 Q. Okay. So that's a little bit different 24 question, is it not, when we are talking about 25 66(A)(2)(b), we are talking about making a request to 351 1 reduce the applicable statutory EE benchmarks, 2 correct? 3 A. Yes, but you were speaking to make -- 4 after making all possible adjustments. 5 Q. Okay. And so -- so okay, so one of the 6 adjustments you are referring to here is draining 7 your EE bank; is that correct? 8 A. I am not sure "draining" is the proper 9 term, but using your bank, yes. 10 Q. Okay. Just trying to get an 11 understanding what you are thinking. Do you have to 12 deplete your bank completely before you are allowed 13 to seek a 4928.66(A)(2)(b) benchmark adjustment? 14 A. I think that would be a better question 15 for an attorney on the exact what you have to do, but 16 staff would recommend that, yes. 17 Q. Okay. And again, just to be fair, what I 18 am trying to get here, you've incorporated by 19 reference, have you not, 4928.66(A)(2)(b) in your 20 testimony, fair to say? 21 A. Correct. 22 Q. And I just want to get your understanding 23 of how this would operate. So a follow-up question, 24 would any of the adjustments that staff -- strike 25 that. Let me try again. 352 1 You referred to using the bank. Is there 2 any other possible adjustment that staff is referring 3 to before the companies can seek a 28.66(A)(2)(b) 4 benchmark adjustment? 5 A. I think what -- not I think. What you 6 are referencing there other than the bank is also 7 adjusting the portfolios, adjusting the individual 8 programs, you know, managing the portfolio to be able 9 to achieve the benchmark and just demonstrating that 10 the attempt happened. 11 Q. Okay. So before I follow up on that, is 12 there any other adjustment you are referring to 13 before we kind of break this down? 14 A. There's probably some that, you know, 15 can't happen that I am not thinking of off the top of 16 my head. I think while this is allowable, I do not 17 see it as being relevant to the next three years. 18 Q. Well, it's something that you've 19 considered and decided to put in your cost cap 20 proposal; fair to say? 21 A. Yes, it is -- and the reason it is in 22 there it is an option. We do not -- staff does not 23 believe this is an option that would need to be 24 enacted over the next three years. 25 Q. Sure. And I believe, and I can't 353 1 remember if it's you or Mr. Spellman -- did you read 2 Mr. Spellman's testimony by the way? 3 A. No, I did not. 4 Q. Okay. And you were here for portions of 5 his testimony; is that fair to say? 6 A. I was in the room. I was doing some work 7 while I was doing it, but, yes, I was in the room. 8 Q. Understood. Understood. Did you hear 9 him refer to 4928.66(A)(2)(b), this portion of your 10 testimony, as a potential relief valve for the cost 11 cap? 12 MR. JONES: I object, your Honor, as to 13 another witness's testimony by another party to this 14 case. Not relevant. 15 EXAMINER BULGRIN: Sustained. 16 MR. JONES: Beyond the scope of 17 Mr. Donlon's testimony. 18 Q. Mr. Donlon, one of the things you said 19 that an adjustment that the companies should have to 20 consider before seeking this relief under 21 4928.66(A)(2)(b) is adjusting the portfolio, correct? 22 A. Yes. 23 Q. And that is something that would require 24 Commission approval, would it not? 25 A. My understanding is that there is certain 354 1 amounts and certain levels they can adjust without 2 approval; certain levels. I think there's a trigger 3 where they have to seek approval. 4 Q. Okay. My understanding, correct me if I 5 am wrong, was that the staff had a certain level of 6 authority to reallocate program budgets, but if you 7 were actually changing the entire portfolio plan, the 8 Commission would have to approve that; is that not 9 correct? 10 A. I would say that I think it's semantics; 11 that we were off on our definitions. I was referring 12 to the reallocation of a change in the portfolio. So 13 I think we are on the same page, but we might have 14 been using different words. 15 Q. Okay. So just to be clear, you did 16 mention adjusting the programs, so that would make 17 sense in that context, but you also said one of the 18 potential adjustments you need to make before you 19 seek amendment to the benchmarks is to adjust the 20 portfolio plans themselves. Is that what you 21 intended to say or not? 22 MR. JONES: I object, your Honor. I 23 don't think that's facts in evidence. I think he has 24 misconstrued the testimony. 25 MR. GLADMAN: We can read it back? 355 1 EXAMINER BULGRIN: I'll sustain. 2 MR. GLADMAN: He said that. There was -- 3 MR. JONES: I object, your Honor. He did 4 not say that. 5 MR. GLADMAN: I will ask him again just 6 to clarify. 7 EXAMINER BULGRIN: Yeah. 8 Q. Is one of the possible adjustments that 9 staff is contemplating before seeking the amendment 10 to the benchmarks is adjustment of the actual 11 portfolio plans? 12 A. That could be a possibility. I will say 13 that I don't think staff -- I keep saying "I don't 14 think." Staff did not -- we put this in, and I 15 actually like Mr. Spellman's comment of as 16 identifying a safety valve or relief valve on the 17 mandates in that the benchmark could actually, in 18 staff's opinion, the benchmark or the overall cap 19 would allow the company to be able to use this 20 section of the code as a safety valve. 21 As for the specific mechanisms and, you 22 know, adjustments, we did not spend too much time 23 discussing that as we don't think it's relevant in 24 this case that the company will have to hit that. 25 MR. GLADMAN: Your Honor, I am going to 356 1 move to strike that only because what's good for the 2 goose is good for the gander. If I am not allowed to 3 ask him about what Mr. Spellman's testimony was on 4 this point, I don't think he should be allowed to 5 parrot it. 6 MR. JONES: Objection, your Honor. 7 Within the scope of the question. 8 EXAMINER BULGRIN: Yeah. I'll sustain 9 your objection and overrule yours. 10 MR. GLADMAN: Thank you, your Honor. 11 Q. Mr. Donlon, are you familiar with 12 4928.66? If I am going to ask you questions, would 13 it be helpful for you to have a copy of that in front 14 of you? 15 A. It would. 16 MR. GLADMAN: May we approach the 17 witness, your Honor? 18 EXAMINER BULGRIN: Sure. 19 MR. GLADMAN: Sorry for the delay. 20 MR. HEALEY: I have a copy. 21 MR. GLADMAN: I am guessing everyone here 22 has a copy. 23 Q. So, Mr. Donlon, your testimony on page 6, 24 lines 124 through 127, references 4928.66(A)(2)(b), 25 correct? 357 1 A. Yes, it does. 2 Q. And if we take a look at that provision, 3 why don't I just read it and that will be easier. 4 It's not very long. It says, "The commission may 5 amend the benchmarks set forth in division (A)(1)(a) 6 or (b) of this section if, after application by the 7 electric distribution utility, the commission 8 determines that the amendment is necessary because 9 the utility cannot reasonably achieve the benchmarks 10 due to regulatory, economic, or technological reasons 11 beyond its reasonable control." Did I read that 12 correctly? 13 A. Yes. 14 Q. And that's the provision that you were 15 referencing in your testimony on page 6, lines 1 -- 16 A. Correct. 17 Q. I'm sorry. I didn't mean to interrupt. 18 A. Sorry. I thought you were done. 19 Q. Just to complete the question. On lines 20 124 through 127? 21 A. Mine doesn't have page numbers, but 22 correct. Or -- oh, I'm sorry. My reference, yes. 23 Q. We are getting this messy. Let me try 24 that again. 25 A. Sorry. 358 1 Q. That provision that I just read from 2 4928.66(A)(2)(b) is the provision you've incorporated 3 by reference on page 6, lines 124 through 127, of 4 your testimony, correct? 5 A. Yes, it is. 6 Q. And that provision specifically mentions 7 regulatory, economic, or technological reasons as 8 reasons for seeking an amendment to the statutory 9 benchmark, correct? 10 A. Yes, it does. 11 Q. Okay. There are no other reasons beyond 12 that identified in that specific provision of the 13 Revised Code? 14 A. No, there is not. 15 Q. Okay. It doesn't say that if you fail to 16 meet a cost cap or energy efficiency that you are 17 permitted to seek statutory amendment of the 18 benchmarks. 19 MR. JONES: Your Honor, objection. The 20 statutory provision speaks for itself. 21 EXAMINER BULGRIN: Sustained. 22 Q. Do you believe that any portion of this 23 provision of 66(A)(2)(b) would permit the 1, 2, or 3 24 that's identified, regulatory, economic, or 25 technological reasons, would permit a request to 359 1 amend the statutory benchmarks due to a failure to 2 meet a cost cap? 3 A. Yes. 4 Q. And is that the economic provision? 5 A. Perhaps the economic, but more so the 6 regulatory, but economic would play into that. So I 7 think you could make a reasonable argument that 8 economic played into it. I think you could make a 9 reasonable argument that technological played into 10 it. And I would focus on regulatory. I guess that 11 would be from our standpoint. So I think all three 12 could play into the rationale behind it; regulatory 13 being the kind of anchor of that. 14 Q. How long would it take the Commission to 15 rule on the companies' request for a benchmark 16 amendment? 17 MR. JONES: Objection, speculation. 18 EXAMINER BULGRIN: Sustained. 19 Q. Does staff have a reliable sense of the 20 timing of such a request and how long that would 21 take? Any experience? 22 MR. JONES: Objection, your Honor. 23 EXAMINER BULGRIN: Sustained. 24 MR. GLADMAN: Can I ask the basis for 25 that? I am asking if he has any experience with how 360 1 long that would take. 2 MR. JONES: That's speculation, improper. 3 MR. GLADMAN: If he doesn't know, he can 4 say so. 5 MR. JONES: Improper. 6 EXAMINER BULGRIN: Okay. Go ahead and 7 answer. 8 A. Sorry. Seeing as no company has tried to 9 implement this, I don't think it would be accurate 10 for staff to sit here today and try and guess how 11 long it would take for the Commission to rule on a 12 piece of legislation that had never happened before. 13 Q. Does staff have a contemplated approach 14 for a company that would seek an amendment to the 15 benchmark under 4928.66(A)(2)(b) in terms of what 16 that company should do with its energy efficiency 17 plans while it's seeking that amendment? 18 A. What I would suggest any company do when 19 they have a filing or a concern is meet with staff as 20 early as possible when there is an issue and try and 21 discuss the possibility so we can get a quick resolve 22 of the issues. But I think that's something that 23 would need to happen if and when the company felt 24 they were needing to seek relief. 25 Q. Mr. Donlon, are you aware that Revised 361 1 Code 4928.66 provides for daily penalties if a 2 utility fails to meet its statutory benchmark 3 requirements? 4 A. I know there are, but if it's 5 specifically in this section, but I know there are 6 penalties, yes. 7 Q. Mr. Donlon, at page 6, lines 127 to line 8 -28, of your testimony, you also state that if the 9 companies were to seek an amendment of the benchmarks 10 under section 4928.66(A)(2)(b), "the EDU would not be 11 eligible for shared shavings when making such a 12 request." Do you see that portion of your testimony? 13 A. Yes, I do. 14 Q. Is there anything in Revised Code 15 4928.66(A)(2)(b) that says a consequence of seeking a 16 benchmark amendment under the statute is you cannot 17 seek shared savings? 18 A. Shared savings is a creation of the 19 Commission and, thus, is not referenced other than 20 one piece of what cannot be counted for shared 21 savings referenced in law. 22 Q. So shared savings, I believe there is a 23 reference in both the Administrative Code and Revised 24 Code; is that what you are referring to? 25 A. Yeah. It's just speaking of what can and 362 1 can't be counted in shared shavings, but shared 2 savings was a creation of the Commission. 3 Q. Okay. But fair to say that you are 4 attaching that interpretation to this portion of the 5 Revised Code? 6 A. No. I am saying that section is that the 7 staff would recommend to the Commission that if the 8 company or a company came in and sought relief under 9 that code, that staff would request that -- recommend 10 that shared savings not be eligible because the 11 Commission would determine if it was or not if law 12 does not speak to it. 13 Q. Okay. Mr. Donlon, let's talk about the 14 PJM component of the staff's proposed cost cap. On 15 page 7, lines 139 to -41 of your testimony, you state 16 "Revenues from PJM that the Companies receive for 17 bidding energy efficiency into the RPM Auction and 18 are credited back to customers through the rider can 19 offset the overall costs of the portfolio programs." 20 Did I read that portion of your testimony correctly? 21 A. Yes. 22 Q. Mr. Donlon, is it accurate to say that 23 the companies have no way of knowing what the revenue 24 figure will be for RPM auctions that have not yet 25 cleared? 363 1 A. For the -- 2 Q. Well, let me ask you, for example, are 3 you aware that the base residual auction to be 4 conducted in May of this year is for delivery years 5 2020 through 2021? 6 A. So outside the portfolio period, correct? 7 Q. Yes. 8 A. Yeah, yes. 9 Q. Okay. And given that the companies had 10 most of their energy efficiency programs suspended as 11 you referenced earlier for 2015 and '16, would you 12 expect that that would result in lower PJM revenues 13 during this plan period 2017 through '19 since they 14 have little incremental resources to offer into the 15 PJM auctions those years? 16 MR. JONES: Objection, your Honor, 17 assumes facts not in evidence. 18 MR. GLADMAN: He testified as to what was 19 going on with the plans in 2015 and '16. 20 EXAMINER BULGRIN: I'll allow it. 21 A. I do not know what the company bid in or 22 didn't bid in. I will -- that would make sense from 23 a logical standpoint, but it was the companies' 24 choice to suspend their programs. 25 Q. Sure. Is it fair to say that -- fair to 364 1 say then if you didn't -- if you don't know exactly 2 what the PJM future revenues for the companies will 3 be, that's not something staff considered in 4 formulating its cost cap proposal? 5 A. This was -- the reason this is in there 6 is if staff is concerned with overall costs of 7 programs that are being passed back for customers to 8 pay, that if they are getting a credit for it, it's 9 only fair to the company to allow those revenues to 10 offset any cap so that is the reason that that's in 11 there is to try and be fair to the companies to 12 offset any revenues the customers are receiving. 13 Q. I appreciate that. Is it fair to say 14 though that the companies have no way of knowing what 15 the revenue figure will be for RPM auctions that have 16 not yet cleared? 17 A. For the auctions that are outside this 18 portfolio plan? Yes, they would not know what -- 19 what those are for the -- at that time. 20 Q. And what about auctions within this 21 portfolio plan that have not yet cleared? 22 A. This is '17, '18, '19, so those have 23 already cleared. Other than the supplemental 24 auctions, they would have. 25 Q. Okay. Mr. Donlon, the companies' revised 365 1 program portfolio plans contain overall plan and 2 program budgets, correct? 3 THE WITNESS: I'm sorry. Can you please 4 reread that question. 5 (Record read.) 6 A. Correct. 7 Q. Okay. And the plan and program budgets 8 are set for the entire three-year duration of the 9 plans; that's fair to say, isn't it? 10 A. That's my understanding. 11 Q. And if the Commission approves the plans 12 as proposed, the companies could not then spend money 13 under the plans beyond those plan budgets without 14 further Commission approval; is that fair to say? 15 A. That's my understanding. 16 Q. And, in fact, if the companies wanted to 17 spend money above and beyond those budgets, they 18 would first have to file amended plans and seek 19 Commission approval; is that true? 20 A. That is my understanding. 21 Q. And so, in other words, once the 22 Commission approves the plans and corresponding 23 budgets, the companies have to stay within those 24 budgets, correct? 25 A. I know the company went over the budget 366 1 in 2012, I believe, so I think -- but, however, I am 2 not sure what happened to allow that to happen. So I 3 think there is ways they can get -- they can spend 4 more. 5 Q. Okay. Fair to say that the 6 Commission-approved budget serves as a cap on what 7 the companies can spend on their EE/PDR plans? 8 A. I would not reference it that way, no. 9 Q. You think a cap is somehow different than 10 a Commission-approved budget? 11 A. Yes. 12 Q. Let's talk about shared savings and the 13 proposed cost cap for just a minute. The 14 Commission's previous energy efficiency orders permit 15 the companies to -- the opportunity to recover shared 16 savings, correct? 17 A. Yes. 18 Q. And is it fair to say that a policy goal 19 behind permitting shared savings is to encourage the 20 utilities through financial incentives to exceed 21 their statutorily-mandated energy efficiency 22 benchmarks? 23 A. Keywords there being "exceed" as well as 24 I think the secondary piece is within a reasonable 25 cost. 367 1 Q. When a utility earns shared savings, it 2 means that customers are benefiting as well? 3 A. That gets into the participating 4 customers are benefiting and overall the way shared 5 savings is calculated, it takes the life of the 6 program and puts it into the present day, so 7 customers are paying that today to the company for 8 savings that will happen over time. So it's 9 debatable how much this customer is saving today, 10 particularly the nonparticipating customers when you 11 are front loading those costs from the life of the 12 project. 13 Q. Okay. You understand that in the -- 14 well, let me strike that. 15 Are you familiar with the companies' 16 proposed shared savings mechanism for the 2017 17 through '19 portfolio plans? 18 A. Are you -- are you talking about the 19 trigger for '17 or how they calculate shared savings? 20 Q. The entire thing, the entire shared 21 savings mechanism. 22 A. So generally, yes. 23 Q. Okay. And are you aware that the 24 FirstEnergy companies have proposed the top incentive 25 tier of 13 percent of those adjusted net benefits as 368 1 their shared savings recovery? 2 A. Except for in '17. 3 Q. Well, you understand that the incentive 4 percentage in '17 actually stays at a top level of 5 13 percent as well, correct? 6 A. Meaning that you -- I think that's just 7 semantics of how we determine. I mean, really you 8 don't have to achieve -- you don't have to achieve 9 113 percent in '17 to get your full shared savings, 10 so I think I am getting the two confused. But for 11 '18 and '19, yes, I would agree with that. 12 Q. I appreciate that clarification. I am 13 not intending to get to the trigger reduction issue. 14 We will do that a little bit later here. We are in 15 agreement then for -- let's say for '18 and '19 that 16 the maximum percentage of shared -- the companies can 17 get of the adjusted net benefits is 13 percent, 18 correct? 19 A. Or $10 million after taxes. 20 Q. Fair qualification. We will get to that 21 in a minute. The remaining 87 percent, subject to 22 caps, shared savings caps, are what goes to the 23 customers; that's a benefit to the customers, 24 correct? 25 A. Again, I think it depends on your 369 1 perspective, and I think there is some debate on the 2 fact it's all front load -- the dollars is -- the 3 dollars are front loaded to the company, and then the 4 consumers get that over time, so I am not sure 5 there's equal benefit to that. 6 Q. And sure. You are aware that part of the 7 mechanism is there is a calculation of adjusted net 8 benefits which you've correctly pointed out occur 9 over the -- in a lifetime of these energy efficiency 10 measures, correct? 11 A. Yes. 12 Q. And I am just trying to get the 13 percentage of the shared savings, that the percentage 14 of that adjusted net benefits, the most the companies 15 can get is 13 percent and the customers, even if it 16 is delayed over time, would get 87 percent; is that 17 fair to say? 18 A. That is the theory. 19 Q. Okay. Mr. Donlon, I think you've alluded 20 to this, but you are aware that the Commission has 21 established a cap on the shared savings the company 22 may earn from their energy efficiency programs? 23 A. Correct. 24 Q. And to kind of take this in order, under 25 the companies' 2013 to '15 energy efficiency order 370 1 that cap was $10 million per year aftertax; is that 2 right? 3 A. Yes. 4 Q. And are you aware, Mr. Donlon, that the 5 Commission approved an increase of that shared 6 savings cap to 25 million per year aftertax but 7 stayed the effective date of that increase until the 8 companies are no longer receiving revenue under rider 9 DMR? 10 A. Correct. 11 Q. And the Commission approved an increase 12 of that cap to 25 million per year aftertax pursuant 13 to a stipulation, a third supplemental stipulation, 14 recommendation that was filed in the companies' most 15 recent ESP case? 16 A. Correct. 17 Q. Do you know if staff was a signatory 18 party to that third stipulation? 19 A. Staff was. 20 Q. You understand that the companies' 21 ability to earn shared savings is, as of today, 22 because of that stay language subject to a monitary 23 cap of $10 million per year aftertax, correct? 24 A. Correct. 25 Q. Mr. Donlon, as we've discussed, under 371 1 staff's proposal the 3 percent overall cost cap would 2 apply to the sum of all program costs under the 3 EE/PDR plans and the pretax shared savings for any 4 given program year less the PJM offset; is that 5 accurate? 6 A. Yes. 7 Q. And staff's proposal means that the 8 companies' shared savings which are already capped at 9 $10 million a year aftertax in any given year will be 10 subject to the 3 percent cost cap that the staff has 11 proposed as well? 12 A. Yes, subject to the DMR being collected 13 which is the $10 million cap. 14 Q. Sure. And would you agree with me then 15 that the companies' ability to earn shared savings 16 stemming from its energy efficiency programs would be 17 double capped? 18 A. I'm not sure it is, but you -- I can see 19 how it can be viewed that way as well. 20 Q. Okay. Fair to say that the shared 21 savings, if the cost cap that staff is proposing is 22 approved, would be subject to both the cap in the ESP 23 case as well as staff's cap, correct? 24 A. Yes. 25 MR. GLADMAN: Okay. Do you want to take 372 1 a short break or keep going? 2 EXAMINER BULGRIN: Let's go off the 3 record. 4 (Discussion off the record.) 5 (Recess taken.) 6 EXAMINER BULGRIN: Let's go back on then. 7 And Ms. Dunn. 8 MS. DUNN: Yes, your Honor. Under Rule 9 4901:1-39-04(E) the companies were required to post, 10 your Honor, legal notice of the hearing in this 11 matter. That did occur back in June 2016. I would 12 like to mark as Company Exhibit 10, the legal notices 13 for the case from June 2016. I have a copy if 14 someone wants to inspect it and ask that this be 15 admitted into evidence. 16 EXAMINER BULGRIN: Okay. And are you 17 actually requesting to file those as well? 18 MS. DUNN: Yes, I am going to leave a 19 copy to be filed. 20 EXAMINER BULGRIN: Okay. Great. Company 21 Exhibit 10? 22 MS. DUNN: Yes. 23 EXAMINER BULGRIN: Okay. It will be so 24 marked. 25 (EXHIBIT MARKED FOR IDENTIFICATION.) 373 1 EXAMINER BULGRIN: And I assume there is 2 no objections. So we will admit those, and you will 3 file them in the docket. 4 (EXHIBIT ADMITTED INTO EVIDENCE.) 5 EXAMINER BULGRIN: And that being said, 6 we will reconvene here tomorrow morning at 9 o'clock. 7 (Thereupon, at 4:16 p.m., the hearing was 8 adjourned.) 9 - - - 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 374 1 CERTIFICATE 2 I do hereby certify that the foregoing is a 3 true and correct transcript of the proceedings taken 4 by me in this matter on Tuesday, January 24, 2017, 5 and carefully compared with my original stenographic 6 notes. 7 8 _______________________________ Karen Sue Gibson, Registered 9 Merit Reporter. 10 11 _____________________________ Carolyn M. Burke, Registered 12 Professional Reporter. 13 (KSG-6305) 14 - - - 15 16 17 18 19 20 21 22 23 24 25