1 BEFORE THE PUBLIC UTILITIES COMMISSION OF OHIO 2 - - - 3 In the Matter of the : Application of Duke Energy: 4 Ohio, Inc., for Approval : Case No. 16-0576-EL-POR of Its Energy Efficiency : 5 and Peak Demand Reduction : Program Portfolio Plan. : 6 - - - 7 PROCEEDINGS 8 before Mr. Richard Bulgrin, Attorney Examiner, at the 9 Public Utilities Commission of Ohio, 180 East Broad 10 Street, Room 11-D, Columbus, Ohio, called at 10:00 11 a.m. on Monday, February 27, 2017. 12 - - - 13 14 15 16 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 - - - ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 2 1 APPEARANCES: 2 Duke Energy Ohio, Inc. By Ms. Elizabeth H. Watts 3 and Ms. Amy B. Spiller 139 East Fourth Street 4 Cincinnati, Ohio 45201 5 On behalf of the Applicant. 6 Bruce J. Weston, Consumers' Counsel By Mr. Christopher Healey, 7 Assistant Consumers' Counsel 10 West Broad Street, Suite 1800 8 Columbus, Ohio 43215-3485 9 On behalf of the Residential Customers of Duke Energy Ohio, Inc. 10 Ohio Partners for Affordable Energy 11 By Ms. Colleen L. Mooney P.O. Box 12451 12 Columbus, Ohio 43212-2451 13 On behalf of the Ohio Partners for Affordable Energy. 14 Mike DeWine, Ohio Attorney General 15 By Mr. William L. Wright, Section Chief 16 Mr. John H. Jones and Ms. Natalia Messenger, 17 Assistant Attorneys General Public Utilities Section 18 30 East Broad Street, 16th floor Columbus, Ohio 43215 19 On behalf of the Staff of the Public 20 Utilities Commission of Ohio. 21 Environmental Law & Policy Center By Ms. Madeline Fleisher 22 21 West Broad Street, Suite 500 Columbus, Ohio 43215 23 On behalf of the Environmental Law & 24 Policy Center. 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 3 1 APPEARANCES: (Continued) 2 IGS Energy By Mr. Joseph Oliker 3 6100 Emerald Parkway Dublin, Ohio 43016 4 On behalf of IGS Energy. 5 Carpenter Lipps & Leland LLP 6 By Ms. Angela M. Paul Whitfield 280 North High Street, Suite 1300 7 Columbus, Ohio 43215 8 On behalf of The Kroger Company. 9 Ohio Environmental Council By Ms. Miranda Leppla 10 1145 Chesapeake Avenue, Suite I Columbus, Ohio 43212 11 On behalf of the Ohio Environmental 12 Council and Environmental Defense Fund. 13 Ohio Hospital Association By Mr. Richard Sites 14 155 East Broad Street 3rd Floor 15 Columbus, Ohio 43215 16 Bricker & Eckler, LLP By Mr. Devin Parram 17 Mr. Dylan Borchers and Mr. Matthew Warnock 18 100 South Third Street Columbus, Ohio 43215-4291 19 On behalf of the Ohio Hospital 20 Association. 21 Carpenter Lipps & Leland LLP By Ms. Kimberly W. Bojko 22 and Mr. James D. Perko, Jr. 280 North High Street, Suite 1300 23 Columbus, Ohio 43215 24 On behalf of The Ohio Manufacturers' Association. 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 4 1 APPEARANCES: (Continued) 2 McNees, Wallace & Nurick LLC By Mr. Matthew Pritchard 3 and Mr. Frank Darr 21 East State Street, 17th Floor 4 Columbus, Ohio 43215 5 On behalf of the Industrial Energy Users of Ohio. 6 Law Office of Robert Dove 7 By Mr. Robert Dove P.O. Box 13442 8 Columbus, Ohio 43213 9 Natural Resources Defense Council By Ms. Samantha Williams 10 Staff Attorney 20 North Wacker Drive, Suite 1600 11 Chicago, Illinois 60606 12 On behalf of the Natural Resources Defense Council. 13 - - - 14 15 16 17 18 19 20 21 22 23 24 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 5 1 INDEX 2 - - - 3 Witness Page 4 Timothy J. Duff Direct Testimony by Ms. Watts 16 5 Cross-Examination by Mr. Healey 17 Cross-Examination by Mr. Jones 38 6 Redirect Examination by Ms. Watts 61 Recross-Examination by Mr. Healey 64 7 Trisha A. Haemmerle 8 Direct Examination by Ms. Watts 68 Cross-Examination by Mr. Healey 69 9 Redirect Examination by Ms. Watts 75 10 James E. Ziolkowski Direct Examination by Ms. Watts 76 11 Cross-Examination by Mr. Healey 78 Redirect Examination by Ms. Watts 82 12 Colleen Shutrump 13 Direct Examination by Mr. Healey 87 Cross-Examination by Ms. Watts 89 14 Cross-Examination by Ms. Leppla 114 15 Patrick Donlon Direct Examination by Mr. Jones 144 16 Cross-Examination by Ms. Watts 146 Cross-Examination by Ms. Fleischer 184 17 - - - 18 Joint Exhibits Identified Admitted 19 1 Stipulation and Recommendation 13 206 20 2 Amended Stipulation and 21 Recommendation 13 206 22 - - - 23 Duke Exhibits Identified Admitted 24 1 Application Filed on June 15, 2016 14 206 25 - - - ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 6 1 INDEX (Continued) 2 - - - 3 Duke Exhibits Identified Admitted 4 2 Market Potential Study Filed on August 15, 2016 15 206 5 3 Amended Application Filed 6 on October 14, 2016 15 206 7 4 Supplemental Direct Testimony of Timothy J. Duff 16 65 8 5 Direct Testimony of Trisha A. 9 Haemmerle 68 76 10 6 Supplemental Testimony of Trisha A. Haemmerle 68 76 11 7 Direct Testimony of James E. 12 Ziolkowski 76 83 13 8 Direct Testimony of Kevin A. Bright 84 86 14 9 Supplemental Direct Testimony 15 of Kevin A. Bright 84 86 16 10 Meeting Sign-In Sheet 91 143 17 11 11-07-2016 E-mails 94 143 18 12 12-16-2016 E-mails 97 143 19 - - - 20 OCC Exhibits Identified Admitted 21 1 OCC-INT-06-067 22 65 22 2 NRDC-INT-01-009 25 65 23 3 OCC-INT-02-002 77 83 24 4 IGS-INT-01-003 80 83 25 5 IGS-INT-01-007 81 83 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 7 1 INDEX (Continued) 2 - - - 3 OCC Exhibits Identified Admitted 4 6 NRDC-INT-01-012 84 86 5 7 NRDC-INT-01-015 84 86 6 8 IGS-INT-01-001 84 86 7 9 IGS-INT-01-002 84 86 8 10 OCC-INT-02-031 84 86 9 11 OCC-INT-02-040 85 86 10 12 OCC-INT-04-059 85 86 11 13 Direct Testimony of Colleen Shutrump 86 140 12 - - - 13 Staff Exhibits Identified Admitted 14 1 Direct Testimony of Patrick Donlon 143 205 15 2 Second Entry on Rehearing, 16 14-457-EL-RDR 44 65 17 3 STAFF-DR-01-001, 1-11-2017 E-mail from Ms. Watts, 18 STAFF-DR-01-001 SUPPLEMENTAL 48 65 19 4 Response to Staff Data Request 1 48 65 20 21 - - - 22 Environmental Intervenors Ex. Identified Admitted 23 1 The 2016 State Energy Efficiency Scorecard 127 -- 24 2 Implementation Order, 25 Docket No. M-2008-2069887 132 -- ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 8 1 INDEX (Continued) 2 - - - 3 Environmental Intervenors Ex. Identified Admitted 4 3 Efficiency Maine FY2015 Annual Report 137 -- 5 4 Duke Rider DR-IM 6 Sheet No. 104.9 186 206 7 5 Duke Rider DCI Sheet No. 103.6 186 206 8 6 2-26-2015 Letter from 9 Chairman Johnson 191 206 10 - - - 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 9 1 Monday Morning Session, 2 February 27, 2017. 3 - - - 4 EXAMINER BULGRIN: Let's go on the record 5 then. 6 Good morning, all. This is the hearing 7 in Case No. 16-576-EL-POR, being the Application of 8 Duke Energy Ohio, Inc., for Approval of Its Energy 9 Efficiency and Peak Demand Reduction Program 10 Portfolio Plan. My name is Dick Bulgrin. I am the 11 Attorney Examiner assigned by the Commission to 12 conduct the hearing this morning. 13 And let's start with appearances of the 14 parties. For the company. 15 MS. WATTS: Thank you, your Honor, and 16 good morning. On behalf of Duke Energy Ohio, Amy B. 17 Spiller and Elizabeth H. Watts, 139 East Fourth 18 Street, Cincinnati, Ohio. 19 EXAMINER BULGRIN: All right. Why don't 20 we just go around the horn here. Ms. Leppla. 21 MS. LEPPLA: Miranda Leppla for the Ohio 22 Environmental Council and Environmental Defense Fund, 23 1145 Chesapeake Avenue, Suite I, Columbus, Ohio 24 43212. 25 MS. FLEISHER: Good morning. Madeline ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 10 1 Fleisher for the Environmental Law & Policy Center, 2 21 West Broad Street, Suite 500, Columbus, Ohio 3 43215. 4 MR. DOVE: Robert Dove of the Law Office 5 of Robert Dove at P.O. Box 13442, Columbus, Ohio 6 43213, for Natural Resources Defense Council at 20 7 North Wacker Drive, Suite 1600, Chicago, Illinois 8 60606. 9 MR. PERKO: On behalf of the Ohio 10 Manufacturers' Association, Kimberly W. Bojko and 11 James D. Perko with the law firm Carpenter Lipps & 12 Leland, 280 North High Street, Suite 1300, Columbus, 13 Ohio 43215. 14 And I have also been asked to make the 15 appearance of Angela Paul Whitfield also on behalf of 16 Carpenter Lipps & Leland, and I will be making an 17 appearance for The Kroger Company. 18 EXAMINER BULGRIN: Okay. Mr. Healey. 19 MR. HEALEY: Good morning. Representing 20 the residential customers of Duke Energy Ohio, 21 Christopher Healey on behalf of Bruce Weston, Ohio 22 Consumers' Counsel, 10 West Broad Street, Suite 1800, 23 Columbus, Ohio 43215. Thank you. 24 EXAMINER BULGRIN: Ms. Mooney. 25 MS. MOONEY: On behalf of the Ohio ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 11 1 Partners for Affordable Energy, I'm Colleen Mooney, 2 Post Office Box 12451, Columbus, Ohio. 3 EXAMINER BULGRIN: Mr. Parram. 4 MR. PARRAM: Good morning, your Honor. 5 On behalf of the Ohio Hospital Association, Rick 6 Sites, regulatory counsel for the Ohio Hospital 7 Association, 155 East Broad Street, 3rd Floor, 8 Columbus, Ohio 43215 and also the law firm of Bricker 9 & Eckler, Attorneys Matthew Warnock, Dylan Borchers, 10 and Devin Parram, 100 South Third Street, Columbus, 11 Ohio 43215. 12 EXAMINER BULGRIN: Mr. Jones. 13 MR. JONES: Good morning, your Honor. On 14 behalf of the staff of the Public Utilities 15 Commission of Ohio, Attorney General Mike DeWine, 16 Assistant Attorney General Natalia Messenger and John 17 Jones, 30 East Broad Street, Columbus, Ohio 43215. 18 EXAMINER BULGRIN: Okay. Thank you. 19 Anybody else? 20 MS. WATTS: Your Honor, I was asked to 21 enter an appearance on behalf of Industrial Energy 22 Users of Ohio as well. 23 EXAMINER BULGRIN: Thank you. Okay. 24 Just preliminarily I've got, I believe, pending 25 motions to intervene by the Interstate Gas Supply, ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 12 1 Inc., by Industrial Energy Users - Ohio, by the Ohio 2 Hospital Association, by the Natural Resources 3 Defense Council and by the Environmental Defense Fund 4 and the Ohio Environmental Council. And all of those 5 motions will be granted. Oh, and Consumers' Counsel. 6 I am not sure whether officially we granted you 7 reading through, but you are granted. 8 MR. HEALEY: Thank you. 9 EXAMINER BULGRIN: Good to have you all 10 here. All right. Let's -- 11 MS. MOONEY: Your Honor, was OPAE's 12 intervention granted? 13 EXAMINER BULGRIN: I think yours was. 14 Yes, it was. 15 MS. MOONEY: Okay. Thank you. 16 EXAMINER BULGRIN: Yes. Go ahead. 17 MS. WATTS: Thank you, your Honor. 18 First, I would like to mark as joint exhibits the 19 stipulation and recommendation that was filed in this 20 case on December 22 and the subsequent amended 21 stipulation as Joint Exhibits 1 and 2. 22 EXAMINER BULGRIN: All righty. 23 MS. WATTS: May I approach? 24 EXAMINER BULGRIN: Sure. And I won't 25 need copies of anything. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 13 1 MS. WATTS: You will or will not? 2 EXAMINER BULGRIN: Will not. 3 MS. WATTS: Okay. Thank you. Does 4 anybody else need copies of these? 5 Darn, I've got a lot of wasted copy. 6 EXAMINER BULGRIN: We are going to mark 7 the original stipulation as Company Exhibit 1 -- or 8 Joint Exhibit 1 and the amended stipulation as Joint 9 Exhibit 2 or the other way around? 10 MS. WATTS: The stipulation -- the first 11 stipulation would be Joint Exhibit 1, and the amended 12 stipulation would be Joint Exhibit 2. 13 EXAMINER BULGRIN: Okay. I am really 14 asking that because I see it's already marked Joint 15 Exhibit 2 -- or 1 on there. Okay. 16 (EXHIBITS MARKED FOR IDENTIFICATION.) 17 MS. WATTS: Your Honor, is it your 18 preference documents that are docketed in the case 19 also be marked as exhibits; or if they are docketed, 20 do you deem those to be already part of the record? 21 EXAMINER BULGRIN: Yeah. The latter if 22 they are already docketed. Let's not create more 23 paper than we have to. 24 MS. WATTS: So, for example, the 25 application does not need to be marked and entered. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 14 1 EXAMINER BULGRIN: We could mark it as an 2 exhibit, if you want, but I don't see any utility in 3 that so. 4 MS. WATTS: Okay. Unless anybody 5 disagrees I will dispense with that practice then. 6 MR. HEALEY: For what it's worth my 7 preference is to mark them for exhibits so we know 8 it's in the record. My understanding things that are 9 filed are not necessarily part of the record. They 10 are in the public record. 11 EXAMINER BULGRIN: Let's go through and 12 you won't need to submit the papers but we can at 13 least note for the record. 14 MS. WATTS: Okay. So, your Honor, we 15 would ask that the application in this proceeding be 16 marked as Duke Energy Ohio Exhibit 1. 17 EXAMINER BULGRIN: Okay. 18 MS. WATTS: And -- 19 EXAMINER BULGRIN: And that was the 20 application filed? 21 MS. WATTS: On June 15, 2016. 22 EXAMINER BULGRIN: Okay. 23 (EXHIBIT MARKED FOR IDENTIFICATION.) 24 MS. WATTS: And then the Market Potential 25 Study that was filed on August 15, 2016, we would ask ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 15 1 be marked as Duke Energy Ohio Exhibit 2. 2 EXAMINER BULGRIN: Okay. 3 (EXHIBIT MARKED FOR IDENTIFICATION.) 4 MS. WATTS: And along with that exhibit 5 was an amended application that was filed on 6 October 14, 2016, we would ask that be marked as Duke 7 Energy Ohio Exhibit 3. 8 EXAMINER BULGRIN: Okay. 9 (EXHIBIT MARKED FOR IDENTIFICATION.) 10 MS. WATTS: And then the testimonies we 11 can address as each witness takes the stand, if 12 that's. 13 EXAMINER BULGRIN: Sounds good. Okay. 14 Thank you. 15 MS. WATTS: So for its first witness Duke 16 Energy Ohio would call Timothy Duff. 17 (Witness sworn.) 18 EXAMINER BULGRIN: Please be seated. 19 Thank you. 20 MS. WATTS: May I approach, your Honor? 21 EXAMINER BULGRIN: Yes. 22 MS. WATTS: Your Honor, I would ask that 23 Mr. Duff's testimony be marked as Duke Energy Ohio 24 Exhibit 1. 25 EXAMINER BULGRIN: How about 4? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 16 1 MS. WATTS: I'm sorry, 3. 2 EXAMINER BULGRIN: 4. 3 MS. WATTS: 4. 4 (EXHIBIT MARKED FOR IDENTIFICATION.) 5 - - - 6 TIMOTHY J. DUFF 7 being first duly sworn, as prescribed by law, was 8 examined and testified as follows: 9 DIRECT EXAMINATION 10 By Ms. Watts: 11 Q. Mr. Duff, do you have before you what's 12 been marked as Duke Energy Ohio Exhibit 4 just now? 13 A. Yes. 14 Q. And can you identify that document, 15 please. 16 A. It's my supplemental direct testimony 17 filed on January 4. 18 Q. And did you yourself write this 19 testimony? 20 A. Yes. 21 Q. And is everything contained in that 22 testimony true and accurate to the best of your 23 knowledge? 24 A. Yes. 25 Q. And do you have any additions and ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 17 1 corrections? 2 A. Not to my knowledge. 3 MS. WATTS: Thank you. Mr. Duff is 4 available for cross-examination. 5 EXAMINER BULGRIN: All righty. 6 Mr. Healey. 7 MR. HEALEY: Thank you, your Honor. 8 - - - 9 CROSS-EXAMINATION 10 By Mr. Healey: 11 Q. Good morning, Mr. Duff. 12 A. Good morning. 13 Q. Just preliminarily do you have a copy of 14 the amended stipulation in front of you? 15 A. I do. 16 Q. And you have a copy of your testimony 17 obviously. 18 A. Yeah. 19 Q. Thank you. Now, you are Duke's witness 20 sponsoring the amended stipulation and 21 recommendation, correct? 22 A. Yes. 23 Q. And just as a minor cleanup, I am only 24 going to focus on the amended stipulation so if I say 25 "stipulation," that's what I am referring to. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 18 1 A. Yep. 2 Q. We are not going to refer to the original 3 one. 4 A. Yep. 5 Q. Let's look first at page 1 of the 6 stipulation, please. And about four lines down 7 there's a defined term "signatory parties" which I 8 understand to mean the parties that signed the 9 stipulation, correct? 10 A. Yeah, that's my understanding. 11 Q. And the -- a couple lines down further it 12 states that "This Stipulation and Recommendation, 13 which resolves all of the issues raised by Parties" 14 as opposed to signatory parties. Is there a 15 distinction between parties and signatory parties as 16 those terms are used here? 17 A. I believe it would be the signatory 18 parties. 19 Q. And is that consistent throughout, 20 whenever it says "parties" -- 21 A. I believe so, yes. 22 Q. -- it means the signatory parties? 23 A. I didn't draft the stipulation. 24 Q. Understood. I'm just trying to -- 25 A. That would be my interpretation. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 19 1 Q. Let's turn to page 2 of the stipulation 2 really quickly -- or actually we can skip that. 3 Let's look at page 4 of the stipulation, 4 please. And I direct you to the second to last 5 whereas clause right in the middle that states 6 "WHEREAS, this Stipulation represents a serious 7 compromise of complex issues and involves substantial 8 benefits that would not otherwise have been 9 achievable." Do you see that? 10 A. Yes. 11 Q. Now, Duke did not calculate the monetary 12 value of the substantial benefits in this whereas 13 clause, correct? 14 A. To the best of my -- 15 MS. WATTS: Objection as to form. 16 EXAMINER BULGRIN: Excuse me? 17 MS. WATTS: I am objecting as to the form 18 of the question. 19 EXAMINER BULGRIN: Could you rephrase? 20 MR. HEALEY: I am not sure I understand 21 the objection, your Honor. If the witness 22 understands the question -- 23 MS. WATTS: It assumes a fact not in 24 evidence because you asked him if he calculated 25 monetary value, and I am not sure he was referring to ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 20 1 monetary value. Actually it is not his document, so 2 I don't know how he could answer that question but. 3 MR. HEALEY: Your Honor, he is the 4 witness sponsoring the stipulation. It says there 5 are substantial benefits. I am asking if he has a 6 monetary value for those benefits. If he says "no," 7 he says "no." If he says "yes," then he says "yes." 8 EXAMINER BULGRIN: Well, you can answer. 9 A. I did not calculate any monetary benefit 10 associated with the stipulation. 11 Q. Let's turn now to page 9 of your 12 testimony. 13 A. I'm there. 14 Q. And starting at line 13, you discuss the 15 Commission's criteria for approval and line 15 you 16 identify three different I'll call them factors and 17 you state that as you understand it and as explained 18 by legal counsel, "the Commission will approve a 19 stipulation when it (i) is the product of serious 20 bargaining, among capable, knowledgeable parties; 21 (ii) does not violate any important regulatory 22 principle or practice, and (iii) as a package, 23 benefits ratepayers and the public interest." Do you 24 see that? 25 A. Yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 21 1 Q. If I refer to that as the Commission's 2 three-prong or three-part test, you will understand 3 what I am referring to? 4 A. Yes, sir. 5 Q. And in line 15 you state that this is 6 based on your understanding and explained by your 7 legal counsel. Did you review any PUCO orders or 8 Ohio Supreme Court decisions to identify these three 9 factors? 10 A. No, I did not. I testified in support of 11 stipulations in the past and these were the three 12 factors that have been discussed in those cases. 13 Q. And you note that "as explained by my 14 legal counsel." Can you tell me what your legal 15 counsel explained to you with regard to these three 16 prongs? 17 MS. WATTS: Objection. 18 EXAMINER BULGRIN: Sustained. 19 MR. HEALEY: Your Honor, it says 20 "explained by my legal counsel." I don't know what 21 clearer waiver of privilege there could be. 22 EXAMINER BULGRIN: Well, I am going to 23 sustain the objection anyhow. 24 MR. HEALEY: Thank you, your Honor. 25 Q. (By Mr. Healey) Mr. Duff, you believe ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 22 1 that the stipulation was, in fact, the product of 2 serious bargaining, correct? 3 A. Yes. 4 Q. And you believe that Duke seriously 5 bargained with all of the parties that signed the 6 stipulation? 7 A. Yes. 8 MR. HEALEY: Your Honor, I would like to 9 mark as OCC Exhibit 1 Duke Energy Ohio's response to 10 OCC Interrogatory O6-067. May I approach the 11 witness, please? 12 EXAMINER BULGRIN: Sure. This is OCC 13 Exhibit 1. 14 (EXHIBIT MARKED FOR IDENTIFICATION.) 15 Q. Now, Mr. Duff, you testified that the 16 company, in fact, seriously bargained with all the 17 signatory parties, correct? 18 A. Yes. 19 Q. And to bargain with these parties, you 20 had various conversations with them? 21 A. Conversations, communications I would say 22 is a better. 23 Q. That's broad enough, sure. And many of 24 these communications were over the telephone; is that 25 right? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 23 1 A. Some were. 2 Q. Some were? I would like you to look at 3 OCC Exhibit 1, please, and in this discovery request 4 from OCC, OCC asked Duke to identify the settlement 5 communications related to the stipulation. And after 6 various objections, near the bottom of Duke's 7 response Duke stated that "The Company has engaged in 8 numerous telephone discussions with various parties 9 to the proceeding most of which were not recorded in 10 any fashion or logged." Do you see that language 11 there? 12 A. Uh-huh. 13 Q. And you were part of many of these 14 conversations? 15 A. Yes. 16 Q. Were you part of all of them? 17 A. Maybe not all of them. I can't say for 18 sure but the majority of them, yes. 19 Q. And the Ohio Consumers' Counsel did not 20 participate in all of these numerous telephone 21 conversations, correct? 22 A. No, but I know I was on phone calls with 23 you relating to this, I think. 24 Q. And the PUCO staff did not participate in 25 each of these numerous telephone conversations, ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 24 1 correct? 2 A. They participated in some of the phone 3 conversations. 4 Q. But not all of them. 5 A. That's correct. 6 Q. Thank you. Do you have a copy of the 7 amended application in front of you? 8 A. No, I do not. 9 MR. HEALEY: Your Honor, may I approach? 10 EXAMINER BULGRIN: Sure. 11 MR. HEALEY: I am handing the witness 12 what's been marked Duke Exhibit 3 already. It's a 13 copy of the amended application. 14 Q. (By Mr. Healey) Can you turn to page 12, 15 please, Mr. Duff, of the amended application. 16 A. Yes. I'm there. 17 Q. Now, Table 3 in the amended application 18 provides the energy efficiency benchmarks for 2017, 19 2018, and 2019, correct? 20 A. That's correct. 21 Q. And you are familiar with those 22 benchmarks? 23 A. Yes. 24 Q. And these are the cumulative benchmarks 25 as opposed to the annual benchmarks? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 25 1 A. The sum of the annual benchmarks. 2 Q. Sure. So if we talk about cumulative 3 benchmarks or annual benchmarks, you know what we are 4 talking about? 5 A. Yes. 6 Q. Those are the benchmarks under -- 7 A. Yes. 8 Q. -- 4928.66, and the the cumulative -- 9 A. Yes. 10 Q. -- is the sum of the -- it would be 11 easier if you let me finish the question just so 12 we'll have a cleaner record. So I'll finish, and 13 then you can confirm. Thank you. 14 MR. HEALEY: Your Honor, I would like to 15 mark as OCC Exhibit 2 a copy of Duke's response to 16 NRDC Interrogatory 01-009. May I approach the 17 witness, please? 18 EXAMINER BULGRIN: Sure. 19 (EXHIBIT MARKED FOR IDENTIFICATION.) 20 Q. Now, Mr. Duff, you have in front of you 21 what's been marked OCC Exhibit 2, and you're 22 identified as the responsible witness on this 23 discovery response, correct? 24 A. Yeah. 25 Q. And this interrogatory NRDC asks Duke for ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 26 1 information about the cumulative energy savings 2 through 2015 and 2016. Do you see that? 3 A. Yes. 4 Q. And I just want to very quickly compare 5 the cumulative savings actually achieved by Duke in 6 2015 in response A in OCC Exhibit 2 which you'll note 7 is 1,541,645 megawatt-hours, correct? 8 A. Yes. 9 Q. And then if you look back at Table 3 on 10 page 12 of the amended application, you'll see that 11 the cumulative required energy efficiency savings for 12 2017 is 1,489,662 megawatt-hours, correct? 13 A. Yes, those are the numbers. 14 Q. So it's fair or accurate to say that Duke 15 is at least as of 2017 about two years ahead of its 16 cumulative savings requirements given that the 2015 17 actual savings is higher than the 2017 target? 18 A. Again, these are projected numbers so, I 19 mean, I guess based off those projections, these 20 definitely need to be known they are not final, so it 21 really depends on what the annual sales would be. 22 Q. Okay. Thank you for that clarification. 23 Let's turn to page 4 of the amended stipulation, 24 please. 25 A. The stipulation again? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 27 1 Q. Yes, stipulation again. 2 A. Oh, okay. You said page 4, right? 3 Q. Yes. 4 A. Okay. 5 Q. Just a clarifying point, in the paragraph 6 that starts with the "Now, therefore," it reads "the 7 Parties stipulate, agree and recommend that the 8 Commission make the following findings and issue its 9 Opinion and Order in these proceedings accepting and 10 approving the Company's application and testimony as 11 filed." I just want to confirm that the word 12 "application" here means the original application and 13 the market potential study and the amended 14 application collectively? 15 A. Yes, that would be a fair statement. 16 Q. Thank you. Now, the stipulation does not 17 modify any of the program costs for any particular 18 program; is that right? 19 A. It does not modify any of the projections 20 of any of the programs unless ultimately approved. 21 There were some nonresidential marketing dollars that 22 were built in as part of the stipulation. 23 Q. But just, for example, you know, the 24 application has projected budgets for each program. 25 The stipulation is not changing any of those ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 28 1 numbers -- 2 A. It could, yes. 3 Q. It could. 4 A. Yes. As I just mentioned, some of the 5 commitments in the stipulation are pertaining to 6 finding the markets of targeted groups, and those 7 marketing dollars would be part of -- part of the 8 marketing budgets. 9 Q. Okay. So those marketing dollars would 10 potentially increase the budget for the programs they 11 apply to? 12 A. Potentially. 13 Q. Okay. And the stipulation doesn't 14 provide any projections or estimates of those 15 marketing dollars, does it? 16 A. It did. 17 Q. It -- 18 A. It was specific dollar amounts. 19 Q. Are you referring to -- sorry. Are you 20 referring to the commitments in the stipulation I 21 believe to OMA and OHA? 22 A. Yes. 23 Q. Are there any others? 24 A. Not to my knowledge, no. 25 Q. Okay. So other than the marketing ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 29 1 commitments in the amounts stated in the stipulation 2 for OMA and OHA, does the stipulation contemplate any 3 changes to the budgets of particular programs? 4 A. It doesn't in that we don't have any 5 granular projections. There are commitments to 6 develop new programs. 7 Q. Okay. 8 A. And obviously without having those 9 programs approved or having the time to put those 10 programs together to create projections wasn't -- 11 wasn't possible at this time. 12 Q. Now, those programs you just mentioned, 13 you are referring to at the very least -- as one 14 example is a smart thermostat program, correct? 15 A. Correct. 16 Q. And then another example is, I believe, a 17 space heating program, I think? 18 A. Yes. 19 Q. Let's talk briefly about the smart 20 thermostat program since you mentioned that now. 21 Let's look at page 8 of the stipulation. Now, as you 22 mentioned, the smart thermostat program in the 23 application doesn't provide any projected budget, 24 correct? 25 A. That's correct. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 30 1 Q. And Duke has not actually determined what 2 the budget for this program would be, correct? 3 A. Correct. Going to work with parties to 4 determine that. 5 Q. And the stipulation doesn't provide any 6 estimate of the costs of the program? 7 A. No. It's -- the addition is based off of 8 it being able to prove cost effective. That analysis 9 hasn't been done yet. 10 Q. But through the stipulation, Duke is, in 11 fact, seeking approval of this program? 12 A. I don't necessarily think it says that we 13 are seeking the approval. I think it says it is 14 going to determine, and then if cost effective, it 15 would be added. It says "Once the Company's 16 portfolio is approved by the Commission," so I'm 17 assuming that's -- that that would be the -- the 18 approval of the program, yes. 19 Q. So it's not Duke's intention based on the 20 stipulation to come back to the PUCO for further 21 approval of this program if it is determined to be 22 cost effective, correct? 23 A. I -- no. I think that there is -- there 24 is some Commission oversight after the collaborative. 25 Midway through the page it says "Following the ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 31 1 deployment of the program, such instant rebates will 2 be eligible for reimbursement at the incentive level 3 established by the" Commission and -- or "established 4 by the Company and approved by the Commission." So I 5 believe that there is a level of approval necessary 6 for the incentive amount. 7 Q. Okay. So the stipulation provides for 8 Commission approval of an incentive amount, and you 9 do not expect that to occur in the context of the 10 stipulation given that the stipulation doesn't state 11 an amount, correct? 12 A. Correct. 13 Q. And does the stipulation anticipate 14 any -- any Commission oversight other than approving 15 the rebate amount in the future? 16 A. I don't believe so. I think it was 17 part -- that's why it was part of the stipulation, so 18 the Commission could consider it at this time. 19 Q. I would like to direct you to the bottom 20 of page 8 of the stipulation, the page we are 21 currently on, and the very last sentence that states 22 "Duke Energy Ohio will not offer any incentive or 23 rebate that would, on its own or in combination with 24 any applicable gas utility rebate, exceed the actual 25 cost of the purchased smart thermostat." Do you see ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 32 1 that there? 2 A. Yes. 3 Q. I would like to walk through a couple of 4 examples of how this provision might take effect. 5 Let's suppose, for example, that a customer goes to a 6 local retailer, Home Depot, Lowe's, whatever, and 7 buys an approved smart thermostat for $250. Under 8 this sentence the consumer could conceivably get up 9 to $250 in rebates from both Duke and the applicable 10 gas utility, correct? 11 A. Yes, as long as it's not exceeding the 12 actual cost, that's correct. 13 Q. Now, let's suppose in a new example that 14 a customer buys an approved smart thermostat for $150 15 and that customer receives a $100 rebate from his gas 16 utility. Then the maximum rebate from Duke would be 17 $50, correct? 18 A. That's correct. 19 Q. Now, suppose a customer gets a free smart 20 thermostat from a CRES provider in exchange for 21 buying his or her electricity from the CRES provider, 22 that situation the CRES provider could receive the 23 rebate directly from Duke, correct? 24 A. If, in fact -- if, in fact, the CRES 25 provider had costs associated with it and it was part ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 33 1 of their cost acquisition, then, yes. 2 Q. And so in that situation Duke would 3 confirm the actual costs that the CRES provider -- 4 A. Correct. 5 Q. -- incurred to obtain the thermostat and 6 that would be the maximum rebate -- 7 A. Yes. 8 Q. -- that the CRES could receive -- 9 A. Yes. 10 Q. -- right? Let's consider one final 11 example. Let's suppose a customer buys a thermostat 12 for $200 and gets a $100 rebate from the CRES 13 provider. Then the customers could also get a $100 14 rebate from Duke, correct? 15 A. So let's just make sure I have your 16 example correct. $200 thermostat that the CRES 17 provider is providing to the customer. So as long as 18 the -- we can't pay both the CRES provider and the 19 customers, so as long as the customer didn't convey 20 the incentive to the CRES provider, yes, you could 21 pay $100 to the -- to the customer. 22 Q. Okay. Thank you. Let's go back to page 23 4 of the stipulation, please. 24 A. I'm there. 25 Q. And I would like to focus on paragraph 1 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 34 1 which reads "Signatory Parties acknowledge that the 2 Company will offer programs consistent with its 3 existing approved energy efficiency and peak demand 4 reduction programs during 2017 until such time as the 5 Commission approves a new portfolio." Do you see 6 that language? 7 A. Yes. 8 Q. And Duke has, in fact, continued its 2016 9 programs into 2017? 10 A. It has offered programs consistent with 11 the historic portfolio, yes. 12 Q. And so under this provision if the 13 Commission does not approve the new portfolio until 14 say March 31, 2017, then Duke will continue its 2016 15 programs until the end of March, correct? 16 A. Programs consistent with the 2016 17 portfolio, yes. 18 Q. Sure. And by the same token if the 19 Commission gets delayed and doesn't approve the new 20 portfolio until September of 2017, then again the 21 2016 programs -- programs will be continued 22 consistent with the 2016 programs? 23 A. Yes. Parties felt that was in the best 24 interest of customers. 25 Q. Now, let's say the stipulation does, in ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 35 1 fact, get approved and there are new programs. Will 2 the money that Duke spends on programs in 2017 from 3 the continuation of the previous programs, will those 4 dollars be on top of the budget that's approved in 5 the stipulation? 6 A. I don't think it really went to the 7 specifics of that with respect to those dollars. 8 Again, it was something that was put into the amended 9 stipulation because the hearing for this case kept on 10 getting pushed out, and we didn't know when we would 11 get an approval. 12 I think with respect to the dollars, if 13 we are not operating under a firm cap, the dollars -- 14 historically what has worked is the dollars that have 15 been spent in a year have been what the company seeks 16 to recovery as long as it's in attempts to meet and 17 exceed its mandates, so I would think that, yes, they 18 would be total dollars spent in 2017 to reach the 19 2017 energy efficiency benchmarks. 20 Q. Maybe we can take a step back and break 21 this down a little bit more. The dollars spent in 22 2017 before approval of a new portfolio, Duke will 23 seek recovery of those costs, correct? 24 A. That's correct. 25 Q. And if the stipulation gets approved, it ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 36 1 gets approved with a budget, correct? 2 A. It gets approved with projections for 3 costs. I don't think -- my point is it has never 4 been a firm budget that you have to hit your budget 5 and then you stop spending. It's because the 6 Commission and the state of Ohio has encouraged 7 utilities to meet and exceed that you basically will 8 spend to get as much energy efficiency as you can in 9 the year because that's the most cost effective way 10 to get energy efficiency before standards move 11 forward. You are trying to pull the efficiency 12 forward. 13 My point is there hasn't been a total 14 budget. There have been projections provided for the 15 years for the portfolios but there's never been a 16 firm budget that the company must stop spending at. 17 Q. So it's your understanding then that the 18 projected numbers as recorded in the amended 19 application are not a limit on Duke's spending. 20 A. No. 21 Q. And so your position is -- or your 22 interpretation is that Duke can spend an unlimited 23 amount of money and -- 24 A. Provided cost effective energy 25 efficiency. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 37 1 Q. Okay. Now, Duke has not done any 2 forecast of the amount of costs it will incur for the 3 continuation of the previous programs into 2017, 4 correct? 5 A. No, it has not. It's been -- as I said, 6 it was a response to the delay in this proceeding. 7 Q. Let's say the delay continues until the 8 end of March and that's when the new portfolio is 9 approved, so you would have then at that point run 10 the continued programs for an extra three months, 11 correct? 12 A. Yeah, a quarter of the year. 13 Q. So your anticipation then would be you 14 would spend approximately a quarter of the previous 15 annual projections? 16 A. No, because it's not lineal in terms of 17 when dollars are spent. Customers do different 18 efficiency at different times of the year. Again, I 19 think it's probably looking at historic amounts 20 spent; but, again, the other thing you have to 21 consider is that these programs, which is one of the 22 reasons why we have been so interested in getting the 23 new portfolio program, these programs have been 24 pretty much in place since 2013 and were frozen as 25 part of SB 310 so they haven't had any changes and ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 38 1 updates so it's hard to say it would be a straight 2 similar spending. It's one of the things that's a 3 reality of energy efficiency, when programs are in 4 the market, it gets harder to get customers for those 5 programs because you are reaching deeper into market 6 saturation. 7 MR. HEALEY: Your Honor, that's all I 8 have for Mr. Duff. 9 MR. PARRAM: No questions. 10 MS. MOONEY: No questions. 11 EXAMINER BULGRIN: Staff. 12 MR. JONES: Yes, your Honor. 13 - - - 14 CROSS-EXAMINATION 15 By Mr. Jones: 16 Q. Good morning. 17 A. It's a little bit of a wrench here. 18 Q. Exactly. I want to ask you about the 19 amended stipulation here. I want to refer you to the 20 amended stipulation, if I may, on page 5, paragraph 21 5. 22 A. Yes. 23 Q. And let me know when you are there. 24 A. I'm there. 25 Q. Okay. It states that, paragraph 5 there, ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 39 1 that the signatory parties agree that Duke is 2 "eligible to earn a shared savings consistent with 3 the incentive structure" in the table provided on 4 that page; is that correct? 5 A. Well, there's a clause after that that 6 says "if the Company exceeds the annual statutory 7 benchmark for savings achieved." 8 Q. Okay. And that's noted there in the 9 paragraph, correct? 10 A. Yes. 11 Q. Yes, okay. So, now, if Duke exceeds its 12 statutory benchmark by 101 percent to 106 percent, 13 then it will receive 6 percent aftertax shared 14 savings; is that correct? 15 A. That's correct. 16 Q. And if Duke exceeds its benchmarks by 17 106 percent to 112 percent, then will it receive 18 9 percent aftertax shared savings? 19 A. Yes. 20 Q. Okay. So according to your table there 21 on page 5, Duke -- Duke can choose then between 22 6 percent and 9 percent shared savings when it 23 exceeds the benchmarks by 106 percent? 24 A. No. It's -- it's through -- so the way 25 we would interpret it is just you have got to get ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 40 1 above 100, you would have to get above, so you would 2 have to be at 106.01 percent, so you are correct. 3 If you looked at the pure signs of 4 things, there shouldn't be an underline under that 5 greater than or equal to 106. There is no choice in 6 the matter. The company has to exceed 106 percent to 7 get to the 9 percent shared savings. 8 Q. Okay. Thank you for that clarification. 9 All right. And if Duke then exceeds its benchmarks 10 by 32 percent, then it will receive 12 percent 11 aftertax shared savings; is that correct? 12 A. That's correct. 13 Q. And when we say aftertax, it means that 14 ratepayers also pay Duke's corporate income tax rate 15 of 36 percent on top of the shared savings incentive 16 amount calculated in the second column of the table? 17 A. Yeah. That's consistent with what was 18 approved for AEP in their recent stipulation as well. 19 Q. Okay. Thank you. And then also on that 20 same page, next paragraph, 6, then that the company 21 agrees to a cap on shared savings in the amount of 8 22 million aftertax dollars annually; is that correct? 23 A. That's correct. 24 Q. So, now, if you look at the aftertax 25 amount there for the table, we are looking at 12.5 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 41 1 million annually, right, for aftertax? 2 A. I'll take your word for it. I haven't 3 done the math on it, but approximately I would say 4 given the number you threw out. 5 Q. Okay. So under Duke's amended plan then 6 for 2017 through 2019, under the proposed annual 7 shared savings cap Duke would be eligible to receive 8 up to 37,500,000 aftertax for those three years 9 combined? 10 A. Approximately, approximately, if your 11 math is correct that it is 12.5 a year, the cap is an 12 annual cap so, yes. 13 Q. Okay. And the proposed cap on shared 14 savings over 2017 to 2019 before tax would be 15 24 million? 16 A. No, no, no. The 8 million is the 17 aftertax number. I'm sorry. I must have 18 misunderstood your question. If you gross it up for 19 tax, that's the 12-1/2. 20 Q. Yes. 21 A. So it would be the sum of those is the 22 pretax amount. I misunderstood your question. The 8 23 million is an aftertax number. So you would gross 24 that number up. That would give you your 12.5 25 million assuming the tax percentage that you quoted, ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 42 1 and then the sum of those three, those would then be 2 the pretax number. 3 Q. And for the record what's the pretax 4 number? 5 A. The pretax number would be the 12.5 you 6 referenced earlier. 7 Q. Okay. And then what is the aftertax 8 number? 9 A. $8 million. 10 Q. And if you had that for three years, what 11 would that be? 12 A. The sum of the aftertax is 24. 13 Q. 24 million, okay. And Duke's proposed 14 annual energy efficiency program portfolio budget is 15 approximately 38 million a year? 16 A. The program costs, yes. Again, that's -- 17 I should caveat that's based off of projections and 18 that doesn't factor in any of the costs of any of the 19 amendments that were part of the stipulation. 20 Q. Okay. So if you were to take that -- 21 that 38 million, subject to the other changes you 22 just mentioned there, you would get 114 million over 23 three years; is that correct? 24 A. Approximately -- let's see, yeah, 25 approximately. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 43 1 Q. Okay. And as -- if Duke were to be 2 eligible to receive then the maximum 37,500,000 over 3 three years, then what percentage would that be of 4 the 114 million? 5 A. The 114 million doesn't project out to 6 12 percent overachievement, so we haven't done that 7 math, Mr. Jones. 8 Q. Okay. All right. I want to refer your 9 attention here to page 7 of the -- sorry, paragraph 10 7. 11 A. Paragraph 7. 12 Q. 7 on page 5 there -- 13 A. Yes. 14 Q. -- and continues over on page 6. 15 A. Yep. 16 Q. And it reads, correct me if this isn't 17 what it says here, it says that "During the term of 18 the Stipulation, net benefits from the following will 19 not count towards shared savings," and I am skipping 20 ahead to G here, "any energy savings previously used 21 in the calculation of a shared savings incentive 22 during a prior year." Do you see that? 23 A. That's correct. 24 Q. Mr. Duff, you have knowledge and were 25 involved in the proceeding involved in Case No. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 44 1 14-457-EL-RDR, were you not? 2 A. I most certainly was. 3 Q. Okay. And -- 4 MR. JONES: Your Honor, if I could have 5 an exhibit here that's an entry of the Commission on 6 that stipulation for what was approved by the 7 Commission and I would like to just show Mr. Duff 8 this exhibit. 9 EXAMINER BULGRIN: Sure. 10 MR. JONES: I want to take administrative 11 notice of it too. 12 EXAMINER BULGRIN: Sure. 13 MR. JONES: May I approach? 14 MS. WATTS: John, I don't have any 15 objection to that, and I suspect the witness has a 16 photographic memory of the decision. 17 MR. JONES: I am sure you are right. 18 EXAMINER BULGRIN: So we are going to 19 mark this Staff Exhibit 2. 20 MR. JONES: Yeah. I would ask 21 administrative notice to be taken of the decision. 22 EXAMINER BULGRIN: Okay. 23 (EXHIBIT MARKED FOR IDENTIFICATION.) 24 Q. (By Mr. Jones) And what I have handed you 25 is marked as Staff Exhibit 2. And it's a second ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 45 1 entry on rehearing from the Commission in Case No. 2 14-457-EL-RDR. Do you see that? 3 A. Yeah. Do you want to go to page 6? 4 Q. Excuse me, yes, yes. And this is a 5 decision that approved the stipulation that you were 6 involved with, right? 7 A. Yes. 8 Q. And the staff was involved with. Okay. 9 And one of the terms of that stipulation dealt with 10 the provision, and if you will look on page 6, as you 11 mentioned, down at the bottom, in paragraph 1, you'll 12 see there in the third sentence, would you read that 13 please for the record. 14 A. Sure. "Beginning in 2017, the company 15 will not file for recovery of the shared savings 16 mechanism in any portfolio plan year after 2014 in 17 which banked savings have been used to meet the 18 annual benchmark. If there is a change in law or 19 regulation regarding shared savings, Duke may seek a 20 shared savings incentive consistent with such change 21 in law, regulation, or order." 22 Q. Okay. Thank you. Now, I want to go back 23 then to that provision in the amended stipulation 24 that goes from page 5 to page 6 and paragraph 7G and 25 that language that's provided there, "any energy ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 46 1 savings previously used in the calculation of a 2 shared savings incentive during a prior year." Now, 3 let me ask you so any energy savings in the bank from 4 the previous year that was not used to calculate 5 shared savings, can that count toward shared shavings 6 in this proposal? 7 A. So I think -- I think just to kind of 8 explain because I am losing a little on your 9 question. 10 Q. Okay. 11 A. The stipulation provision that says that 12 the company can't file for recovery shared in any 13 portfolio plan year after 2014 in which banked 14 savings have been used to meet the annual benchmark, 15 that really pertains to the language that we read 16 earlier in 5 that says if the company exceeds, it can 17 earn the incentive, if they exceed the annual 18 statutory benchmark for shared savings meaning that 19 it can't -- it can't earn an incentive unless it 20 exceeds the annual statutory benchmark. 21 Q. Yes. 22 A. So that is consistent. The term 7 deals 23 with the net benefits included in shared savings and 24 what this was saying was any net benefits that's been 25 previously recognized in the calculation of shared ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 47 1 savings can't be counted again. The company had a 2 bad experience with the term banked savings, and the 3 language that was originally in the stipulation had 4 banked savings in it, so we worked with parties to 5 define what banked savings were which means that 6 things that have been used in the past recognized the 7 net benefit of shared savings, so it's crystal clear 8 that we're not double counting savings in the shared 9 savings calculation, and we can't earn an incentive 10 in any year in which we have to meet the -- in which 11 we can't meet the benchmark without annual savings. 12 Q. Okay. So just to be clear then from -- 13 for this amended plan that's before us in this 14 proceeding, that the way you are interpreting 7G of 15 the amended stipulation is you can't use banked 16 savings for anything other than to help meet the 17 benchmark for any year in the portfolio plan, right? 18 A. Correct. It doesn't -- the term 7 19 doesn't deal with meeting the benchmark at all. Term 20 7 only deals with what the net benefits included in 21 the shared savings calculation are to be. And this 22 was to be cleared that if it's been used to calculate 23 shared savings in the past, it can't be -- no net 24 benefit can be used. That's the whole point. 25 But the company is committed to the exact ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 48 1 terms in the stipulation. It won't file for shared 2 savings or any net benefits in any year that it has 3 to -- that it -- in which banked savings have been 4 used to meet the annual benchmark. 5 Q. So Duke would not rely on banked savings 6 to get the incentive then for any plan year in this 7 amended -- 8 A. It cannot. It cannot under the terms of 9 the stipulation unless there is any change in law or 10 regulation. 11 Q. Mr. Duff, I want to ask you moving on 12 from that did you assist Duke in replying to any of 13 staff's data requests in this case? 14 A. I looked at some of them, not all of them 15 but some of them, yes. 16 Q. Okay. 17 MR. JONES: Your Honor, I have two 18 exhibits here I would like to present to Mr. Duff. 19 EXAMINER BULGRIN: All righty. 20 MR. JONES: Thank you. 21 EXAMINER BULGRIN: And these are marked 22 Staff Exhibits 3 and 4. 23 (EXHIBITS MARKED FOR IDENTIFICATION.) 24 Q. (By Mr. Jones) Mr. Duff, what I have 25 handed you is marked as Staff Exhibit 3 and Staff ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 49 1 Exhibit 4. Do you see that before you? 2 A. Yes. 3 Q. And if I could have you turn to page -- 4 the second page. I guess it would be the third page 5 actually. This is on front and back. 6 A. Of? 7 Q. Where it says "Request." Do you see 8 that? 9 A. Yes. So you are talking about Exhibit 3. 10 Q. Exhibit 3, yes. 11 A. Okay. Yeah. 12 Q. And do you see there before you as to 13 STAFF-DR-01-001 request for data being made to Duke 14 from staff? 15 A. Yes. 16 Q. Okay. And then if you would refer to 17 Staff Exhibit 4 and if you refer to the second to the 18 last page. 19 A. Yes. 20 Q. Page 4 of Exhibit 4, do you see then a 21 chart there and information provided on that page 22 that says -- 23 A. Yes. 24 Q. -- responsive to the Data Request? 25 A. Yes, I believe so. This was a complex ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 50 1 one where it depended on which source document you 2 were pulling from. We were surprised because this 3 was all publicly available data through filings, but 4 we determined it was more challenging to find because 5 timing of different things and projections to figure 6 out projected costs, particularly going back for the 7 2009 to 2012 period because it was under save-a-watt. 8 Q. Okay. Very good. So you are familiar 9 with this. You have helped prepare this -- 10 A. Yes. 11 Q. -- response to staff's Data Request. 12 Okay. Let me ask you on Staff Exhibit 4, page 4, 13 then -- 14 A. Yes. 15 Q. -- does it provided there for the years 16 2009 to 2015, does it show the company's projected 17 and actual costs versus energy portfolio plans? 18 A. Yes. 19 Q. Okay. And also from the same years, 2009 20 through 2015, it shows Duke's actual program costs? 21 A. That's correct. 22 Q. Okay. And does it show that the actual 23 program costs for those years were less than what was 24 projected for each year? 25 A. Yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 51 1 Q. Okay. 2 A. It is important to note some of those 3 years we didn't hit our mandates though because the 4 portfolio was frozen. I think that's important to 5 note. 6 Q. And in 2012 look for a second. 7 A. Yes. 8 Q. And if you want to do this simple 9 calculation, I am saying that the actual costs were 10 approximately 74 percent of what was projected; would 11 you agree with that? 12 A. That's correct. 13 Q. Okay. And if you look at 2013, the 14 actual costs were approximately 86 percent of what 15 was projected; is that correct? 16 A. Subject to check, I'll take your math, 17 yeah. 18 Q. Okay. And in 2014, Duke spent 97 percent 19 of what it projected, and in 2015 it was 86 percent 20 of what it projected; is that correct? 21 A. That is correct. 22 Q. The actual -- 23 A. Again, I haven't done the math. Looking 24 at those numbers those sound approximately correct. 25 Q. Okay. And if you were to do the math and ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 52 1 average those percentages actually spent on program 2 costs below what was projected from those years 2012 3 through 2015, you get an average of 86 percent -- 4 A. I -- 5 Q. -- approximately? 6 A. I haven't added those. That one is 7 getting a little bit bigger. I can't do a quick ball 8 park to give you an average on four large numbers. 9 If you have done the math, subject to check, I'll 10 accept that. 11 Q. Okay. Thank you. So then looking at 12 that information, and the difference would be an 13 average reduction of 14 percent between what was 14 actually spent and what was projected each year from 15 2012 through 2015, correct? 16 A. I think that -- based off what you said. 17 Again, I think it's important in 2013, '14, and '15, 18 the company fell short of its annual benchmark in 19 those years. 20 Q. Thank you. And you're familiar then with 21 what staff is proposing then pursuant to Mr. Donlon's 22 testimony as to FERC Form line 10 of 2015, FERC Form 23 1, what's being proposed by staff for a cost cap 24 here? 25 A. I have read his testimony, yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 53 1 Q. Okay. And you are familiar then with 2 that number 33,820,565 -- 3 A. Yes. 4 Q. -- from that line 10? 5 A. Yes. 6 Q. Now, if you reduced your proposed annual 7 38 million budget to the 33,820,565 shown on the 2015 8 FERC Form 1, line 10, this reduces your average 9 annual budget by 11 percent, approximately, correct? 10 A. So that's just the program costs, no lost 11 revenues and no shared savings which is in 12 Mr. Donlon's 33 million cap, so I don't think that's 13 an apples-to-apples comparison, Mr. Jones. 14 Q. But you would agree that's a 11 percent 15 reduction. 16 A. Subject to check, I haven't done the math 17 to know. 18 Q. Okay. And if you reduced your annual 19 budget then to that line 10, 33,820,565, you would 20 still have approximately 3 percent or 1.14 million 21 left over in your annual budget; is that correct? 22 A. No. I don't think you can look at it 23 that way. 24 Q. I am just asking you that question 25 though. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 54 1 A. No. Well, you are just throwing math out 2 that I haven't done, so if your math is correct and 3 you are saying the difference between 4 -- 33 and 4 whatever the 11 percent reduction is is that, subject 5 to check, I can -- I can, but I haven't done that 6 math to know, Mr. Jones. 7 Q. Okay. Fair enough. And looking again at 8 Staff Exhibit 4, page 4, looking between 2009 and 9 2015, with the exception of 2011, the actual 10 kilowatt-hour energy savings achieved was above what 11 Duke projected, correct? 12 A. That's correct. We are very pleased with 13 the way we manage our portfolio to try to make it as 14 cost effective as possible. The shared savings 15 incentive structure is very effective for doing so. 16 MR. HEALEY: Your Honor, I move to strike 17 the last commentary as unresponsive. 18 EXAMINER BULGRIN: Overruled. 19 Q. Mr. Duff, beginning in 2012, Duke's 20 actual kilowatt-hour energy savings achieved was 21 141 percent of what it projected; is that correct? 22 A. So you are saying the sum of the actuals 23 is -- the sum of the projected over the 2012 to 2015 24 period is 141 percent greater? 25 Q. Overachieved, yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 55 1 A. I haven't done that math again, subject 2 to check. But I would point out, as I pointed out 3 earlier, the Commission wants the company to hit its 4 annual mandates. It's incentivized to do this. It's 5 desired to be incentivized to do so. And from 2013 6 to 2015, the company fell significantly short of its 7 mandates primarily due to the fact it was operating 8 under a frozen portfolio. 9 So looking at those numbers, it's not 10 really a true estimate of what the company would have 11 done because it couldn't strive to hit its actual 12 mandates due to the freeze. 13 MR. JONES: Your Honor, I would move to 14 strike everything after talking about 2013 forward 15 because beyond the scope of the question. 16 EXAMINER BULGRIN: I will deny that. You 17 asked the question so. 18 Q. Mr. Duff, in 2013, Duke's actual 19 kilowatt-hour savings achieved was 125 percent of 20 what you projected, overachieved; is that correct? 21 A. Are you comparing the 144,101,736 to 22 115,117,713? 23 Q. Yes. 24 A. Subject to check, that math looks 25 correct. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 56 1 Q. Okay. And subject to check then, Duke's 2 actual energy efficiency savings in kilowatt-hours 3 was 131 percent in 2014 and 119 percent in 2015 of 4 what you projected; is that correct? 5 A. Subject to check. 6 Q. Okay. I want to ask you Duke's 7 forecasted mandate for megawatt-hour savings for 2017 8 is approximately 202,190 megawatt-hours; is that 9 correct? 10 A. Are you going back -- are you going back 11 to the -- can you reference the source? 12 Q. Yeah. Let's see here, going back to the 13 amended application. 14 A. Okay. I want to make sure we are on the 15 same. 16 Q. Page 12. Yes. 17 A. That looks approximately correct, yes. 18 Q. Okay. 19 A. Again, obviously that's subject -- these 20 are projections but. 21 Q. Right. 22 A. So you are saying for 2017? Actually I 23 can't do any math to figure out that number for 2017. 24 Q. Okay. 25 A. I don't have a 2016 baseline to compare ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 57 1 it to to figure out what the annual number is. 2 Q. Okay. And let's see here, 2018 it would 3 be -- 4 A. 2018 looks like the 202 you referenced. 5 Q. I have 203,213. 6 A. Yeah. Yeah, that's -- 7 Q. That looks right to you? 8 A. Because that's just '18 minus '17, but I 9 can't determine the '17 projection because I don't 10 have the '16 baseline in front of me. 11 Q. Right. Okay. 12 EXAMINER BULGRIN: I'm sorry. What page 13 are you on? 14 MR. JONES: This is page 12 of the 15 amended application, table 3. 16 EXAMINER BULGRIN: Okay. 17 MR. JONES: Looking at the cumulative 18 energy savings. 19 EXAMINER BULGRIN: Got it. 20 Q. Let's see here, and now let's look at 21 what Duke proposed in savings for those years 2017 22 through 2019. If you look at what Duke proposed for 23 savings in energy efficiency, for 2017 that number 24 would be 239,148? 25 A. Can you reference a page again? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 58 1 Q. Actually this is coming from the -- 2 A. You are throwing a lot of numbers out, 3 and I don't have a source. 4 Q. JEZ Exhibit 1. 5 A. If you can show that to me, that would be 6 great. That's not one of my exhibits. 7 Q. Yeah. If you look at the direct 8 testimony of James Ziolkowski. 9 A. I don't have that, Mr. Jones. 10 Q. Okay. 11 MS. WATTS: John, I have a copy. The 12 exhibit is not legible in this form. 13 Q. Yeah. This is hard to read too so you 14 are probably going to struggle with this. This is 15 what we have. This is what we were provided. 16 MS. WATTS: We typically give the live 17 file to staff. From a working perspective everybody 18 has the live file, but in the hearing room we don't 19 have that advantage so. 20 EXAMINER BULGRIN: Let's go off the 21 record here. 22 (Discussion off the record.) 23 (Recess taken.) 24 EXAMINER BULGRIN: Let's go back on the 25 record. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 59 1 Mr. Jones. 2 MR. JONES: Thank you, your Honor. Your 3 Honor, the company is willing to stipulate that the 4 proposed megawatt-hour savings for 2017 was 239,148 5 megawatt-hours and for 2018 it was 236,582 6 megawatt-hours and for 2019 it was 234,352 7 megawatt-hours and this is reflected in the record 8 from the testimony of James Ziolkowski at his Exhibit 9 JEZ-1, page 3 of 6, and it provides that information 10 in that exhibit. 11 EXAMINER BULGRIN: Very good. Thank you. 12 MR. JONES: Thank you. 13 Q. (By Mr. Jones) So, Mr. Duff, if the 14 company only achieved 90 percent of its proposed 15 megawatt-hours for 2017, you still achieve 16 approximately 215,233 megawatt-hours of savings and 17 still exceed the mandate by 12,243 megawatt-hours; is 18 that right, subject to check? 19 A. Well, no, because we never were able to 20 agree on a 2017 mandate number. You never provided 21 me the 2017 projected mandate, annual mandate amount. 22 You recall you referenced the table in the amended 23 application that had '18 and '19. But without a '16 24 baseline, I can't determine what '17 is so, again, 25 those are projections. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 60 1 I think the other thing that is important 2 to note is that's a set of projections of 2017 3 assuming the portfolio was in place January 1, so 4 looking at 2017 is a really hard exercise to say 5 there is any sort of accuracy in the projections. 6 Q. Okay. Fair enough. Let's look at 2018. 7 If you achieve 90 percent of your proposed 8 megawatt-hour savings in 2018, you still achieve 9 212,924 megawatt-hours of savings and still exceed 10 the mandate by 9,326 hours, megawatt-hours of 11 savings, correct? 12 A. Subject to check, that math sounds 13 correct. 14 Q. Okay. And also then for if you achieve 15 90 percent of your proposed megawatt-hour savings in 16 2019, you achieve 210,917 megawatt-hour savings and 17 still exceed the mandate by 7,704 megawatt-hour 18 savings, correct? 19 A. Subject to check, based off of those 20 original projections, yes. 21 MR. JONES: Very good. Can I have a 22 second, your Honor? 23 EXAMINER BULGRIN: Sure. 24 MR. JONES: Your Honor, I have no further 25 questions. Thank you. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 61 1 EXAMINER BULGRIN: Okay. Any redirect? 2 MS. WATTS: Can we take just one brief 3 moment, your Honor? 4 EXAMINER BULGRIN: Sure. 5 (Discussion off the record.) 6 MS. WATTS: Just a couple of questions, 7 your Honor. 8 EXAMINER BULGRIN: Sure. 9 - - - 10 REDIRECT EXAMINATION 11 By Ms. Watts: 12 Q. Mr. Duff, do you remember some questions 13 you responded to earlier with respect to the smart 14 thermostat program? 15 A. Yes. 16 Q. And I believe the questions related to 17 whether the program would be approved by the 18 Commission in this order and dealt with in the 19 collaborative? 20 A. Yes. 21 Q. Could you explain how you anticipate that 22 happening? 23 A. Sure. So once we start working with 24 parties to get the estimates of program costs and get 25 program structure and design through the different ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 62 1 channels put together, we will do some cost 2 effectiveness analysis and bring that to the 3 collaborative in which all the parties are generally 4 present and work through this is how the project is 5 cost effective, these are the proposed incentives 6 that were included, and get input from those parties 7 prior then I guess to getting any approval from the 8 Commission regarding the actual incentive amounts. 9 Q. Okay. Thank you. And you've answered a 10 number of questions with respect to the amended 11 application in response to mathematical calculations 12 that Mr. Jones has done, correct? 13 A. Yes, I have. 14 Q. And can you explain what those 15 projections indicate? 16 A. Well, I think the point -- I think that 17 Mr. Jones was pointing out that the company has 18 achieved more than its projected efficiency savings 19 at a lower cost than its projection and trying to 20 extrapolate that that's going to go into the future 21 potentially. However, if you look over history, the 22 trend in terms of how much under the company has 23 spent versus how much it has overachieved is going 24 down over time. Energy efficiency is getting more 25 difficult to achieve and more costly to achieve. And ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 63 1 so while the company really does with the help of its 2 collaborative actively manage its programs to get -- 3 to exceed its projected impacts and spend less, the 4 variance between those two is going down over time 5 because it's getting harder. So to say that the 6 company spent 14 percent less in 2013 and achieved 25 7 percent more than its projection, that goes down 8 because if you look at the 2010 numbers, the company 9 overachieved by 33 percent and saved -- and saved a 10 similar type of 10 percent percentages. 11 So the company is -- has traditionally 12 done that, and when you are looking at mandates where 13 you are trying to exceed the mandates as aggressively 14 as possible in a cost effective manner, to try and 15 say that the history of being able to overexceed your 16 projections is going to be something that would 17 continue would be, I think, a false assumption. 18 MS. WATTS: Thank you, your Honor. I 19 have nothing further. 20 EXAMINER BULGRIN: Okay. 21 MR. HEALEY: I have got a brief recross, 22 if that's okay, your Honor. 23 EXAMINER BULGRIN: Sure, Mr. Healey. 24 - - - 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 64 1 RECROSS-EXAMINATION 2 By Mr. Healey: 3 Q. Mr. Duff, you testified just now that 4 you'll get input from the parties through the 5 collaborative regarding a thermostat program; is that 6 right? 7 A. Correct. 8 Q. Now, the members of the collaborative 9 don't vote on any decisions that Duke makes with 10 respect to its portfolio, correct? 11 A. It's not a formal vote, no. 12 MR. HEALEY: That's all, your Honor. 13 EXAMINER BULGRIN: Okay. Anything 14 further? 15 All right. I think you can step down. 16 Thank you. 17 THE WITNESS: Thank you. 18 MS. WATTS: Your Honor, I can move 19 Mr. Duff's testimony in now or wait and do them all 20 at once. 21 EXAMINER BULGRIN: Why don't we go ahead 22 and move it all. 23 THE WITNESS: Should I move it back to 24 the original? 25 EXAMINER BULGRIN: I think that's fine. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 65 1 MS. WATTS: Could you pull it around a 2 little bit? 3 THE WITNESS: Good? 4 EXAMINER BULGRIN: Thank you. 5 Any objection to Company Exhibit 4? 6 Hearing none, it will be admitted. 7 (EXHIBIT ADMITTED INTO EVIDENCE.) 8 MR. JONES: Your Honor, as to the staff 9 exhibits, I know I think I moved for administrative 10 notice of Staff Exhibit 2 which is a second entry on 11 rehearing in the 14-457-EL-RDR case, so I don't know 12 if I still move for admission of Staff Exhibit -- 13 EXAMINER BULGRIN: Yeah. Is there any 14 objection to the admission of Staff Exhibits 2, 3, or 15 4? 16 MS. WATTS: None from us. 17 EXAMINER BULGRIN: Okay. Those will be 18 admitted. 19 (EXHIBITS ADMITTED INTO EVIDENCE.) 20 EXAMINER BULGRIN: And we have OCC 21 Exhibits 1 and 2, I believe, also. 22 No objections? Those will be admitted. 23 (EXHIBITS ADMITTED INTO EVIDENCE.) 24 EXAMINER BULGRIN: Okay. Let's go off 25 the record for a minute. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 66 1 (Discussion off the record.) 2 (Thereupon, at 11:32 a.m., a lunch recess 3 was taken.) 4 - - - 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 67 1 Monday Afternoon Session, 2 February 27, 2017. 3 - - - 4 EXAMINER BULGRIN: Okay. Let's go back 5 on the record then. 6 Ms. Watts. 7 MS. WATTS: Thank you, your Honor. Duke 8 Energy Ohio would call Trisha Haemmerle. And, your 9 Honor, we would ask -- hold on. Let me find my 10 exhibit list. I don't know what we are up to. 11 EXAMINER BULGRIN: Hang on. I have got 12 one too. 13 Before you sit down. 14 (Witness sworn.) 15 MS. WATTS: I think we are on 6 and 7. 16 Does that seem right? 17 MR. HEALEY: 5. 18 MS. WATTS: 5 and 6? 19 EXAMINER BULGRIN: Okay. Company 20 Exhibits 6 -- 6 and 7. 21 MS. WATTS: 5 and 6. 22 EXAMINER BULGRIN: 5 and 6. 23 MS. WATTS: Your Honor, so the initial 24 testimony would be Exhibit 5 and the supplemental 25 would be Duke Exhibit 6. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 68 1 EXAMINER BULGRIN: Okay. 2 (EXHIBITS MARKED FOR IDENTIFICATION.) 3 - - - 4 TRISHA A. HAEMMERLE 5 being first duly sworn, as prescribed by law, was 6 examined and testified as follows: 7 DIRECT EXAMINATION 8 By Ms. Watts: 9 Q. Ms. Haemmerle, do you have those before 10 you? 11 A. I do. 12 Q. And could you describe those, please. 13 A. I have my direct testimony from June 15, 14 2016, and my supplemental testimony from October 14, 15 2016. 16 Q. Thank you. And did you write that 17 testimony yourself? 18 A. I did. 19 Q. And is it true and accurate to the best 20 of your knowledge? 21 A. It is. 22 Q. Do you have any additions or corrections? 23 A. Not that I'm aware of. 24 MS. WATTS: Okay. Ms. Haemmerle is 25 available for cross-examination. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 69 1 EXAMINER BULGRIN: All righty. 2 Mr. Healey. 3 - - - 4 CROSS-EXAMINATION 5 By Mr. Healey: 6 Q. Good afternoon. 7 A. Good afternoon. 8 Q. Ms. Haemmerle, do you have a copy of the 9 stipulation in front of you? 10 A. I do not. 11 Q. Okay. 12 MR. HEALEY: Your Honor, may I approach 13 with a copy of that? 14 EXAMINER BULGRIN: Sure. 15 MR. HEALEY: It is a copy of the amended 16 stipulation that has been marked Exhibit 2. 17 Q. As with Mr. Duff, if I refer to the 18 "stipulation," I will be referring to this document, 19 and we won't worry about the original one that was 20 filed. We will just focus on this. 21 A. Okay. 22 Q. Can you turn to page 8, please, of the 23 stipulation. 24 A. Okay. 25 Q. And on page 8 it discusses a smart ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 70 1 thermostat program that's included in the 2 stipulation, correct? 3 A. Yes. 4 Q. And I would like to refer you back, 5 halfway down there's a provision that states -- let 6 me find it. It starts with the word "Once." "Once 7 the Company's portfolio is approved by the 8 Commission, a retailer or competitive retail electric 9 supplier may, at their own risk, provide a customer 10 with an instant discount prior to the full 11 implementation of the Smart Thermostat Program." Do 12 you see that? 13 A. I do. 14 Q. And then the following sentence right 15 after that reads "Following the deployment of the 16 program, such instant rebates will be eligible for 17 reimbursement at the incentive level established by 18 the Company and approved by the Commission." Do you 19 see that as well? 20 A. Yes. 21 Q. And I just want to confirm the phrases 22 "instant discount" and "instant rebate" in these two 23 sentences mean the same thing, correct? 24 A. I believe so. I did not write the 25 stipulation so. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 71 1 Q. Now, under this provision which permits a 2 retailer or CRES provider to provide an instant 3 discount or rebate to a customer, when they provide 4 this instant discount, are they required to inform 5 the customer that the retailer or CRES provider may 6 seek reimbursement from Duke? 7 A. I don't know. I did not write the 8 stipulation, and I'm not sure how we had planned to 9 implement the program as we still are under analysis 10 of how we are going to implement the program. 11 Q. Now, Ms. Haemmerle, you said you didn't 12 write the stipulation. You are Duke's witness for 13 various discovery responses related to this smart 14 thermostat program, are you not? 15 A. I am. 16 Q. So you are generally familiar with this 17 provision? 18 A. Yes. 19 Q. And you stated, I believe, a minute ago, 20 and correct me if I am not getting it completely 21 correctly, you are still working out the details for 22 this program; is that right? 23 A. That is correct and I believe that's what 24 we stated in many of the discovery responses. 25 Q. And so one of those details that still ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 72 1 needs to be worked out is what an instant rebate or 2 instant discount is? 3 A. Yeah, yes. I mean, we are still 4 analyzing the program and trying to determine the 5 specifics as it has not been approved at this time. 6 Q. Sure. Now, under this provision that we 7 just discussed, those two sentences, I would like to 8 walk you through some examples, and you can tell me 9 if you have any insight on the examples. 10 A. Okay. 11 Q. Let's say that a local retailer like 12 Lowe's is running a sale for Memorial Day and they 13 are giving $100 off Nest thermostats. Would that 14 qualify as an instant discount subject to future 15 reimbursement? 16 A. I guess it could. I mean, like I said, 17 I'm not sure exactly how we plan to implement this at 18 the time. 19 Q. Let's say in a new example that a 20 customer buys a $250 thermostat from a retailer and 21 under this provision that we are discussing their 22 CRES providers gives them $125 instant discount. 23 Would the CRES provider be able to then get that $125 24 from Duke after the fact? 25 A. Again, I'm not sure exactly how we plan ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 73 1 to implement the program at this time. 2 Q. I understand that you're not sure how you 3 plan to implement the program. 4 A. Yes. 5 Q. I'm asking how -- 6 A. It's a possibility. It's a possibility 7 that we would discuss as we are trying to implement 8 the program and talking through it with our 9 collaborative on how we should. 10 Q. Sure. I understand that the -- every 11 detail of this program has not been determined. 12 A. Right. 13 Q. I am trying to understand what these 14 precise two sentences mean because they seem -- you 15 know, these sentences don't say we'll figure this out 16 later. They say "Following the deployment of the 17 program, such instant rebates will be eligible for 18 reimbursement at the incentive level established by 19 the Company and approved by the Commission." So I am 20 trying to understand what "will be eligible for 21 reimbursement" means. That doesn't indicate to me 22 that there is some kind of future decision to be 23 made. 24 So that's what I am trying to get at 25 here. So in light of that do you understand ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 74 1 whether -- when a CRES provider gives a $100 discount 2 to a customer, under these two sentences it will then 3 be able to get that $100 back from Duke? 4 A. I don't know. 5 Q. Let's turn to page 10, please, of the 6 stipulation again. And this page paragraph 13 7 discusses a space heating program. Are you generally 8 familiar with this provision of the stipulation? 9 A. Generally, yes. 10 Q. And Duke has not determined what the cost 11 of this program will be, correct? 12 A. Correct. 13 Q. And Duke has not projected a budget for 14 this program? 15 A. That is correct. 16 Q. And the stipulation doesn't provide any 17 estimate of the potential costs for this program, 18 correct? 19 A. Correct. 20 MR. HEALEY: That's all I have, your 21 Honor. 22 EXAMINER BULGRIN: Great. 23 Mr. Jones. 24 MR. JONES: I have no questions, your 25 Honor. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 75 1 EXAMINER BULGRIN: Very good. 2 Any redirect? 3 MS. WATTS: Just one moment, your Honor. 4 EXAMINER BULGRIN: Sure. 5 MS. WATTS: Just one quick question, your 6 Honor. 7 EXAMINER BULGRIN: Sure. 8 - - - 9 REDIRECT EXAMINATION 10 By Ms. Watts: 11 Q. Ms. Haemmerle, with respect to the two 12 programs you just answered questions about in 13 response to OCC's questions, in particular the first 14 one was a smart thermostat program. Just to be clear 15 the company hasn't determined the details of how that 16 program will work just yet, correct? 17 A. That is correct. 18 Q. So how the rebates are paid and under 19 what circumstances, that's a detail of the program 20 that just isn't clear just yet. 21 A. That is correct. 22 MS. WATTS: Thank you. I have nothing 23 further. 24 EXAMINER BULGRIN: Okay. It looks like 25 you can step down. Thank you. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 76 1 Any objection to the admission of Company 2 Exhibits 5 or 6? 3 Okay. They will be admitted 4 (EXHIBITS ADMITTED INTO EVIDENCE.) 5 EXAMINER BULGRIN: Thank you. One more? 6 MS. WATTS: One more, your Honor. Duke 7 Energy Ohio would call Mr. Ziolkowski to the stand. 8 EXAMINER BULGRIN: All righty. 9 (Witness sworn.) 10 MS. WATTS: May I approach, your Honor? 11 EXAMINER BULGRIN: Sure. 12 MS. WATTS: And, your Honor, may we have 13 Mr. Ziolkowski's testimony marked as Duke Energy Ohio 14 Exhibit 7? 15 EXAMINER BULGRIN: All righty. 16 (EXHIBIT MARKED FOR IDENTIFICATION.) 17 - - - 18 JAMES E. ZIOLKOWSKI 19 being first duly sworn, as prescribed by law, was 20 examined and testified as follows: 21 DIRECT EXAMINATION 22 By Ms. Watts: 23 Q. Mr. Ziolkowski, do you have before you 24 what's just been marked as Duke Energy Ohio Exhibit 25 7? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 77 1 A. Yes. 2 Q. And is that the testimony you caused to 3 be prepared in this proceeding? 4 A. Yes. 5 Q. Did you write that testimony? 6 A. Yes. 7 Q. And is it true and correct to the best of 8 your knowledge? 9 A. Yes. 10 Q. And do you have any additions or 11 corrections? 12 A. No. 13 MS. WATTS: Mr. Ziolkowski is available 14 for cross-examination. 15 EXAMINER BULGRIN: Mr. Healey. 16 MR. HEALEY: Thank you, your Honor. I 17 would like to start by marking an exhibit. This will 18 be OCC Exhibit 3 and this is Duke Energy Ohio's 19 response to OCC Interrogatory 02-002. May I 20 approach, your Honor? 21 EXAMINER BULGRIN: Sure. 22 MR. HEALEY: Thank you. 23 (EXHIBIT MARKED FOR IDENTIFICATION.) 24 - - - 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 78 1 CROSS-EXAMINATION 2 By Mr. Healey: 3 Q. Now, Mr. Ziolkowski, is that right? 4 A. Yes. 5 Q. Thank you. You have what's been marked 6 OCC Exhibit 3 in front of you. Do you recognize this 7 discovery response? 8 A. Yes, I do. 9 Q. And you are identified as the person 10 responsible for this discovery response? 11 A. Yes. 12 Q. And a couple of clarifying questions 13 here. Duke is asking about month -- sorry. OCC is 14 asking about monthly projected customer bill impacts 15 for 2017, '18, and '19 in this discovery request? 16 A. Yes. 17 Q. And just to confirm there's three columns 18 here, 1, 2, and 3. Column 1 is for 2017, 2 is for 19 2018, and 3 is for 2019? 20 A. That's correct. 21 Q. And I would like you to look at the row 22 near the top that is titled "Residential from 23 Portfolio." Do you see that? 24 A. Yes. 25 Q. Do those -- the numbers on that line, do ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 79 1 they include shared savings amounts in addition to 2 program costs; is that right? 3 A. I believe they do. I have to pull up the 4 original -- my original Attachment JEZ-1 to my 5 testimony, but they would have included -- I believe 6 they would have included the shared savings. Based 7 on the magnitude, they do, but I need to check that. 8 Q. Okay. If you wouldn't mind checking if 9 you can do it quickly. Otherwise we can take it 10 subject to check. That would be fine. 11 MS. WATTS: Do you have glasses up there, 12 Jim? You might need some. 13 A. I am having a hard time reading the 14 print. 15 Q. That's fair. How about this, let me ask 16 you a more general question. Do the numbers you 17 referenced, your Exhibit JEZ-1, the numbers in this 18 response in the first section about "Summary Revenue 19 Requirements," were those derived from JEZ-1 20 generally? 21 A. Yes, yes, they are. 22 Q. And just so I understand the calculation 23 that's being done here, near the bottom -- the third 24 part of your chart, "Estimated EE-PDRR Rate Excluding 25 Prior Period True-Ups," that's just calculated by ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 80 1 dividing the revenue numbers from the first part by 2 the estimated kWh numbers in the second part of the 3 chart, correct? 4 A. That's correct. 5 Q. And then you multiply that by a thousand 6 to get the monthly bill impact at the bottom? 7 A. Correct. 8 Q. Thank you. Mr. Ziolkowski, you're aware 9 that under the stipulation Duke is proposing an 10 aftertax shared savings cap of $8 million, correct? 11 A. Correct. 12 MR. HEALEY: Your Honor, I would like to 13 mark as OCC Exhibit 4, this is one of Duke's 14 discovery responses to IGS, Interrogatory 01-003. 15 May I approach, please? 16 EXAMINER BULGRIN: Sure. This is OCC 17 Exhibit 4. 18 (EXHIBIT MARKED FOR IDENTIFICATION.) 19 Q. (By Mr. Healey) Do you have what's been 20 marked OCC Exhibit 4? This is Duke's response to an 21 interrogatory request from IGS and you'll note that 22 you are the person responsible for subsection C to 23 this discovery response; is that right? 24 A. That's correct. 25 Q. And this question asks you to "Identify ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 81 1 the estimated shared savings (after-tax) that Duke 2 will earn in each year of the Portfolio Plan," and 3 you answer for 2017 about 7.6 million, for 2018 about 4 6.9 million, and for 2019 about 6.7 million. Do you 5 see that? 6 A. Yes. 7 Q. And so if I am interpreting this 8 correctly, if those shared savings estimates turn out 9 to be accurate, or roughly accurate, then the $8 10 million cap under the stipulation wouldn't have any 11 effect, correct? 12 A. If those numbers came out to be accurate. 13 However, they were based on my original -- the 14 original numbers in Attachment JEZ-1, and the program 15 portfolio as a result of the stipulation, my 16 understanding, has been potentially modified with the 17 programs that you discussed earlier with the various 18 witnesses. 19 Q. Thank you. 20 MR. HEALEY: I would like to mark one 21 more exhibit, your Honor. This will be OCC Exhibit 5 22 and this is the company's response to IGS 23 Interrogatory 01-007. May I approach, please? 24 EXAMINER BULGRIN: Sure. 25 (EXHIBIT MARKED FOR IDENTIFICATION.) ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 82 1 Q. (By Mr. Healey) And looking at OCC 2 Exhibit 5 and understanding that there may be changes 3 to the budgets based on the stipulation, given this 4 question was asked in the context of the application, 5 I just want to confirm that the -- these annual 6 budget amounts were determined by adding up the 7 individual program budget amendments in the amended 8 application -- I guess in the original application, 9 correct? 10 A. That is correct. They are program costs, 11 and they include the EM&V costs too. 12 MR. HEALEY: Great. That's all I've got, 13 your Honor. 14 EXAMINER BULGRIN: Great. 15 Mr. Jones. 16 MR. JONES: No questions, your Honor. 17 EXAMINER BULGRIN: Any recross? Or 18 redirect. 19 MS. WATTS: Yeah, just a quick question. 20 - - - 21 REDIRECT EXAMINATION 22 By Mr. Watts: 23 Q. Mr. Ziolkowski, those discovery responses 24 that you were just reviewing in response to questions 25 from Mr. Healey were submitted to IGS prior to the ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 83 1 stipulation being entered into, correct? 2 A. That is correct. 3 Q. And they were also submitted out to IGS 4 at a time when we had not yet filed -- when Duke 5 Energy Ohio had not yet filed its market potential 6 study. 7 A. I don't know what date we filed our 8 market -- the market potential study, but these data 9 requests were responded to in August, August and 10 October of 2016. 11 MS. WATTS: Okay. Thank you. That's all 12 I have for him. 13 EXAMINER BULGRIN: All right. Thank you, 14 sir. 15 Any objections to the admission of 16 Company Exhibit 7 and OCC Exhibits 3 through 5? 17 Hearing none, they will be admitted 18 (EXHIBITS ADMITTED INTO EVIDENCE.) 19 MS. WATTS: Your Honor, Duke Energy Ohio 20 had one additional witness, and it's my understanding 21 that the parties are willing to stipulate in the 22 testimony of Kevin A. Bright both direct and 23 supplemental. 24 EXAMINER BULGRIN: Okay. Have we marked 25 those yet? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 84 1 MS. WATTS: So those would be Duke Energy 2 Ohio -- 3 EXAMINER BULGRIN: 8 and 9? 4 MS. WATTS: -- 8 and 9. 5 (EXHIBITS MARKED FOR IDENTIFICATION.) 6 EXAMINER BULGRIN: Okay. Any objections 7 to the admission of those? 8 MR. HEALEY: Your Honor, OCC's agreement 9 to waive cross on Mr. Bright was subject to the 10 admission of various discovery responses for which 11 Mr. Bright was identified as the responsible witness. 12 I would like to mark those as OCC exhibits now before 13 the admission just given that was a qualification. 14 EXAMINER BULGRIN: Why don't we do that 15 right now. 16 MR. HEALEY: Sure. I believe there will 17 be seven of them. 18 EXAMINER BULGRIN: Okay. 19 MR. HEALEY: So these will be OCC 6 20 through 12. OCC 6 will be -- I will approach and 21 give these all at the same time just because it will 22 be easier. 23 EXAMINER BULGRIN: Sure. 24 MR. HEALEY: OCC 6 is Duke's response to 25 NRDC Interrogatory 01-012. OCC 7 is Duke's response ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 85 1 to NRDC-INT-01-015. OCC 8 is Duke's response to IGS 2 Interrogatory 01-001. OCC 9 is Duke's response to 3 IGS Interrogatory 01-002. OCC 10 is Duke's response 4 to OCC Interrogatory No. 02-031. And -- 5 MS. WATTS: I'm sorry. That last one, 6 Mr. Healey, was a response to whom? 7 MR. HEALEY: To OCC, 02-031. 8 MS. WATTS: Thank you. 9 MR. HEALEY: OCC 11 is Duke's response to 10 OCC Interrogatory 02-040. And, finally, OCC Exhibit 11 12 will be Duke's response to OCC Interrogatory No. 12 04-059. 13 MS. FLEISHER: What was that number on 14 the last one? 15 MR. HEALEY: Last one 04-059. 16 MS. FLEISHER: Thank you. 17 (EXHIBITS MARKED FOR IDENTIFICATION.) 18 MR. HEALEY: If anybody wants copies, I 19 have all of them. 20 MS. WATTS: We don't need copies. 21 MR. HEALEY: Okay. Thank you, your 22 Honor. With that and assuming these all get 23 admitted, then OCC has no objection to the admission 24 of Mr. Bright's testimony. 25 MS. WATTS: No objection, your Honor. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 86 1 EXAMINER BULGRIN: Okay. Very good. All 2 right. They will be admitted then. 3 (EXHIBITS ADMITTED INTO EVIDENCE.) 4 EXAMINER BULGRIN: I think that concludes 5 the -- 6 MS. WATTS: It does, your Honor. The 7 company has no more witnesses. 8 EXAMINER BULGRIN: Okay. 9 MR. HEALEY: I assume staff wants to go 10 last. 11 EXAMINER BULGRIN: Let's go off the 12 record. 13 (Discussion off the record.) 14 EXAMINER BULGRIN: Let's go back on the 15 record then. 16 Mr. Healey. 17 MR. HEALEY: Your Honor, OCC calls 18 Witness Colleen Shutrump. 19 (Witness sworn.) 20 MR. HEALEY: Your Honor, I would like to 21 mark as OCC Exhibit 13 the direct testimony of 22 Colleen Shutrump. 23 EXAMINER BULGRIN: Okay. It will be so 24 marked. 25 (EXHIBIT MARKED FOR IDENTIFICATION.) ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 87 1 MR. HEALEY: May I approach? 2 EXAMINER BULGRIN: Yes. 3 MR. HEALEY: Does anyone else need a 4 copy? I have a copy for the reporter. 5 - - - 6 COLLEEN SHUTRUMP 7 being first duly sworn, as prescribed by law, was 8 examined and testified as follows: 9 DIRECT EXAMINATION 10 By Mr. Healey: 11 Q. Can you please state your name and 12 business address. 13 A. Colleen Shutrump, my business address is 14 10 West Broad Street, Suite 1800, Columbus, Ohio 15 43215. 16 Q. Did you file or cause to be filed 17 testimony in this case? 18 A. I did. 19 Q. And do you have in front of you what has 20 been marked as OCC Exhibit 13? 21 A. I do. 22 Q. And do you recognize this document as the 23 testimony that you filed in this case? 24 A. Yes. 25 Q. Was this testimony prepared by you or ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 88 1 under your direction? 2 A. Yes. 3 Q. On whose behalf are you testifying today? 4 A. On behalf of the OCC. 5 Q. And OCC is the Ohio Consumers' Counsel? 6 A. That is correct. 7 Q. And since the filing of your testimony, 8 do you have any changes? 9 A. I do. I have one small correction on 10 page 12, footnote 9, the date that references Case 11 No. 13-833 should be December 4, 2013, not 12 December 3. 13 Q. And other than that change, do you have 14 any other changes? 15 A. No. 16 Q. And with that one change, if I were to 17 ask you the same questions today as they appear in 18 your testimony, would your answers be the same? 19 A. They would. 20 MR. HEALEY: Your Honor, at this time I 21 would move Ms. Shutrump's testimony, OCC Exhibit 13, 22 into the record, subject to cross-examination. 23 EXAMINER BULGRIN: Thank you. Any cross? 24 MS. WATTS: I have cross. Do I get to go 25 first? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 89 1 EXAMINER BULGRIN: I am wondering who 2 else has cross. 3 MS. LEPPLA: We will likely have 4 follow-up cross as well. 5 EXAMINER BULGRIN: Do you want to go 6 first then? 7 MS. LEPPLA: You feel free. 8 MS. WATTS: I guess I get to go first. 9 EXAMINER BULGRIN: Okay. Glad that was 10 decided. 11 - - - 12 CROSS-EXAMINATION 13 By Ms. Watts: 14 Q. Ms. Shutrump, may I call you Colleen? 15 A. You may. 16 Q. Could you tell me again what was the date 17 on page 12 you changed because I didn't quite catch 18 that. 19 A. So the footnote 9, the date should be 20 December 4, not December 3. 21 Q. I see. Okay. Thank you. Good 22 afternoon. Now, Ms. Shutrump, Colleen, your 23 contention in your testimony overall is that the 24 stipulation violates the Commission's prongs for 25 determining whether stipulations should be accepted, ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 90 1 correct? 2 A. Correct. 3 Q. And you contend that this stipulation 4 violates prongs 1 and 2. 5 A. Correct. 6 Q. And you did not reach any conclusion with 7 respect to prong 3, correct? 8 A. Correct. 9 Q. And you are not disputing that the 10 parties that negotiated a stipulation were capable 11 and knowledgeable, correct? 12 A. Correct. 13 Q. And you don't offer any analysis 14 regarding the cost effectiveness of any of the 15 programs in the company's portfolio, correct? 16 A. I do not. 17 Q. And you believe that the stipulation 18 should be rejected because you contend that OCC was 19 not afforded meaningful participation and also 20 because Kroger was not invited to the first 21 settlement meeting, correct? 22 A. Yes. 23 MR. HEALEY: Objection as to 24 mischaracterizing her testimony. Her testimony 25 speaks for itself in this regard. Trying to ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 91 1 summarize the testimony, your Honor. 2 EXAMINER BULGRIN: I think she already 3 answered. 4 Q. Okay. And, Colleen, if I misstate any of 5 your testimony, please let me know that, okay? Okay. 6 MS. WATTS: Your Honor, I would like to 7 have marked as Duke Energy Ohio Exhibit 10. 8 (EXHIBIT MARKED FOR IDENTIFICATION.) 9 Q. Colleen, do you recall attending a 10 settlement discussion here at the Commission with 11 Duke Energy and parties too, intervenors in this 12 proceeding? 13 A. I do. 14 Q. And did that meeting take place on 15 November 3? 16 A. Yes. 17 Q. And does this appear to be the sign-in 18 sheet that was used for purposes of that meeting? 19 MR. HEALEY: Objection, your Honor, lack 20 of foundation. We haven't established Ms. Shutrump 21 has ever seen this document before. 22 EXAMINER BULGRIN: Sustained. Can you 23 rephrase? 24 MS. WATTS: Okay. Yes, thank you. 25 Q. Ms. Shutrump, I call your attention to a ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 92 1 signature that's four lines up from the bottom that 2 appears to be your signature. Is that your 3 signature? 4 A. Yes. 5 Q. And do you recall signing this sheet when 6 you attended a meeting on November 3 at the 7 Commission? 8 A. It looks like I signed this sheet. It's 9 not dated, but we did attend a meeting on November 3. 10 Q. Okay. And do you also see about halfway 11 up from where your signature is that there is a 12 signature on behalf of Kroger by someone named Angie 13 Paul Whitfield? 14 MR. HEALEY: Your Honor, I make the same 15 objection, lack of foundation. We haven't 16 established what this document is. If she is going 17 to sit here and identify people's names on it, I am 18 not sure what purpose it serves. 19 EXAMINER BULGRIN: I'll overrule on that. 20 You can answer. 21 A. Can you repeat the question, please? 22 Q. Sure. Do you see a signature on that 23 page that appears to be signed on behalf of Kroger by 24 someone named Angie Paul Whitfield? 25 A. I see her name. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 93 1 Q. Do you happen to know who Angie Paul 2 Whitfield is? 3 A. I don't know. 4 Q. Is it possible that there was someone in 5 that meeting on November 3 representing Kroger whom 6 you did not know? 7 MR. HEALEY: Objection, your Honor, calls 8 for speculation. 9 EXAMINER BULGRIN: She can answer. 10 A. It's possible. 11 Q. Thank you. And that meeting on 12 November 3, so far as you recall, was that the first 13 time all of the parties gathered to discuss 14 settlement in this case? 15 MR. HEALEY: Objection, your Honor. 16 Assumes facts not in evidence. We have not 17 established that all of the parties were at this 18 meeting. 19 EXAMINER BULGRIN: Perhaps you can 20 rephrase. 21 MS. WATTS: Yes, thank you, your Honor. 22 Q. You've testified that you attended a 23 meeting here at the Commission on November 3 with at 24 least some of the parties to this proceeding in order 25 to discuss settlement, correct? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 94 1 A. Yes. 2 Q. And was that the first meeting that you 3 recall having attended where parties to this 4 proceeding met to discuss settlement? 5 A. That is the first meeting. As far as 6 discussions about a settlement, I think that meeting 7 since it was the initial meeting was more about 8 attempting to understand, better understand Duke's 9 application. 10 MS. WATTS: Your Honor, I would like to 11 have marked as Duke Energy Ohio Exhibit 11 an e-mail 12 from me to counsel for OCC. 13 EXAMINER BULGRIN: Okay. This is Duke 14 Exhibit 11. 15 MS. WATTS: Yes. 16 (EXHIBIT MARKED FOR IDENTIFICATION.) 17 Q. (By Ms. Watts) Colleen, is it your habit 18 when you are working on a case at OCC to form teams 19 to work on cases? 20 A. I'm not sure what you mean by "habit." 21 Q. Is it OCC's practice internally to form 22 groups of people to address particular cases? 23 A. Yes. 24 Q. Okay. And were you assigned at some 25 point in time to work on this particular case? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 95 1 A. Yes. 2 Q. And do you recall when that was? 3 A. It was shortly after Duke filed its plan. 4 Q. Okay. And during the course of such 5 cases, is it not your practice to have Mr. Healey -- 6 isn't it true you and Mr. Healey may share e-mails 7 back and forth? 8 A. Yes. 9 Q. And was this an e-mail that you saw? 10 Have you ever seen this e-mail before? 11 MR. HEALEY: Various objections, your 12 Honor. First, there is no foundation. Second of 13 all, she's not on this e-mail. Third of all, this is 14 clearly a confidential settlement communication 15 betweens Duke and OCC. I don't think there should be 16 any questions on this subject. 17 MS. WATTS: And, your Honor, I have a 18 number of e-mails I would like to introduce, none of 19 which reveal any substance of settlement in any of 20 them. I have checked them very carefully for that 21 purpose. 22 MR. HEALEY: I think this goes to OCC's 23 strategy in settlement, your Honor. It states, and I 24 don't want to put in the record, what we may or may 25 not do in the context of settlement negotiation. The ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 96 1 fact it doesn't have any terms does not mean it is 2 not a settlement communication. It is revealing in 3 part OCC's strategy through these negotiations and 4 trying to get them in the record to establish, you 5 know, what OCC may or may not have been doing in the 6 context of negotiations is not appropriate. 7 MS. WATTS: Your Honor, the heart of 8 Ms. Shutrump's testimony is that OCC was not included 9 in settlement negotiations, and these e-mails 10 establish that OCC was, in fact, quite included. 11 EXAMINER BULGRIN: Yeah. I am going to 12 allow them. 13 A. I'm sorry. Can you repeat the question? 14 Q. Sure. Have you seen this e-mail before? 15 A. No. 16 Q. Is it possible that there were e-mails 17 back and forth between your counsel and counsel for 18 the case to which you were not privy? 19 MR. HEALEY: Objection, your Honor, 20 speculation. She doesn't even know what e-mails I 21 did or did not send to Ms. Watts or anybody else at 22 Duke. 23 EXAMINER BULGRIN: Yeah. I think we're 24 beating the dead horse here so. 25 MS. WATTS: Okay. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 97 1 EXAMINER BULGRIN: I will uphold the 2 objection and move on. 3 Q. (By Ms. Watts) Ms. Shutrump, do you 4 recall having settlement discussions with the company 5 over the telephone? 6 A. I don't recall. 7 Q. So it's your testimony that you have no 8 recollection of having any settlement discussion with 9 Duke Energy along with your counsel in a 10 teleconference; is that correct? 11 A. My only recollection is the meeting that 12 occurred on November 3. 13 MS. WATTS: Your Honor, I would like to 14 have this next e-mail marked as Duke Energy Ohio 15 Exhibit 12. 16 (EXHIBIT MARKED FOR IDENTIFICATION.) 17 Q. (By Ms. Watts) Colleen, would you take a 18 moment to review the document that's just been marked 19 as Duke Energy Ohio Exhibit 12. 20 A. Okay. 21 Q. And does this document appear to be an 22 e-mail communication from OCC's counsel to the 23 parties in this proceeding? 24 MR. HEALEY: Object, lack of foundation. 25 Again, your Honor, she is not on this e-mail. She ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 98 1 hasn't testified she's seen it. 2 MS. WATTS: I haven't even gotten there. 3 EXAMINER BULGRIN: Let's go off the 4 record for a second. 5 (Discussion off the record.) 6 EXAMINER BULGRIN: We'll go back on the 7 record. 8 I'm going to allow you just a little more 9 leeway on this line of questioning, but I think your 10 point is probably well made now. I don't want to 11 really get into the settlement. It does say 12 privileged and confidential, for settlement 13 discussion only, and I believe that's on your stamp 14 so. 15 MS. WATTS: Absolutely but there is no 16 communication in any of these about positions or 17 anything with respect to. It's just dates and times. 18 EXAMINER BULGRIN: Okay. 19 MR. HEALEY: I would also note this 20 appears to be incomplete, your Honor. It is cut off 21 middle of the sentence at the bottom. The rest is 22 not there so there could be lost context in this 23 exhibit in particular. 24 EXAMINER BULGRIN: Okay. Well, let's see 25 if we can move along here. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 99 1 Q. (By Ms. Watts) So, Colleen, looking at 2 that e-mail that was just put in front of you, it 3 would appear to suggest a draft stipulation was 4 circulated in December, correct? 5 MR. HEALEY: Same objection, your Honor. 6 I thought we were moving on. 7 EXAMINER BULGRIN: I'll sustain the 8 objection. 9 MS. WATTS: Okay. I am going to just 10 move on from that, your Honor. Thank you. 11 EXAMINER BULGRIN: Thank you. 12 Q. (By Ms. Watts) And, Colleen, the second 13 major point you raise in your testimony is that the 14 settlement fails the second prong because you believe 15 there should be an overall cap on costs, correct? 16 A. Correct. 17 Q. And you're recommending a 7.8 million cap 18 before taxes on shared savings only, correct? 19 A. Correct. 20 Q. But you also believe there should be a 21 cap on program costs as well. 22 A. I think a cap on program costs is 23 reasonable, yes. 24 Q. And for that reason you support staff's 25 recommendation, correct? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 100 1 A. I think staff's recommendation of a 3.5 2 percent cost cap is reasonable. 3 Q. Have you reviewed Mr. Donlon's testimony? 4 A. Yes. 5 Q. Is it your position that a 3.5 percent 6 cap would reduce spending to 33.8 million? 7 A. That is my understanding. 8 Q. And that calculation, did you take that 9 directly from his testimony, or did you run a 10 calculation yourself? 11 A. I looked at his approach to the 12 calculation. 13 Q. Now, as to staff's overall cap, do you 14 have an opinion as to what amount of that overall cap 15 should apply to program costs and what amount should 16 apply to shared savings respectively? 17 A. I'm sorry. Can you repeat the question? 18 Q. Sure. Staff is recommending an overall 19 cap which would amount to 33.8 million, correct? 20 A. Yes, correct. 21 Q. Are you making any representation as to 22 how much of that cap should be allocated to program 23 costs and how much should be shared savings? 24 A. No, I did not evaluate that. 25 Q. Okay. And you did not include any ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 101 1 consideration of lost distribution revenue in your 2 recommendation, correct? 3 A. I did not evaluate lost revenues. 4 Q. And you don't know what the magnitude of 5 the company's lost distribution revenues are per 6 year, do you? 7 A. I don't recall. 8 Q. With respect to your statement turning to 9 page 5, line 17 of your testimony, I will give you a 10 minute to get there. 11 A. I'm there. 12 Q. You stated that you thought a cap of 12.5 13 million was too high. Do you see that? 14 A. I do. 15 Q. You didn't do any analysis -- analysis or 16 study to reach that conclusion, correct? 17 A. That's correct. I did not do any 18 mathematical analysis. 19 Q. And you do not know on a per customer 20 basis what that cap would amount to, correct? 21 A. Correct. 22 Q. And with respect to the $7.8 million cap 23 that you are recommending, again, you did not do any 24 formal mathematical analysis, correct? 25 A. No. My -- my recommendation is based on ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 102 1 my concern for two -- two groups within the 2 residential class, the nonparticipating customers who 3 do not directly benefit from Duke's energy efficiency 4 measures but that pay for these measures and 5 low-income customers. 6 Q. And you did not compare this proposed cap 7 with any other Ohio utility cap or any utility 8 outside of Ohio, correct? 9 A. The shared savings cap? 10 Q. The overall cap as recommended by staff. 11 A. Can I have that question reread, please? 12 Q. Sure. You did not compare the proposed 13 cap with any other utility in Ohio or outside of 14 Ohio, correct? 15 A. I think -- I mean, with respect to -- 16 when you say "compare," I'm thinking of analysis. I 17 did not do any analysis, comparative analysis, but I 18 did compare as it relates to how other states are 19 approaching a cost cap and a shared savings cap. 20 Q. So in -- in that sense you are saying you 21 looked at the concept of the cap but not the specific 22 dollar amount of the cap; is that correct? 23 A. That's correct. 24 Q. And you've stated -- you understand that 25 Mr. Donlon's approach to setting a cap is to start ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 103 1 with using a number that comes from FERC Form 1, 2 correct? 3 A. Yes. 4 Q. And you agree with that approach. 5 A. I think that approach is reasonable, yes. 6 Q. But you acknowledge that the number on 7 the FERC Form 1 is different for each utility in 8 Ohio, correct? 9 A. Correct. 10 Q. And each utility has a different 11 percentage of shopping customers that will impact 12 that number, correct? 13 MR. HEALEY: Objection, your Honor. The 14 shopping statistics of the various Ohio utilities are 15 not in the record. 16 EXAMINER BULGRIN: She can answer if she 17 knows. 18 A. Can you repeat the question? 19 Q. Sure. The number on the FERC form that 20 you are recommending along with Mr. Donlon be the 21 starting point for setting a cap, is it your 22 understanding that that number is different for each 23 Ohio utility based on the number of shopping 24 customers each Ohio utility might have? 25 A. Yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 104 1 Q. The number of shopping customers for each 2 utility in Ohio can go up or down each year, correct? 3 A. I don't know. 4 Q. Do you happen to know what percentage of 5 customers are shopping customers in Duke Energy 6 Ohio's service territory? 7 A. I do not know. 8 Q. Looking at your testimony on page 9, on 9 line 7, you state that "The first Energy Efficiency 10 Portfolio Standard was adopted in 1999 by the State 11 of Texas. Do you see that? 12 A. I do. 13 Q. Do you know what the mandates are 14 specifically for the state of Texas? 15 A. I don't, I don't recall. 16 Q. And beginning on line 11, you talk about 17 other states that have cost caps. And you state that 18 there is a cost cap in place for Texas but do you 19 know what that cap is? 20 A. In Texas the cap is set based on a cost 21 recovery factor rate, energy efficiency rider rate. 22 For any program year the rate must not exceed a 23 specific dollar amount per kWh consumed. 24 Q. And do you know what that dollar amount 25 per kWh is? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 105 1 A. No. 2 Q. And is it established by Commission rule, 3 the dollar amount per kWh? 4 A. It is. 5 Q. And also utilities in Texas likewise -- 6 similar to Ohio submit a portfolio for approval by 7 the Texas Commission, correct? 8 A. I don't know. 9 Q. You refer also to the state of Illinois 10 in your testimony on page 9, correct? 11 A. Yes. 12 Q. And you mention that Illinois likewise 13 has a cost cap and that cap is set at 2 percent of 14 customer rates, correct? 15 A. Yes. 16 Q. Do you know what rates are used for 17 purposes of setting that cap? 18 A. The cap in Illinois is set by looking at 19 the average annual increase in the energy efficiency 20 rider charge relative to the costs of the entire 21 bill, and the costs of the entire bill would include 22 the costs of supply, transmission, and distribution, 23 any surcharges, and taxes. 24 Q. Ms. Shutrump, do you recall my taking 25 your deposition late last week? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 106 1 A. Yes. 2 Q. Would you refer to page 30, please, of 3 your deposition. Do you recall my asking you "Do you 4 know which customer rates are referred to for 5 purposes of establishing the 2 percent cap?" Do you 6 recall that question? 7 A. Yes. 8 Q. So if you would look at lines 3 and 4 9 there, the deposition states "I'm not certain, but I 10 think it refers to both residential and 11 nonresidential." Did I read that correctly? 12 A. Yes. 13 Q. You've stated that Mr. Donlon's approach 14 to setting a cap using the FERC form number, you've 15 stated that you support that proposition, correct? 16 A. I do. 17 Q. But in Texas the rate established in 18 Texas is not from sales -- is from sales as opposed 19 to operating revenues, correct? If you know. 20 A. I don't know. 21 Q. And Illinois is a competitive state, 22 correct? 23 A. I believe so. 24 Q. In reading the Illinois statute that you 25 quoted, rates can increase by 2.015 per year per ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 107 1 amount paid per kWh, correct? 2 A. Correct. 3 Q. And that language allows for a reduction 4 of program spend if costs exceed the stated level; 5 isn't that true? 6 A. Can you repeat that, please? 7 Q. The language in the Illinois statute 8 allows for a reduction of program spend if the costs 9 exceed the stated level. 10 A. Correct. 11 Q. And that cap applies to program spend but 12 you are not aware of whether it includes shared 13 savings, correct? 14 MR. HEALEY: Object as compound, your 15 Honor. Can we get a rephrase on that? 16 EXAMINER BULGRIN: Yeah. Maybe you want 17 to clarify. 18 MS. WATTS: Sure. 19 Q. The cap that you are referring to there 20 applies to program spend, correct? 21 A. The cap in place limits program costs to 22 a maximum of 2 percent of customer rates. 23 Q. And so is it your understanding that 24 shared savings is included in that number or not 25 included? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 108 1 A. I don't know. 2 Q. And do you know what the mandates are in 3 Illinois specifically? 4 A. I don't. 5 Q. And going back to the cap that's applied 6 in Texas, do you know what categories of costs are 7 included in that cap? 8 A. I don't know. 9 Q. Do you know what the mandates in 10 Pennsylvania are? 11 A. Yes. 12 Q. Is that something you've learned since 13 your deposition was taken? 14 A. Yes. I did look at that over the 15 weekend. 16 Q. So when you were asked during your 17 deposition, you weren't aware of the answer to that 18 question, correct? 19 A. I wasn't aware, correct. 20 Q. And do you know what the Maine Efficiency 21 Trust is? 22 A. I do. 23 Q. Could you describe it, please. 24 MR. HEALEY: Object as to vague and 25 broad, "describe it." ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 109 1 EXAMINER BULGRIN: Overruled. You can 2 answer. 3 MR. HEALEY: Thank you. 4 EXAMINER BULGRIN: You can answer. 5 A. Okay. Efficiency Maine Trust is a 6 third-party administrator that administers, manages, 7 delivers programs on a statewide level for the state 8 of Maine. 9 Q. And at least part of the source of 10 funding for that entity comes from the utilities in 11 Maine, correct? 12 A. Yes. 13 Q. But it's possible that that entity also 14 receives funding from other sources? 15 A. Is it possible? Yes. 16 Q. Referring to page 8 of your testimony, 17 you recommended a cap in this case, and you pointed 18 in your testimony to the Commission's language in the 19 AEP portfolio case, correct? 20 A. Yes. 21 Q. And have you read the stipulation in the 22 AEP cases? 23 A. I have. 24 Q. And that stipulation provides for 25 approval of a plan that will run for four years, ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 110 1 correct? 2 MR. HEALEY: Objection, your Honor, best 3 evidence. 4 EXAMINER BULGRIN: She's asking if she 5 knows, so I'll overrule the objection. 6 You can answer. 7 Q. Are you aware of that? 8 A. That the plan runs for four years? 9 Q. Yes. 10 A. To the best of my knowledge, yes. 11 Q. And that plan also provides for a cap 12 that is an overall cap similar to the one recommended 13 by staff in this case but set at a 4 percent level, 14 correct? 15 A. Correct. 16 Q. And it allows for a cost cap of that 17 4 percent rate that equates to a dollar value of 18 $110,310,902. 19 A. Subject to check, correct. 20 Q. And that cap does not include lost 21 distribution revenue, correct? 22 A. I don't know. 23 Q. And does it exclude IRP-D revenue? 24 A. I don't know. 25 Q. And AEP has proposed to retain -- AEP ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 111 1 proposed to retain 20 percent of the proceeds it 2 receives from bidding resources into PJM, correct? 3 MR. HEALEY: Object to this line of 4 questioning generally, your Honor. She said it was a 5 single line in an order, and now we are getting into 6 minutia of an AEP document that's not in the record 7 here. 8 MR. JONES: I would object too, your 9 Honor, as to relevance. 10 MS. WATTS: Your Honor, OCC itself is 11 comparing this. In Ms. Shutrump's testimony she is 12 comparing matters in this case to the AEP case, and I 13 merely want to point out how different it is. 14 EXAMINER BULGRIN: Okay. Well, I will 15 give you a little more leeway. You can answer. 16 A. Can you repeat the question, please? 17 Q. Sure. The AEP stipulation provided that 18 AEP would retain 20 percent of the proceeds received 19 from bidding resources into PJM, correct? 20 A. I just don't recall. 21 Q. Okay. Turning to page 13 of your 22 testimony, you have a footnote in your testimony, 23 it's footnote 10, that refers to an article entitled 24 "Beyond Carrots for Utilities: A National Review of 25 Performance Incentives for Energy Efficiency." Do ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 112 1 you see that footnote? 2 A. I do. 3 Q. And have you read that report? 4 A. I have. 5 Q. And you state in your testimony that 6 there are 19 states that have cost caps, and you cite 7 that report for that proposition, correct? 8 A. Correct. 9 Q. Do you know how many states do not have 10 cost caps? 11 A. I don't know. 12 Q. And can we agree that the authors of this 13 report, their methodology was to send out a survey to 14 various state commissions for information? 15 A. Yes. 16 Q. And so the information in the report is 17 derived from whichever states actually responded to 18 that survey? 19 A. Yes. 20 Q. And I believe you -- you undertook some 21 research with respect to the level of the various 22 caps set in various states, and you in particular 23 researched Michigan, Arizona, and Texas; is that 24 correct? 25 A. As it relates to the shared savings cap, ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 113 1 yes. 2 Q. And based on your research, you learned 3 that Michigan provides for an incentive that equals 4 15 percent of program spend and 25 percent of net 5 benefits, correct? 6 A. Yes. 7 Q. Did you happen to use those values and 8 calculate what that might look like for Duke Energy 9 Ohio? 10 A. I did not. 11 Q. Is there any trigger that permits a 12 utility in Michigan to be eligible for an incentive? 13 A. Say that again, please. 14 Q. Is there any trigger in Michigan that 15 permits a particular utility to be eligible for 16 incentive? 17 A. I don't know. 18 MS. WATTS: I have nothing further, your 19 Honor. 20 MS. LEPPLA: Could I have just two 21 minutes so I don't ask additional items that have 22 already been asked? 23 EXAMINER BULGRIN: Sure. 24 (Discussion off the record.) 25 (Recess taken.) ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 114 1 EXAMINER BULGRIN: Ms. Leppla. 2 - - - 3 CROSS-EXAMINATION 4 By Ms. Leppla: 5 Q. Ma'am, my name is Miranda Leppla. I 6 represent the Ohio Environmental Council and the 7 Environmental Defense Fund. 8 I want to first refer you to your direct 9 testimony page 8, lines 3 to 5. And at this place 10 you recommend there should be a cap on the total 11 costs for Duke's energy efficiency programs for 2017 12 to 2019, correct? 13 A. Yes. 14 Q. Is it correct you support the cost cap 15 proposed by the staff of the PUCO, specifically the 16 3.5 percent overall cost cap proposed by Patrick 17 Donlon? 18 A. Yes. 19 Q. Do you know what the monthly energy 20 efficiency costs recovery rider is for residential 21 customers in Duke's territory? 22 A. So I did look at the rider filings, the 23 past five rider filings for Duke, and I think I 24 calculated an average of $8.40. 25 Q. You haven't done any analysis of what the ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 115 1 total program costs will be for Duke to hit their 2 annual targets under this portfolio plan, have you? 3 A. No. 4 Q. You haven't done any other analyses, 5 correct, specific to the 2017 to 2019 proposed plan 6 to determine whether Duke would be able to meet their 7 annual statutory target under the 3.5 percent cost 8 cap? 9 A. No. 10 Q. And have you done that analyses -- you 11 haven't done it without collecting for shared savings 12 either? 13 A. You're -- I'm sorry. I don't think I 14 understand. 15 Q. It's okay. So you haven't done any 16 analyses whatsoever related to whether or not Duke's 17 able to hit this 2017 to 2019 proposed cost cap under 18 that 3.5 percent cost cap without collecting shared 19 savings? 20 A. Correct. My recommendation is based on 21 the fact that I believe a cost cap is necessary and 22 my concern is for two -- the groups I mentioned 23 earlier, the nonparticipating customer and the 24 low-income customer who, as it relates to shared 25 savings, if given the opportunity to not pay 3 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 116 1 million a year in shared savings to Duke would 2 certainly be meaningful to the family budget. 3 Q. And not to belabor the point, but you 4 haven't also done any analyses related to whether 5 Duke could collect their maximum shared savings under 6 the proposal either then under that 3.5 percent cost 7 cap? 8 A. Whether they can collect their max shared 9 savings? 10 Q. Whether they would be able to. 11 A. I have not done that analysis. 12 Q. Have you analyzed what costs for first 13 year kilowatt-hours saved Duke would need to meet to 14 comply with their annual targets under a 3.5 percent 15 cost cap? 16 A. Can you restate the question, please? I 17 didn't hear the first part. 18 Q. Okay. Sorry. I have a little sore 19 throat so I apologize. If you can't hear, just ask 20 again. Have you analyzed what the costs for first 21 year kilowatt-hours saved that Duke would need to 22 meet in order to comply with their annual savings 23 targets under that 3.5 percent cost cap that's been 24 proposed? 25 A. No. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 117 1 Q. And, again, you have not done any 2 analyses -- what I just asked you, you haven't done 3 any analyses of whether or not they could do it 4 without collecting their shared savings? 5 A. Whether or not they can do what? 6 Q. Whether or not they can -- you haven't 7 analyzed their cost for first year kilowatt-hours 8 saved they would need to meet their cost cap under -- 9 I'm sorry, to comply with their annual targets under 10 that 3.5 percent cost cap without collecting any 11 shared savings? 12 A. No. 13 Q. And, again, you have not analyzed any 14 costs for first year kilowatt-hours saved Duke would 15 need to meet to comply with their annual savings 16 under this 3.5 percent cost cap without collecting 17 maximum shared savings under the proposal? 18 A. Can you repeat the question? 19 Q. Sure. You've not done any analysis of 20 whether -- what costs for first year kilowatt-hours 21 saved Duke would need to meet to comply with their 22 annual savings target under the 3.5 percent proposed 23 cost cap without -- without collecting their maximum 24 shared savings under the proposal? 25 A. That's correct. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 118 1 Q. You haven't done any analysis on whether 2 Duke would have the ability to potential exceed its 3 annual statutory target under the 3.5 percent cost 4 cap, correct? 5 A. That's correct. 6 Q. You've not analyzed what mix of programs 7 would potentially be in Duke's portfolio plan under 8 the 3.5 percent cost cap, correct? 9 A. Can you state your question again? 10 Q. Sure. Have you done any analysis of what 11 mix of programs would potentially be in Duke's 12 portfolio plan under that 3.5 percent cost cap that's 13 been proposed? 14 A. No. 15 Q. And you haven't done any analysis of 16 whether any energy efficiency programs in Duke's 17 proposed plan might need to be reduced or eliminated 18 under that 3.5 percent proposed cost cap? 19 A. No. 20 Q. You haven't analyzed the individual costs 21 of the programs in Duke's 2017 to 2019 portfolio to 22 stay within a 3.5 percent cost cap? 23 A. No. 24 Q. And you have not analyzed the individual 25 cost caps proposed and whether those costs are ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 119 1 reasonable, have you? 2 A. I don't -- I haven't done any analysis on 3 that, correct. 4 Q. Would you agree that Duke's proposed plan 5 is cost effective at the portfolio level? And by 6 cost effective I am referring to the total resource 7 cost test. 8 A. I believe in Duke's plan they present a 9 plan that states -- where it states the plan is cost 10 effective. 11 Q. And, again, you haven't done any analyses 12 that compares Duke's proposed program from 2017 to 13 2019 to plans for the same years in other states, 14 have you? 15 A. Can you repeat the question? 16 Q. Sure. Have you done any analysis of 17 whether -- Duke's proposed programs for this 2017 to 18 2019 period, you haven't done any analysis comparison 19 to the same years for other states? 20 A. That's correct. 21 Q. How involved in the Duke's collaborative 22 process are you? And by collaborative process where 23 we get together and discuss the portfolio plans and 24 what should be part of those. 25 A. So I attend meetings, provide input, ask ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 120 1 questions, and attempt to identify any consumer 2 protection issues. 3 Q. Can you name any programs you suggested 4 should be changed in the process? 5 A. No. I did not evaluate that. 6 Q. Can you name any programs to your 7 knowledge that staff suggested to modify in the 8 process? 9 MR. HEALEY: Objection, your Honor. This 10 is outside the scope of her testimony. 11 EXAMINER BULGRIN: Sustained. Sustained. 12 MS. LEPPLA: She testified she attended 13 meetings. I wondered if she had any knowledge of 14 staff's analysis at those meetings. 15 MR. HEALEY: They can ask staff's witness 16 if they would like. 17 EXAMINER BULGRIN: Yeah. 18 Q. (By Ms. Leppla) Did OCC to your knowledge 19 recommend a cost cap on programs during the 20 collaborative process? 21 A. I don't -- I don't recall. 22 Q. One of the reasons you give in your 23 testimony for supporting a cost cap is to lower 24 overall program costs, correct? 25 A. Yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 121 1 Q. And you believe lowering costs are in the 2 public interest, right? 3 A. I believe that what costs? 4 Q. Lowering costs. 5 A. Lowering costs, yes. 6 Q. Do you believe it's also in the public 7 interest to have an energy efficiency portfolio 8 program that provides a balance of cost effective 9 residential, commercial, and industrial programs to 10 reach as many customers as possible? 11 A. I think it depends. 12 Q. Would you support an efficiency portfolio 13 program that was optimized solely to achieve the 14 statutory savings goals defined as first year savings 15 at the lowest possible cost regardless of the mix of 16 programs it contained? 17 A. Would you repeat the question? 18 Q. Sure. I am trying to ask if you -- if 19 you are looking at an energy efficiency portfolio 20 program that's optimized to solely achieve that 21 statutory savings goal at the lowest possible cost, 22 would you approve of that regardless of the types of 23 programs it contained? 24 MR. HEALEY: I would object to that as an 25 incomplete hypothetical. There is a lot going on in ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 122 1 that question, your Honor. I know that's not very 2 precise but. 3 EXAMINER BULGRIN: I'll overrule. You 4 can answer if you know. 5 A. I think it depends. 6 Q. Do you believe programs that produce 7 long-term savings provide added value over programs 8 that produce short-term savings? 9 A. Yes. 10 Q. I am going to kind of shift gears and 11 refer you back to your direct testimony. If you 12 could take a look at page 8, lines 16 through 21. 13 A. Page 8? 14 Q. Yes, lines 16 through 21. 15 A. Okay. 16 Q. And you mention here the Commission's 17 order in the recent AEP energy efficiency case, 18 correct? 19 A. Yes. 20 Q. And you state that "The PUCO has also 21 recognized the need to limit the costs that customers 22 pay for energy efficiency programs"? 23 A. Yes. 24 Q. And just to follow up on this, are you 25 aware that the environmental groups filed a request ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 123 1 for rehearing on that decision? 2 A. Yes. 3 Q. Are you aware that OCC filed a response 4 to that request for a rehearing called a memorandum 5 contra? 6 A. Yes. 7 Q. And have you read that filing? 8 A. Yes. 9 MS. LEPPLA: Your Honor, if I can 10 approach? 11 EXAMINER BULGRIN: Sure. 12 Q. I am going to hand you a copy of that 13 memorandum contra that you just said you had read 14 previously. 15 EXAMINER BULGRIN: This is publicly 16 filed. 17 MS. LEPPLA: Publicly filed, 18 administrative notice. 19 MR. JONES: Your Honor, I am going to 20 object to this exhibit. It's not within the scope of 21 this proceeding. It's AEP's portfolio case. It 22 doesn't have any relevance to this case. 23 MS. LEPPLA: Your Honor, I would 24 disagree. She references this in her -- she 25 references this case in her testimony, and it is ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 124 1 referenced -- it is relevant, rather. 2 EXAMINER BULGRIN: Okay. A little leeway 3 on this. Go ahead. 4 Q. (By Ms. Leppla) If you can turn to page 5 8. Are you already at page 8? 6 A. No. Page 8? 7 Q. I'm sorry, page 5. 8 A. Okay. 9 Q. And it says under this section that "The 10 Cost Cap Sentences do not bind the PUCO to any future 11 decision in this or any other proceedings. This is 12 evident from the plain language of the Opinion and 13 Order, where the PUCO noted merely that it will be 14 reluctant to approve stipulations that do not include 15 an overall cost cap on the annual costs that 16 customers pay for utility-administered energy 17 efficiency programs and utility profits." And that 18 is OCC's position on this? 19 MR. HEALEY: Objection, your Honor. This 20 document speaks for itself. We don't need 21 Ms. Shutrump to interpret OCC's opinions in other 22 cases. 23 EXAMINER BULGRIN: Sustained. 24 Q. Are you aware there was a subsequent 25 Commission order on that request for rehearing? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 125 1 A. I don't recall that. 2 Q. You have not read that order? 3 A. No. 4 Q. Does the OCC's position that this -- from 5 its -- let me start over. 6 It's OCC's position in another case under 7 a cost cap situation that it doesn't apply 8 necessarily to this case with Duke? 9 MR. HEALEY: Same objection. OCC's 10 positions are what they are. 11 EXAMINER BULGRIN: Sustained. 12 Q. Colleen, we will go back to your 13 testimony now and turn to page 9, lines 14 through 14 16. 15 A. Okay. 16 Q. You state here, correct, that at least 17 four states have implemented cost caps similar to the 18 one proposed by the PUCO staff? 19 A. Yes. 20 Q. And these are Illinois, Texas, 21 Pennsylvania, and Maine? 22 A. Yes. 23 Q. Have you done analyses that compare 24 Duke's proposed programs for 2017 to 2019 for the 25 programs for the same years in any of those four ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 126 1 states? 2 A. No. 3 Q. I just have a few questions about each of 4 these. We will start with Texas. You mention in 5 your testimony at page 10, lines 12 through 14 -- 6 A. Okay. Where are you at? 7 Q. Page 10. 8 A. Okay. 9 Q. Lines 12 through 14. And it looks like 10 you state here "Texas S.B. 1125 requires that 11 cost-effective energy efficiency be subject to a 12 maximum spending amount as established by the Texas 13 commission," right? 14 A. Correct. 15 Q. Okay. And are you aware of the annual 16 efficiency mandates for each utility in Texas? 17 A. I'm not. 18 MS. LEPPLA: Can I approach, your Honor? 19 EXAMINER BULGRIN: Sure. 20 Q. I apologize, Colleen. I did not have a 21 binder clip, it's loose, but I am handing you a "2016 22 State Energy Efficiency Scorecard from ACEEE." 23 MS. LEPPLA: I've got copies of the 24 relevant pages, but I did not print 173 pages so. 25 EXAMINER BULGRIN: Okay. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 127 1 MS. LEPPLA: But I can send you a link to 2 the full document. 3 EXAMINER BULGRIN: Do we want to mark 4 this as an exhibit? 5 MS. LEPPLA: Yeah. We can go ahead and 6 mark this as Environmental Inventors Exhibit 1. 7 (EXHIBIT MARKED FOR IDENTIFICATION.) 8 Q. (By Ms. Leppla) And, Colleen, have you 9 seen this document before? 10 A. I may have. I'm not sure. 11 MS. LEPPLA: It's a publicly available 12 document, your Honor, so we just ask administrative 13 notice be taken of it. 14 MR. HEALEY: I object to that, your 15 Honor. 16 EXAMINER BULGRIN: Yeah. 17 MR. HEALEY: I would object, your Honor. 18 There is no foundation. The fact that it exists out 19 in the public doesn't mean it gets into the record. 20 If they want to sponsor a witness to put this on, 21 they are welcome to. 22 EXAMINER BULGRIN: Yeah. 23 MR. HEALEY: They had that chance as 24 well. 25 EXAMINER BULGRIN: Right. I would agree ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 128 1 with that. 2 MS. LEPPLA: Your Honor, this is a 3 publicly filed document and -- 4 EXAMINER BULGRIN: It's not publicly 5 filed in the PUCO cases? 6 MS. LEPPLA: No, it is not. 7 EXAMINER BULGRIN: So, yeah, I am not 8 going to take administrative notice of something 9 that -- 10 MS. LEPPLA: I will go ahead and ask 11 Colleen a few questions about it, at least, if I can. 12 EXAMINER BULGRIN: Yeah. You are welcome 13 to. 14 MS. LEPPLA: Thank you. 15 Q. (By Ms. Leppla) Colleen, if you could 16 turn to page 28. And you said you had done a 17 comparison with Texas and Ohio, correct? 18 A. As it relates to my testimony, yes. 19 Q. Right. But did you not know the annual 20 efficiency mandates for Texas? 21 A. Correct. 22 Q. If you can look down on -- in the second 23 column there, do you see the state of Texas? 24 A. I do, uh-huh. 25 Q. Do you see what their percentage of total ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 129 1 routine sales is? 2 MR. HEALEY: Your Honor, I would object 3 again. We have not established a foundation. She is 4 not sure if she has seen this before. It's not 5 publicly available in the PUCO docket. To ask her 6 questions about it, there is no foundation for this 7 witness. 8 MR. JONES: I would join in that 9 objection, your Honor. 10 EXAMINER BULGRIN: Okay. I'll sustain. 11 Q. (By Ms. Leppla) We will move on to 12 Pennsylvania, if we could. And you stated previously 13 that you have since your deposition looked up annual 14 energy efficiency mandates for each utility in 15 Pennsylvania? 16 A. Not for each utility, in general. 17 Q. Just in general. Thank you. Have you 18 done any analysis on what annual monetary amount is 19 allowed for a Pennsylvania utility under their 20 2 percent cost cap? 21 A. In Pennsylvania the Commission directs 22 the utilities to report total annual revenues and to 23 provide a calculation of total program costs based on 24 the 2 percent limit, so I don't know what those 25 amounts are. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 130 1 Q. So you haven't done any analysis on your 2 own. 3 A. Analysis of what? 4 Q. Of what the annual amount is allowed for 5 Pennsylvania utilities under their 2 percent cost 6 cap. 7 A. No. I think -- no, I have not. 8 Q. And Pennsylvania is similar to Ohio, 9 correct, that customers had the ability to shop for 10 their electricity provider? 11 A. I believe so, yes. 12 Q. And you agree, right, that line 10 of 13 FERC Form 1 which staff is using as the baseline for 14 their cost cap here does not include revenue from 15 shopping customers? 16 A. I'm sorry. You said line 10? 17 Q. Yeah, FERC Form 1, line 10. 18 A. Okay. So on FERC Form -- so repeat the 19 question. 20 Q. Sure. Line 10 of FERC Form 1 that staff 21 has proposed as using for the cost cap in this case 22 does not include revenue from shopping customers, 23 correct? 24 A. I don't know. 25 Q. Are you aware whether line 10 includes ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 131 1 revenue from sales by competitive retail electric 2 suppliers in a given distribution utility territory? 3 A. It may. I don't know. 4 Q. So in the reference in your testimony to 5 total annual revenue on which that 2 percent in 6 Pennsylvania is based, are you aware of what that 7 total revenue actually represents? 8 A. No. 9 Q. So you don't know if this amount includes 10 the total cost of electricity borne by the state of 11 Pennsylvania? 12 A. No. I didn't evaluate that. 13 Q. And you don't know if that includes 14 shopping customers then. 15 A. I don't know. 16 Q. Have you done any analysis of the 17 percentage cost cap, what it would be in Pennsylvania 18 if we removed the revenue from shopping customers 19 making it more in line with FERC Form 1, line 10? 20 A. No. 21 Q. Are you aware of the volume of annual 22 electric sales that are attributed to customers who 23 shop in Duke's territory, in other words, those 24 customers who purchase their power from competitive 25 retail electric suppliers? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 132 1 A. Say that again. 2 Q. Sure. Are you aware of the volume of 3 annual electric sales that are attributed to 4 customers who shop in Duke's territory? 5 A. I don't know. 6 MS. LEPPLA: May I approach, your Honor? 7 EXAMINER BULGRIN: Yeah. 8 Q. Colleen, I am handing you a Public 9 Utility Commission implementation order. 10 EXAMINER BULGRIN: Are we going to mark 11 this as an exhibit? 12 MS. LEPPLA: Yeah. I think if we could 13 mark this as Exhibit 2 for the environmental 14 intervenors. And we would like to take 15 administrative notice. This is the Pennsylvania 16 Utility Commission. 17 EXAMINER BULGRIN: Okay. 18 (EXHIBIT MARKED FOR IDENTIFICATION.) 19 Q. (By Ms. Leppla) Colleen, have you ever 20 read this document? 21 A. I may have. 22 Q. And you had just testified that you 23 weren't sure exactly what -- what the total annual 24 revenue, that 2 percent in Pennsylvania, is based 25 upon, correct? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 133 1 A. Correct. 2 Q. Can you turn to page 33 of this decision. 3 I'm sorry, 32. Can you read that first paragraph 4 under "Determination of Allowable Costs." 5 MR. HEALEY: Your Honor, I would object 6 again on the grounds of foundation. She said she may 7 have read this, but she did not recall. I would also 8 note this is an incomplete document. I see page 32, 9 33, 34, 35, 36, and ends in the middle of a sentence, 10 so any questions about this document are necessarily 11 incomplete and out of context. 12 MS. LEPPLA: Colleen has a full copy, I 13 apologize, your Honor. I forgot to tell you I didn't 14 print a full copy for everyone. I only printed the 15 relevant sections. If you would like to check her 16 copy. 17 EXAMINER BULGRIN: I will allow you a 18 little leeway on this, but she is not an expert on 19 Pennsylvania so. 20 MS. LEPPLA: I am just trying to 21 understand. She said she didn't know exactly what 22 that total annual revenue for Pennsylvania was based 23 upon, but she does do a comparison in her testimony, 24 so I am trying to understand what that does entail. 25 Q. (By Ms. Leppla) So if you could look at ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 134 1 that first paragraph, it says that "The act allows 2 EDC to recover all prudent and reasonable costs 3 relating to the provision or management of its EE&C 4 plan, but limits such costs to an amount not to 5 exceed 2 percent of the EDC's total annual revenue as 6 of December 31, 2006." Were you aware that that was 7 the case in Pennsylvania when you did your analysis? 8 MR. HEALEY: Make a standing objection to 9 all questions on this document, your Honor, for the 10 same reasons of foundation just to preserve them for 11 the record. 12 EXAMINER BULGRIN: I will overrule your 13 objection. You can answer if you know. 14 A. I'm sorry. Can you repeat the question? 15 MS. LEPPLA: Would you mind reading it 16 back. 17 Q. This first sentence right under 18 "Determination of Allowable Costs" on page 32 of the 19 document you are reading, were you aware that there 20 were limits to such costs not to amount -- I'm sorry, 21 limit such costs to an amount not to exceed 2 percent 22 of the EDC's total annual revenue, were you aware 23 that was the case in Pennsylvania when you did your 24 analysis? 25 A. Yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 135 1 Q. And if you can turn to page 33. And you 2 just testified that you were not aware of what total 3 annual revenues were in Pennsylvania when you did 4 your analysis. If you look at the top here, the 5 sentence starting with "Pursuant to the Act," 6 "Pursuant to the Act, total annual revenues shall be 7 defined as 'amounts paid to the electric distribution 8 company for generation, transmission, distribution 9 and surcharges by retail customers.'" Were you aware 10 that was the indication in Pennsylvania when you did 11 your analysis? 12 A. No. 13 Q. I am going to move on to Maine now which 14 is the last state I believe you reference in your 15 testimony. Are you aware -- I'm sorry. Go ahead and 16 turn to your testimony on page 11, if you could. 17 A. I'm there. 18 Q. Lines 1 through 3. You reference that 19 Maine statute and say it "includes an energy 20 efficiency cost cap of 4 percent of total retail 21 electricity and transmission and distribution sales," 22 correct? 23 A. Correct. 24 Q. Are you aware of the annual energy 25 efficiency mandates for each utility in Maine? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 136 1 A. I am not aware of any mandates in Maine. 2 Q. And have you done any analysis of what 3 the annual monetary amount is allowed for Maine 4 utilities under that 4 percent cost cap? 5 A. No. 6 Q. You're familiar -- I believe counsel for 7 Duke asked if you are familiar with the Efficiency 8 Maine Trust? 9 A. Yes. 10 Q. Okay. What is it? 11 A. What is it? 12 Q. Yeah. 13 MR. HEALEY: It's asked and answered, 14 your Honor. We already went through this before. 15 EXAMINER BULGRIN: You can answer. 16 A. It's a third-party administrator that 17 delivers, manages programs statewide. 18 Q. And are you familiar with the sources of 19 the funding for the energy efficiency programs that 20 Efficiency Maine implements? 21 A. Yes. 22 MS. LEPPLA: May I approach, your Honor? 23 EXAMINER BULGRIN: Sure. 24 MS. LEPPLA: Again, I am giving Colleen a 25 full copy of this, and I printed only the relevant ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 137 1 pages for everyone else. 2 EXAMINER BULGRIN: And we should mark 3 this Environmental Intervenors 3? 4 MS. LEPPLA: 3, correct. 5 (EXHIBIT MARKED FOR IDENTIFICATION.) 6 MS. LEPPLA: Again, we can provide the 7 link to this so you can have full copies. 8 Q. (By Ms. Leppla) If you can flip to Table 9 3, page 11, I believe of that exhibit. 10 A. I'm sorry. What page? 11 Q. Page 11. 12 A. There are no pages on some of these so I 13 am having trouble here. Let's see -- 14 EXAMINER BULGRIN: Yeah, that's it. 15 A. I think I am on page 11, yes. 16 Q. Page 11, Table 3, it says "Costs and 17 Savings for Electric Programs." Are you there? 18 A. That's correct. 19 Q. Okay. Make sure we are on the same page. 20 Sorry about that. And were you aware -- you just 21 stated that you were not aware of -- you didn't do 22 any analysis of what the annual monetary amount 23 allowed for Maine utilities under that 4 percent cost 24 cap, correct? 25 A. Correct. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 138 1 Q. And were you aware that 15.2 million of 2 Efficiency Maine's fiscal year 2015 came from a 3 utility system benefits charge? 4 A. If you are referring to a number in the 5 table, I cannot read these numbers. I am having 6 trouble reading what it says under "Program." 7 Q. Okay. Okay. If you can't read it, we 8 don't want to ask you questions about it, so we'll 9 move on. If you can turn back to your direct 10 testimony now, Colleen, page 8, starting at line 3. 11 A. Page? 12 Q. 8. I know, I'm sorry. I didn't have a 13 binder clip for those. 14 A. Okay. Sorry. Okay. 15 Q. Starting at lines 3 through 14, you 16 discuss in the section participating customers' 17 energy efficiency programs versus nonparticipating, 18 correct? 19 A. Yes. 20 Q. And if you look at lines 12 to 14, you 21 state "Nonparticipating customers in Duke's service 22 territory, therefore, are experiencing higher rates 23 (and not necessarily lower bills) to pay for these 24 programs." 25 A. Yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 139 1 Q. You didn't do any analysis to determine 2 specific rate impacts of Duke's 2017 to 2019 proposed 3 plan on those nonparticipating customers, did you? 4 A. No, but at the margin the bill is a 5 function of consumption and a rider rate, so the 6 nonparticipating customer in say 2018 uses a thousand 7 kilowatt-hours per month and in 2019 that customer 8 doesn't change the consumption pattern because that 9 individual does not participate in Duke's energy 10 efficiency measures, but in 2019, for example, if the 11 rider rate increases by 2 percent, then that customer 12 is going to experience a 2 percent rate increase. 13 MS. LEPPLA: Your Honor, I just move to 14 strike after "no." 15 EXAMINER BULGRIN: You asked the question 16 so. 17 MS. LEPPLA: But I was just -- 18 EXAMINER BULGRIN: I will deny that. 19 MS. LEPPLA: I was asking if she did any 20 analysis. 21 Q. Again, you have not done any specific 22 analysis for rate impacts for Duke's 2017 to 2019 23 plan on nonparticipating customers, correct? 24 A. I think I've answered the question. 25 Q. You didn't do any specific analysis. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 140 1 A. That's correct. 2 Q. Did you do any analysis to determine any 3 specific bill impacts of the 2017 to 2019 proposed 4 plan on nonparticipating customers? 5 A. No. 6 MS. LEPPLA: I have no further questions, 7 your Honor. 8 EXAMINER BULGRIN: Okay. 9 MS. LEPPLA: Thank you, Colleen. 10 MR. JONES: No questions, your Honor. 11 MS. MOONEY: No questions, your Honor. 12 EXAMINER BULGRIN: Any redirect? 13 MR. HEALEY: No, your Honor. 14 EXAMINER BULGRIN: I think we are done 15 then. Thank you. 16 THE WITNESS: Thank you. 17 EXAMINER BULGRIN: Okay. Any objection 18 to the admission of OCC Exhibit No. 13? 19 It will be admitted. 20 (EXHIBIT ADMITTED INTO EVIDENCE.) 21 EXAMINER BULGRIN: I'm not sure what to 22 do with all these ones we marked for the 23 environmental advocates. I will take administrative 24 notice of the Pennsylvania Public Utilities 25 Commission decision which is Exhibit No. 2. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 141 1 MS. LEPPLA: I believe that was Exhibit 2 3, your Honor. Sorry. 3 EXAMINER BULGRIN: It's 2. But I believe 4 we have objections to the No. 1 and the memorandum 5 contra as well? 6 MR. JONES: Yes, your Honor. 7 MS. LEPPLA: Your Honor, as far as the 8 memoranda contra, that's a publicly filed document in 9 another case in this Public Utilities Commission, so 10 I think that should be admitted. 11 EXAMINER BULGRIN: Well, I don't think it 12 needs to be admitted to the record of this case. 13 MS. LEPPLA: I apologize. Yes. 14 EXAMINER BULGRIN: Okay. And so I am 15 going to deny admission of No. 1 and No. 3. 16 Okay. Are we down to staff? 17 MS. WATTS: Last but not least, of 18 course. 19 EXAMINER BULGRIN: Of course. 20 MR. JONES: Your Honor, staff would call 21 Patrick Donlon to the stand. 22 EXAMINER BULGRIN: Okay. One minute. 23 We will go off the record here for a 24 second. 25 (Discussion off the record.) ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 142 1 EXAMINER BULGRIN: Ms. Watts. 2 MS. WATTS: We would like to move 3 Exhibits 10, 11, and 12, please, your Honor. 4 EXAMINER BULGRIN: Okay. Any objections? 5 MR. HEALEY: Yes, your Honor. I want to 6 object to all three of them actually. No. 10 was the 7 sign-in sheet. We never established any foundation 8 for this. There is no date. There's no time. We 9 don't know when this sign-in sheet was created. It 10 also says that it's page 1 of 5 and this is only page 11 1 so it's incomplete. I don't think any foundation 12 was ever established and there's no basis to admit it 13 into the record. 14 EXAMINER BULGRIN: Okay. 15 MS. WATTS: Your Honor, OCC made as the 16 subject of their testimony an issue with respect to 17 whether there had been settlement negotiations with 18 OCC. We abbreviated our cross-examination on that 19 topic because we were admonished to do so, but we 20 feel the need to establish there was, in fact, some 21 negotiation with OCC prior to entering the 22 stipulation. 23 EXAMINER BULGRIN: Okay. So for those 24 limited purposes, I will allow the admission of these 25 three exhibits then. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 143 1 MR. HEALEY: With all due respect on No. 2 10, you know, Ms. Shutrump stated in her testimony 3 there were conversations between Duke and OCC so 4 that's in the record. OCC is not denying that Duke 5 spoke to OCC at any given point. I still don't see 6 any basis for admitting No. 10 regardless of what 7 Duke wants to get into the record. We just don't 8 know what this document is. It could be anything. 9 This could be any meeting. It could be any date. 10 There is no foundation to know what this document is. 11 That -- that is the evidentiary standard for letting 12 things into the record on a document like this. 13 EXAMINER BULGRIN: Well, for better or 14 worse, I am admitting it so. 15 (EXHIBITS ADMITTED INTO EVIDENCE.) 16 EXAMINER BULGRIN: Okay. Mr. Donlon. 17 (Witness sworn.) 18 EXAMINER BULGRIN: Mr. Jones. 19 MR. JONES: Thank you, your Honor. 20 (EXHIBIT MARKED FOR IDENTIFICATION.) 21 - - - 22 23 24 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 144 1 PATRICK DONLON 2 being first duly sworn, as prescribed by law, was 3 examined and testified as follows: 4 DIRECT EXAMINATION 5 By Mr. Jones: 6 Q. Would you please state your name for the 7 record, please. 8 A. Patrick Donlon. 9 Q. Where are you employed? 10 A. Public Utilities Commission of Ohio. 11 Q. And what is your job title and 12 responsibilities? 13 A. I'm the director of the rates and 14 analysis department, and I'm responsible for really 15 all aspects of the department. 16 Q. And did you have an opportunity to 17 prefile direct testimony in this proceeding? 18 A. I did. 19 Q. And you have before you what's marked as 20 Staff Exhibit 1 for identification. Could you please 21 identify that document, please. 22 A. It is the prefiled direct testimony of 23 Patrick Donlon. 24 Q. And was this testimony prepared by you or 25 at your direction? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 145 1 A. It was. 2 Q. And do you have any changes or additions 3 to make to that testimony? 4 A. I do have one. 5 Q. And where would that be? 6 A. Page 7, line 128. 7 Q. Okay. Do you want to describe that 8 change, please? 9 A. Yes. The first word in there is "No." 10 It should be "Not necessarily." 11 Q. Okay. So the change you are making on 12 page 7 of your testimony on line 128, you are 13 striking the word "No" and replacing that with "Not 14 necessarily"? 15 A. Correct. 16 Q. And do you have any other changes or 17 additions to make to your testimony? 18 A. I do not. 19 Q. And if I were to ask you the same 20 questions contained in your prefiled testimony with 21 the exception of the change you made here today, 22 would your answers be the same? 23 A. Yes. 24 MR. JONES: Your Honor, I offer 25 Mr. Donlon for cross-examination. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 146 1 EXAMINER BULGRIN: All righty. 2 MS. MOONEY: I have no questions. 3 EXAMINER BULGRIN: Company. 4 MS. WATTS: Yes, thank you, your Honor. 5 - - - 6 CROSS-EXAMINATION 7 By Ms. Watts: 8 Q. Good afternoon, Mr. Donlon. 9 A. Good morning -- or afternoon. 10 Q. Geez, you get up late. I would like to 11 ask you -- first, I would like to just sort of get 12 something off the record. One of the points in your 13 testimony that you mentioned is that you believe the 14 company should file an application to change 15 accounting methods to defer program costs and 16 distribution revenue. The company has, in fact, 17 filed for a deferral of that nature; is that not 18 correct? 19 MR. JONES: Your Honor, can counsel refer 20 the witness to where she is referring to in the 21 testimony? 22 Q. Page 3, line 41. Sorry. 23 EXAMINER BULGRIN: Ms. Watts, would you 24 know what the case number is? 25 MS. WATTS: Your Honor, I do not, but I ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 147 1 can provide that at a break. 2 EXAMINER BULGRIN: Okay. 3 A. Can you repeat the question? 4 MR. JONES: Can I have the question back? 5 EXAMINER BULGRIN: Are you there? 6 THE WITNESS: I'm there but then if we 7 can have the question reread because. 8 Q. Okay. Or I can rephrase it. 9 EXAMINER BULGRIN: Yeah. 10 A. Either way. 11 Q. So you're recommending that the company 12 file an application to change accounting in order to 13 defer costs for 2016 program costs and lost 14 distribution revenue, correct? 15 A. Yes. 16 Q. And do you understand that the company 17 has actually already filed such a request? 18 A. I wasn't aware of that. 19 Q. Okay. But if such a request has been 20 filed, staff would support that request; is that 21 correct? 22 A. Well, staff would review the request. I 23 don't want to say we'll support the request without 24 reading it; but, yes, that would mitigate that 25 portion of the testimony in this case. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 148 1 Q. Okay. Thank you. And your testimony 2 only addresses your contention that the Commission 3 should impose a cap on costs for energy efficiency, 4 correct? 5 A. It also speaks to a section of the 6 stipulation on shared savings that seemed to have a 7 little bit of misleading -- or staff wasn't sure what 8 the intent of the certain section 7G was and then 9 also just that certain programs should be included in 10 the shared savings calculation. 11 Q. Okay. All right. Thank you for that 12 clarification. Your testimony does not address any 13 of the proposed budgets associated with any of the 14 programs in the portfolio, correct? 15 A. Staff has not taken a position on the 16 individual programs or their budgets. 17 Q. And you are not disputing the cost 18 effectiveness of any of those programs, correct? 19 A. Staff has not taken a position on that. 20 Q. And you do not dispute that the portfolio 21 as a whole is designed to be cost effective, correct? 22 A. Staff has not taken a position on that. 23 Q. Would you refer to page 4, line 48 of 24 your testimony. 25 A. I'm there. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 149 1 Q. And you have -- beginning on page 7 you 2 have an answer that includes two bullet responses, 3 and you are advocating there for an overall cost cap, 4 correct? 5 A. Correct. 6 Q. And by overall in this instance you are 7 including program costs, lost distribution revenues, 8 and shared savings, correct? 9 A. Lost distribution revenue would not be a 10 part of this -- 11 Q. Okay. 12 A. -- of the overall cap. 13 Q. Are you -- you don't dispute that the 14 company is entitled to recover lost distribution 15 revenue, correct? 16 A. Correct. 17 Q. You are just not including it; you would 18 not include the revenue from that in the calculation 19 of the cap. 20 A. Right. It is not part of the cost cap. 21 The cost cap would be the overall budget portfolio 22 program and then the shared savings. Lost 23 distribution revenue -- or, yeah, lost distribution 24 revenue as well not part of it. 25 Q. Okay. And the starting point that you ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 150 1 recommend for your proposed cap is line 10, page 300 2 of the 2015 FERC Form 1, correct? 3 A. Correct. 4 Q. And you would take the number on that 5 line, and you would multiply that number by 3.5 6 percent, correct? 7 A. Correct. 8 Q. And in your testimony you acknowledge 9 that that number represents total sales to ultimate 10 consumers, correct? 11 A. Correct. 12 Q. But can we agree that that number 13 represents distribution and transmission sales plus 14 Standard Service Offer sales? 15 A. Correct. 16 Q. So it does not include sales through 17 competitive retail electric service providers, 18 correct? 19 A. Not for Duke, no. 20 Q. Okay. So do you happen to know what the 21 switching rate is for Duke Energy Ohio in its service 22 territory overall? 23 A. Not off the top of my head. 24 Q. Would you agree that switching varies 25 within the service territories for the four Ohio ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 151 1 light distribution utilities? 2 A. It does. 3 Q. And do you know how much switching varies 4 from year to year for Duke Energy? 5 A. Not off the top of my head. 6 Q. Are competitive electric service 7 providers required to meet energy efficiency mandates 8 in Ohio? 9 A. They are not. 10 Q. Referring to page 5, line 85 of your 11 testimony, you state that using a number on the FERC 12 form that you are recommending be used for setting 13 the cap, you believe that it allows for transparency 14 amongst all the utilities in the state, correct? 15 A. Uh-huh. Yes, sorry. 16 Q. When you say "transparency," who are you 17 suggesting that it is transparent to? 18 A. Well, it's similar to -- it goes into -- 19 let me find the right question here. Question 17 on 20 page 7 that "staff decided on this methodology 21 because it's straightforward, simplistic, and easy 22 for both technical and non-technical observers to 23 understand." So that's the transparency. It's one 24 number that people can find. It's not a rate off of 25 your generation or percentage of generation or ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 152 1 something else that could be misinterpreted, 2 confusing, or hard to explain to the general public. 3 So it's a number that's out there, easily defined, 4 and is done in total dollars. 5 Q. Okay. So generally speaking with respect 6 to transparency, is your concern an ability to 7 explain these numbers to the general public? 8 A. I think that's part of the goal to a 9 certain extent. 10 Q. Okay. And the number on the FERC form is 11 only one component of the calculation, correct? 12 A. Uh-huh. Yes. 13 Q. So turning to page 6, line 94 of your 14 testimony, you see -- actually it starts on line 93. 15 "Does the cost cap remain the same for each year of 16 the portfolio plan," and you respond "Yes." Do you 17 see that? 18 A. Yes. 19 Q. So for purposes of clarification are you 20 saying that the cap would be set in the first year 21 and then remain the same for the three years of the 22 approved plan? 23 A. Yes. 24 Q. So if switching -- if shopping customer 25 numbers go up or down in each of those three years, ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 153 1 that impact would not be reflected in any change to 2 the budget numbers, correct? 3 A. That's correct. 4 Q. Now, you've also explained that staff 5 reviewed a number of different options in determining 6 how to set a cap; is that correct? 7 A. Yes. 8 Q. Can you tell me what some of those 9 different considerations were? 10 A. So some of the options we looked at 11 were -- stated a cap that would be a percentage of 12 the total bill. Some of them would be percentage of 13 generation. We looked at the acquisition costs, 14 incentive there; but, again, we felt that this was a 15 simplistic and easy way for multiple parties to 16 understand and come to a set budget for the cap. 17 Q. Is it not correct in FirstEnergy's 18 proceeding that you also explained that you selected 19 this methodology because you thought it would be 20 something consistent across all four EDUs? 21 MR. JONES: Objection, your Honor, 22 outside the scope of this proceeding. We are talking 23 about the FirstEnergy proceeding. 24 EXAMINER BULGRIN: I'll overrule it. You 25 can answer. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 154 1 A. While that consistency came up, and I 2 think it was actually misconstruing in that case, 3 that was consistency among line 10 was the piece and 4 through that they were trying to say that everything 5 was consistent. It was actually, if you will, a -- 6 in that testimony the question 11, why we pick line 7 10, we use the word consistency but I think there was 8 confusion as to if that was consistency on line 10 or 9 consistency for everything so that's why I adjusted 10 to use the word. 11 Q. So is it your testimony then that 12 consistency from staff's perspective only relates to 13 that one number on the FERC form? 14 A. Yes. 15 Q. And so is it not true that staff 16 generally strives for consistency across the four 17 electric distribution utilities in terms of reaching 18 policy decisions? 19 A. So many answers. Strives, I think we -- 20 staff does try to be consistent when appropriate and 21 when we can. There's a lot of different areas and 22 different mitigating factors that changes everything 23 and pretty much every single utility is slightly 24 different. And while we try and stay consistent on 25 overall general policy, when you get into the ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 155 1 minutia, there is a lot of little tweaks into that. 2 Q. With respect to energy efficiency, can 3 you explain what any of those little tweaks were? 4 A. Well, I was talking in generalities. I 5 mean, what exactly with respect to what piece of 6 things? 7 Q. Well, isn't it true that staff 8 recommended a cap level for FirstEnergy companies at 9 3.0 percent? 10 MR. JONES: Objection, your Honor. It 11 hasn't even gone to a decision yet. It's another 12 proceeding outside the scope of this hearing, not 13 relevant to this proceeding. 14 EXAMINER BULGRIN: I will overrule. You 15 can answer. 16 A. Yes, we did. 17 Q. And with respect to AEP, the cap level 18 for AEP has, in fact, already been approved by the 19 Commission, correct? 20 A. I think it has, well subject to 21 rehearing. 22 Q. Okay. And there was a stipulation in 23 that case, correct? 24 A. Correct. 25 Q. And the cap level on that case was 4.0 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 156 1 percent as recommended by staff, correct? 2 MR. JONES: Objection, your Honor, 3 continuing objection. 4 EXAMINER BULGRIN: I'll overrule. You 5 can answer. 6 A. Yes, there was. 7 Q. And with respect to DP&L, the cap level 8 that staff recommended was 4 percent, correct? 9 MR. JONES: Objection, your Honor. 10 Again, there's no decision in that case either. 11 EXAMINER BULGRIN: I will overrule. 12 She's just asking. She is not asking what the 13 Commission has decided. She's asking what the staff 14 has recommended. 15 A. Yes. In both AEP and DP&L it was 16 4 percent through stipulation. 17 Q. So I am wondering if you can tell me what 18 were any of the factors that caused staff to reach 19 different conclusions with respect to cap levels. 20 A. So both AEP and DP&L were stipulations so 21 obviously there was give and take on both sides of 22 those parties to get to that percentage. You know, 23 and we did recognize with Duke that they don't have 24 their generation; so, therefore, the FERC Form 1 may 25 be a little bit lower, and so we bumped that up a ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 157 1 little bit. When doing our analysis, we thought it 2 was -- that 3-1/2 percent Duke would be able to 3 achieve both mandate levels and that's why we felt 4 that was appropriate. 5 Q. So you just mentioned that the number for 6 Duke in its FERC form was a little bit lower. Do you 7 know by what percent it was lower? 8 A. No, I don't. 9 Q. And lower in terms of comparison with 10 other utilities; is that the comparison you made? 11 A. Yes. 12 Q. And do you recall on what basis? 13 A. On what basis what? 14 Q. If you're -- if you're stating that it 15 was lower for Duke Energy, the number on the FERC 16 form was a little bit lower for Duke Energy so, 17 therefore, you recommended a higher cap, and I am 18 wondering if you can tell me did you find it to be 19 lower on a per customer basis or a per kWh basis or 20 what -- in what sense it was lower? 21 A. I think what I really meant to say was 22 that when evaluating the FERC Form 1 number and the 23 program and everything holistically, that we felt 24 Duke needed a slightly higher percentage in that so 25 that's why we got to the 3.5. As to what was lower ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 158 1 in that, I don't have the exact. Off the top of my 2 head I can't tell you exactly all the analysis we 3 went through to look at that. It has been a while. 4 Q. On page 6, line 99, you state that "Staff 5 evaluated that 3.5 percent cap would provide price 6 security for all ratepayers." Do you see that? 7 A. Yes. 8 Q. Can you define what you mean by price 9 security in that context? 10 A. Well, by creating an overall price cap 11 that the company cannot exceed, there's a limit to 12 how much the customers can be charged in any given 13 year. 14 Q. Did you or anyone on the staff do any 15 forecasting or modeling to determine whether a 16 3.5 percent cost cap would provide price security for 17 ratepayers? 18 A. We did not do any modeling or 19 forecasting. 20 Q. Are you aware of any other state that 21 uses the FERC form line 10 as a cost cap -- as a part 22 of a cost cap calculation for energy efficiency 23 programs? 24 A. I am not. 25 Q. Did staff have any idea of what it ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 159 1 might -- what might be acceptable in terms of cost to 2 customers prior to setting the cap proposal? 3 A. Could you rephrase that? 4 Q. Yeah. I would be happy to. When you 5 were determining what would be an appropriate cost 6 cap, what was your starting point in terms of what 7 would be appropriate? 8 A. So staff's always in the position that 9 they have to measure all sides and all parties so 10 what our goal was and what we were trying to do is 11 figure out how much -- what the companies -- or 12 company needed to be able to reach the mandated level 13 but also still mitigate the risk to consumers for 14 energy efficiency. So that was our starting point. 15 Q. And in reaching a decision about an 16 appropriate cost cap, did staff do any calculations 17 with respect to a per customer charge in each 18 different scenario that it was considering? 19 A. We did some. I'm sure we did not do it 20 in each scenario we were considering, but we did 21 evaluate some. What those specific numbers back and 22 forth were I don't remember off the top of my head 23 but I am sure we ran some of them. 24 Q. On page 6 you state that "costs have been 25 escalating to the point that the rider has become one ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 160 1 of the highest on residential bills." Do you see 2 that? 3 A. Yes, I do. 4 Q. When thinking about cost escalation, what 5 period of time are you considering? 6 A. Well, I know off the -- I think it was 7 the October rates that Duke's energy efficiency bill 8 was the third highest rider. 9 Q. October what year, please? 10 A. Of -- well, we are in '16 so '15. We're 11 '17 so '16. Sorry. 12 Q. So your testimony is that in October of 13 2016 -- could you restate what you? 14 A. Yeah. Sorry. October of '16 the 15 estimated bill impacts were an average of I want to 16 say 750 customers, residential customers, it was the 17 third highest rider. I think SmartGrid is -- was the 18 highest and then the kWh tax was the second highest 19 and then it was the energy efficiency rider. I 20 forget exactly what you guys call yours. 21 Q. So when you say SmartGrid was the 22 highest, are we talking about Duke's SmartGrid? 23 A. Duke's, this was just Duke's bill. 24 Q. Okay. 25 A. Just counting the riders you have. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 161 1 Q. Okay. So your testimony is that in 2 October of 2016, for Duke bills in terms of rider 3 prices, the SmartGrid rider was the highest on a per 4 customer basis? 5 A. I think so. I think it was SmartGrid, 6 taxes, and then the energy efficiency. I know energy 7 efficiency was the third highest. I am pretty sure 8 SmartGrid was the first but that's kind of irrelevant 9 to this. 10 Q. Okay. And when you say third highest, 11 you're talking about relative to other charges on the 12 bill as opposed to relative to other utilities in the 13 state. 14 A. To your -- yes, just to the individual, 15 the third highest rider charge on Duke's bill to an 16 average customer of 750 kW. 17 Q. Okay. I think I am clear on that. 18 A. Sorry. Not trying to make it more 19 difficult. 20 Q. Do you know how much that rider has 21 escalated over any period of time? 22 A. Well, it's a little bit harder to do when 23 you look at the fact that it's forecasting and so you 24 can over -- and it's trued up so you always have the 25 adjustments to actuals added in there, so it's better ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 162 1 to really look at overall program costs and that's 2 why we also decided that the cap should be on an 3 overall dollar program costs because if you look at 4 the trend of program costs, those are going up. 5 Q. Do you know if the Commission has 6 received any specific complaints from customers about 7 the energy efficiency rider in particular? 8 A. Customers I don't know. I know they have 9 received a lot from the General Assembly. 10 Q. Okay. Do you know what AEP Ohio's 2015 11 energy efficiency benchmark is? 12 A. No. 13 MR. HEALEY: Objection. 14 THE WITNESS: Sorry. 15 Q. Do you know if staff reviewed that at all 16 in determining what an appropriate cost cap would be 17 for Duke Energy Ohio? 18 A. We -- when looking at the cost cap, we 19 were reviewing the cost cap structure, I guess to 20 call it, we were looking at all the companies. So, 21 yes, we were evaluating that. We have, as you 22 pointed out, consistency among having a cost cap on 23 all four utilities, we've suggested in all four 24 utilities, so, yes, we've looked at that. I just 25 don't remember the other three utilities at this ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 163 1 point what they are. 2 Q. Okay. So for 2015 would you accept, 3 subject to check, that the benchmark number was 427.1 4 gigawatts? 5 MR. HEALEY: Now, I will object to 6 relevance of AEP's benchmark, your Honor. 7 MR. JONES: Object too on the same basis, 8 your Honor. 9 MS. WATTS: Your Honor, the witness has 10 testified about consistency and about methodologies 11 with respect to selecting a cap. And it's important 12 to point out the differences in the way in which that 13 cap affects different utilities in Ohio in terms of 14 fairness, so I would like to demonstrate the 15 difference between Duke Energy's -- how it works for 16 Duke Energy and how it works for AEP. 17 MR. JONES: Your Honor, the witness 18 testified to what consistency meant as far as using 19 FERC Form 1. 20 EXAMINER BULGRIN: I will give you a 21 little leeway on this. You can answer. 22 Q. So the question was would you accept, 23 subject to check, the benchmark for AEP is 427.1 24 gigawatt hours? 25 A. Yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 164 1 Q. And would you agree that Duke 2 Energy's for -- at the same time period was 201.5 3 gigawatt-hours? 4 A. I don't have the -- anyone's gigawatts 5 memorized, so subject to check, I am willing to 6 accept that. 7 Q. Understood. And would you agree then 8 that the calculation of those two, the Duke Energy 9 Ohio's is 47.2 percent of AEP's number in terms of 10 gigawatt-hour benchmarks? 11 A. I'll accept, subject to check. I really 12 didn't listen to the numbers close enough to do the 13 math in my head. 14 Q. So would you agree that staff recommended 15 to the Commission an approved annual cap of 16 $110,319,902 for AEP? 17 A. 110 sounds correct. 18 Q. And the staff is proposing for Duke 19 Energy Ohio a cap at 33 point -- 33,820,556 for Duke 20 Energy Ohio. 21 A. Yes. 22 Q. And would you agree then that the 23 proposal for Duke Energy is 30.7 percent of the cap 24 approved for AEP? 25 A. Again, subject to check, and not doing ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 165 1 any of the math. 2 Q. Okay. In your testimony on page 7 on 3 line 128, there is a reference there to the "economic 4 theory of a product life cycle." Do you see that? 5 A. Yes. 6 Q. Could you -- I know you have a minor in 7 economics, correct? 8 A. Yes. 9 Q. I don't so would you mind describing to 10 me what the economic theory of a product life cycle 11 is. 12 A. Well, simplistically it's -- I like to 13 take T.V.s because everyone has -- most people have a 14 T.V. I remember my physics teacher didn't have one. 15 But as products become more available, more generally 16 people buy them. More and more competition comes in 17 place, and the pricing of products goes down as they 18 become more mainstream. So that is what that is 19 meant to say is that, you know, an LED lightbulb was 20 very cost -- costly a few years ago, and I don't know 21 the exact prices but, and, now, it's cheaper now than 22 it was four or five years ago. So that's the 23 price -- the product life cycle simplistically. 24 Q. And does this theory with respect to a 25 product life cycle include certain stages to the ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 166 1 process? Are there stages to a product life cycle? 2 A. Yes. 3 Q. And are those stages -- do they last over 4 different periods of time for different products? 5 A. Yes, they do. 6 Q. And are the factors that influence that 7 difference in time related to demand for the product? 8 A. There's many factors that affect that. 9 Q. Okay. And is demand one of those 10 factors? 11 A. Yes. 12 Q. And how about production costs? 13 A. Yes. 14 Q. And how about revenues from the product? 15 A. Well, revenues from a product are 16 probably going to determine what other customers 17 are -- or competition coming in so, yes, they could. 18 Q. Okay. Now, with respect to energy 19 efficiency, there's a term of art sort of in the 20 energy efficiency world where we refer to measures 21 within a portfolio. Are you familiar with that term? 22 A. Let's just make sure we are talking about 23 the same word. Can you explain what measures you are 24 talking about? 25 Q. The Ohio utilities provide portfolios ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 167 1 that have programs in them, correct? 2 A. Correct. 3 Q. And the programs include certain measures 4 that make up the program. 5 A. Okay. 6 Q. Is that your understanding? 7 A. Yes. 8 Q. Okay. So and those measures may have 9 a -- may themselves have a life cycle, correct? 10 A. Yes. 11 Q. So with respect to your example about an 12 LED lightbulb, the lightbulb has a lifetime of use, 13 correct? 14 A. Yes. 15 Q. And a lightbulb might be a measure within 16 an energy efficiency program. 17 A. Yes. 18 Q. And so my question to you is the -- given 19 the life cycle of that particular product, how does 20 that compare with your product life cycle theory, 21 your economic product life cycle theory? 22 A. Can you restate the question? 23 Q. Yeah. 24 A. Or have it reread. 25 Q. So you explained a theory that is ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 168 1 referred to in your testimony as the economic theory 2 of a product life cycle, correct? 3 A. Correct. 4 Q. Are you saying that that theory is one 5 and the same as the measure life of an item in a 6 portfolio program? 7 A. It's not one and the same, no. What I am 8 saying here is, you know, with -- this is more 9 talking about the proverbial wall of prices are -- 10 energy efficiency is only going to get more expensive 11 and more expensive. That's not necessarily true. 12 Some of the products that are still energy 13 efficiency, particularly with 3 -- Senate Bill 310 14 that allows you -- actually states to measure the 15 higher of as found or code that some products will 16 get cheaper over time. It still would be valuable in 17 the energy efficiency programs. 18 So it's not saying they are a one for 19 one. It's saying that proverbial wall of energy 20 efficiency and you are going to hit a point where 21 it's not cost effective any more. That wall is 22 always moving and moving backwards a lot of times. 23 Q. So you used a television as an example in 24 your -- in your explanation about how products become 25 cheaper. Did you do a survey of products that are ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 169 1 used for energy efficiency to determine whether what 2 percentage of those products are increasing or 3 decreasing in cost? 4 A. We did not. 5 Q. Do you have any particular products in 6 mind when you talk about products becoming cheaper 7 over time? 8 A. I think there is an example of them but 9 there is not one specific one that we're focused on 10 now. 11 Q. Did you do any research into the product 12 life cycle of energy efficiency measures? 13 A. Not in any detail, individual program and 14 product life cycle analysis, no. 15 Q. And, sir, you're familiar with the TRM, 16 correct? 17 A. Yes. 18 Q. And TRM stands for Technical Reference 19 Manual, correct? 20 A. Correct. 21 Q. And have you reviewed the Commission's 22 TRM? 23 A. I have printed it out before, looked at 24 various sections, but I will certainly not say I have 25 read it cover to cover. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 170 1 Q. And that document -- the Commission's TRM 2 lists value for energy efficiency values, correct? 3 A. Correct. 4 Q. And each measure listed in TRM has a 5 measure life, correct? 6 A. Yes. 7 Q. And the measure life in that instance is 8 not the same as a product life cycle, correct? 9 A. My understanding is that's how long it is 10 projected to last for those energy savings. 11 Q. Okay. Which again is not the same as a 12 product life cycle, correct? 13 A. Correct. Product cycle the way I was 14 using was really more about the cost of a product, 15 not energy savings or anything to that. 16 Q. Okay. Now, staff has concluded that a 17 3.5 percent cap is sufficient for Duke Energy Ohio to 18 meet its benchmarks, correct? 19 A. Correct. 20 Q. Can you tell me how you reached that 21 understanding? 22 A. Looking at historic spend and -- spend 23 and energy savings and what Duke has achieved, Duke 24 has always under -- underachieved their budget and -- 25 or underspent their budget and overachieved the ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 171 1 energy savings that they projected. So within that 2 we projected that they could meet it. It's a little 3 bit hard as the last three years Duke didn't actually 4 set a budget to achieve the mandate. They used their 5 bank to achieve that. So it was a little bit harder 6 with Duke to be looking at the full analysis but 7 that's what we went through and evaluated. 8 Q. Okay. And, sir, do you have some 9 familiarity with Senate Bill 221 in Ohio? 10 A. Yes. 11 Q. And do you also have some familiarity 12 with Senate Bill 310? 13 A. Yes. 14 Q. And isn't it true then that Duke Energy 15 Ohio was not able to amend its portfolio any time 16 during 2014, '15, and '16 pursuant to SB 310? 17 A. Yes. 18 Q. When you look at the company's cost from 19 previous years, did you consider shared savings in 20 that analysis? 21 A. Shared savings is a mechanism created by 22 the Commission to incentivize overcompliance, so 23 while we were taking that into consideration, our 24 main goal was meeting the mandates set by 25 legislation. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 172 1 Q. Is it staff's policy, position now that a 2 company should only meet its mandates or that it 3 should exceed its mandates? 4 A. It's staff's opinion that's a company 5 management decision and that, you know, there is an 6 incentive program designed that they can do that and 7 there is an incentive for it, but they are required 8 to meet the mandate. 9 Q. Okay. So I am not sure you -- that was 10 responsive to my question. My question is is it 11 staff's policy now that a company should strive to 12 exceed its mandate or that it should meet the 13 mandate? 14 MR. JONES: Objection, asked and 15 answered, your Honor. 16 EXAMINER BULGRIN: I'll sustain. 17 Q. In looking at previous years for Duke 18 Energy Ohio, did you consider cost per kWh? 19 A. Staff did evaluate cost per kWh. In 20 fact, if I remember correctly, I think our cost cap 21 gives about 140 -- roughly $140 per megawatt-hour 22 where if you look at inception from -- through 2015, 23 it was roughly 120, 125 per kWh. 24 Q. Did you review Duke Energy -- sorry. 25 A. I said kWh. That was megawatt-hours. I ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 173 1 think I said kWh. Sorry. 2 Q. And you meant megawatt-hours. 3 A. Megawatt-hours, yeah. 4 Q. Okay. Did you review the company's 5 market potential study that was filed in this case? 6 A. My staff did. 7 Q. Did staff incorporate any findings from 8 that market potential study in its recommendation? 9 A. It did not. 10 Q. Has staff done any analysis itself with 11 respect to the market -- any market potential? 12 A. Did we do our own market potential study? 13 Q. Yes. 14 A. No, we did not. 15 Q. Are you aware of any previous Commission 16 decisions related to energy efficiency that 17 incorporate the concept of product life cycle? 18 THE WITNESS: Can you reread that. I'm 19 sorry. 20 (Record read.) 21 A. Specifically referenced, no, but it was 22 within staff's determination and thought pattern when 23 reviewing the cost cap for all the other utilities, 24 so it's not called out anywhere, but it was in our 25 thought pattern. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 174 1 Q. It's in staff's thought pattern. 2 A. Yes. 3 Q. Okay. So staff's proposal in this case 4 is to start with the FERC Form 1 number and use that 5 to establish a budget for the program years for '17, 6 '18, and '19, correct? 7 A. No. It's to create a cost cap, not a 8 budget. 9 Q. Okay. I'm sorry, misspoke. You explain 10 that staff's proposal included an opportunity for the 11 company to retain proceeds, if there are any, from 12 bidding into PJM, correct? 13 A. So it's bidding the demand response in 14 the interruptible in PJM and keeping that because 15 we're not -- the interruptible credit is not a part 16 of the cap, so the interruptible revenues that it 17 gets from PJM should be kept out. It's any revenues 18 that PJM bids in for energy efficiency should be 19 offset by the cap, if that's what you mean. So 20 there's two different pieces. I want to make sure we 21 are keeping it straight. 22 Q. Could you say that last sentence again. 23 A. Sorry. So anything that the company bids 24 in for energy efficiency should come back and be 25 credited to the cap to lower that. So I don't know ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 175 1 if that's what you mean by keep the revenues but 2 lowering the cap because that gets passed back 3 through the rider. On interruptible credits that 4 shouldn't be in there because the interruptible 5 demand response program is not a part of the cap, so 6 they should be separate. 7 Q. I see. And do you know when bids into 8 PJM happen on an annual basis? 9 A. Well, the original base residual auction 10 is three years out but then there is supplemental. 11 Incremental, thank you. 12 Q. And incremental auctions occur when? 13 A. I think there's one each year for leading 14 up to the actual year. 15 Q. And you are aware that the mandate for 16 energy efficiency impacts increases to 2 percent very 17 soon, correct? 18 A. Is it 2021? It's outside this portfolio 19 plan, so I know that much. 20 Q. Okay. Sir, do you have a copy of Staff 21 Exhibit 4 up there? 22 A. I do not. 23 MS. WATTS: John, do you have a copy to 24 give him? 25 MR. JONES: Staff Exhibit what? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 176 1 MS. WATTS: 4. 2 MR. JONES: 4? Yes. 3 Q. Sure. Would you turn to the table that's 4 on page 4 of that exhibit. So your counsel walked 5 Duke Energy Ohio's witness through some numbers, and 6 I am going to sort of go back to some of the same 7 numbers and walk you through them, if that's okay. 8 A. I'm just refamiliarizing myself with what 9 this actually is. 10 Q. Sure. 11 A. Sorry. Thank you. 12 Q. Okay. So have you seen this before? 13 A. Yes. 14 Q. Okay. I want to direct your attention 15 only to the years 2013, '14, and '15 on that table, 16 okay? 17 A. Okay. 18 Q. And I am only referring to the "Actual 19 Costs" column and the "Actual kWh" column. 20 A. Okay. 21 Q. And can we agree -- I will represent to 22 you that we've done the math on this, and I am just 23 going to ask you if you will agree, subject to check, 24 to our math, okay? 25 A. Okay. Sorry. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 177 1 Q. Okay. So the actual costs in 2013 were 2 22,130,677, correct? 3 A. I'm sorry. Can you repeat that? 4 Q. Sure. The actual costs incurred by the 5 company for 2013 was 22,130,677. 6 A. Correct. 7 Q. Do you see that? And the actual kWh 8 achieved was 144,101,736? Do you see that? 9 A. Correct. 10 Q. And would you agree, subject to check, 11 that that turns out to be .154 cents per kWh -- 12 dollars per kWh? 13 A. Subject to check. 14 Q. Okay. And for 2014, the actual costs 15 were 30,608,344. 16 A. Okay. 17 Q. And the actual kWh achieved was 18 152,268,735. 19 A. Correct. 20 Q. And that equals .201 dollars per kWh? 21 A. Subject to check. 22 Q. And then again for 2015, the actual costs 23 were 31,531,908. 24 A. Correct. 25 Q. And the actual kWh was 164,010,308. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 178 1 A. Correct. 2 Q. And on a dollars per kWh basis that's 3 109 -- .192. 4 A. Subject to -- subject to check. 5 Q. Okay. And so would you be willing to 6 accept that the average over three years was 7 460,380,779 and the cents per kWh on average was 8 .183? 9 A. Yes. But as I stated earlier, these 10 programs weren't actually designed to meet the 11 mandate levels so that's why staff went since its 12 inception in determining this because it's a little 13 bit harder with the -- when the program wasn't 14 actually designed to meet the program -- the mandate 15 level. But, yes, I would, subject to check, I agree 16 with the numbers. 17 MS. WATTS: Could you read back that 18 answer, please, Karen, because I am not sure I 19 understood it. 20 (Record read.) 21 A. There wasn't one complete sentence in 22 that. 23 Q. So, Mr. Donlon, can we go back up a 24 little bit. So when you say programs weren't 25 designed to meet the mandate level, which programs ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 179 1 are we referring to? 2 A. The 20 -- I think it was the 2013, '14, 3 '15, my understanding of those programs were designed 4 to achieve -- they were budgeted to actually achieve 5 lower than the mandate -- the mandated amount and use 6 the bank. So what I was trying to say ineloquently, 7 I guess, is when staff did their acquisition costs, 8 they actually looked at all from 2009 through 2015 to 9 get a better handle on what the history was than just 10 the last three years. 11 Q. And is it your understanding in the years 12 2009 through 2012 that the company was under a 13 different cost recovery mechanism? 14 A. I don't know the specifics behind that. 15 Q. Okay. Does rider SAW or rider 16 save-a-watt mean anything to you? 17 A. Yes. 18 Q. And is it your understanding that that 19 was the cost recovery mechanism for Duke in those 20 years? 21 A. What I remember -- I don't know the 22 mechanics behind the individual riders to know how 23 drastically the recovery changed between the rider 24 made changes. 25 Q. So you don't know how rider save-a-watt ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 180 1 was calculated? 2 A. Not for cost recovery use. 3 Q. And so those -- for those earlier years 4 do you know whether the programs were designed to 5 meet the mandates or exceed the mandates? 6 A. You can go back and look from a what the 7 savings were of what they did but from a how they 8 were designed I don't have specifics on that. 9 Q. Okay. Sir, you're recommending that the 10 company -- that the cap that applies to the company's 11 programs for energy efficiency be initially 12 calculated starting with a number that appears on 13 FERC Form 1, line 10, correct? 14 A. Correct. 15 Q. And that line is said to represent in the 16 form itself total sales to ultimate consumers, 17 correct? 18 A. Yes. 19 Q. Are you generally familiar with that FERC 20 Form 1? 21 A. I have become generally familiar. 22 Q. Okay. Do you have a copy of that 23 attached to your testimony? 24 A. I do. 25 MS. WATTS: May I approach, your Honor? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 181 1 EXAMINER BULGRIN: Sure. 2 MS. WATTS: I don't have copies of this, 3 I apologize. 4 Q. Sir, I am showing to you what I represent 5 to be the total document of which you have only an 6 extract in your testimony. Have you seen that 7 document before? 8 A. Yes. 9 Q. And is that the entire FERC form that you 10 are referring to for purposes of your testimony? 11 A. Well, this is Toledo Edison so it's not 12 the one in my testimony, no. 13 Q. Okay. Hold on. How about this one? 14 Let's try this one. 15 A. Are you going somewhere? 16 MR. JONES: Counsel, do you have another 17 copy of that? 18 MS. WATTS: I do not. I'm sorry. 19 A. It adds page 301. 20 Q. Sir, do you see Column D on that document 21 on page 301? 22 MR. HEALEY: I'm sorry, your Honor. Are 23 we marking this as an exhibit? Is this something we 24 are privy to seeing as well while she is doing 25 cross-examination? This is not in the record. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 182 1 MR. JONES: We can't follow along. We 2 don't have a copy of it. 3 MS. WATTS: I can ask the question pretty 4 simply. I don't think anybody needs to see the form 5 to get to the question. 6 EXAMINER BULGRIN: Okay. 7 Q. (By Ms. Watts) Mr. Donlon, referring to 8 the form on page 301, there is a column entitled 9 "Sales by the Utility to Ultimate Consumers in 10 Megawatt-Hours." Do you see that? It's on line 10, 11 Column D, so it goes right across from your line 10, 12 column B. 13 A. Yes. 14 Q. So staff's recommendation is to use 15 operating revenue as relative to the amount of energy 16 efficiency, correct? 17 A. Correct. 18 Q. But there's a number there that also 19 represents megawatt-hours of sales to all customers, 20 correct? 21 A. Yes. 22 Q. Would that not be a more consistent 23 number to use across all four utilities? 24 A. We don't think it's -- consistency, no. 25 We think it's better since the portfolio programs are ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 183 1 done in an overall total cost that it should be a 2 total dollars, shared savings is total dollars. That 3 way it's everything is in total dollars. You don't 4 have to do any conversions so that's why we chose 5 total dollars. 6 Q. You could use that number to derive a 7 total dollar budget for each utility, correct? 8 A. You could do a lot -- you could do a cost 9 cap in a lot of different methodologies. Again, 10 going back to we wanted it somewhat simplistic so 11 that, you know, general public, General Assembly, you 12 know, the companies, staff, intervenors could all 13 simplistically find it here as the FERC Form 1 number 14 in overall dollars times a percentage, that's your 15 number. You don't have to do conversions. You don't 16 have to deal with megawatt-hours and back in savings. 17 It's just an overall dollar amount. 18 Q. So you could take the number on FERC Form 19 1, line -- page 301, Column D, and run the same 20 calculation, correct? 21 A. There's a lot of different ways to run a 22 cost cap, absolutely. 23 MS. WATTS: I have nothing else, your 24 Honor. 25 EXAMINER BULGRIN: Okay. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 184 1 MS. FLEISHER: Your Honor, I have some 2 questions. 3 - - - 4 CROSS-EXAMINATION 5 By Ms. Fleisher: 6 Q. Mr. Donlon, good afternoon. 7 A. Good afternoon. 8 Q. Could you tell me how much is Duke's 9 monthly efficiency rider currently for the average 10 residential customer? 11 A. As of October -- I don't have to date. 12 As of October, I want to say somewhere in the 2 to 3 13 dollars off the top of my head. Again, I know it's 14 the third highest on their rider. I want to say for 15 the average 750 residential customers, it's somewhere 16 in the 2 to 3 dollar range. I might be off slightly 17 on that. 18 Q. Fair enough. Do you know what the 19 monthly efficiency rider costs would be for an 20 average residential customer under the proposed 3.5 21 percent cap? 22 A. Again, the individual -- what the actual 23 max out cap would be, I don't have that off the top 24 of my head. It still may be $3 that would 25 actually -- I think that fits under the cap. So I ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 185 1 don't have the exact highest number but what the 2 rider would be it doesn't necessarily matter. It 3 could be anywhere under whatever that cap number, the 4 cap price is. 5 Q. But you can't tabulate that total cap 6 number into what it would look like on a customer's 7 bill? 8 A. We could get the max it could be. 9 However, I just don't have that off the top of my 10 head, but you could calculate that, yes. 11 Q. And do you know how much the total bill 12 for an average residential customer in Duke territory 13 is? 14 A. For the October it's roughly -- for a 750 15 kWh customer, it's roughly 100 to 108, subject to 16 check. Might even -- Duke might be in the 90s. It 17 might be lower. I have looked at so many companies. 18 MS. FLEISHER: And, your Honor, may I 19 approach? 20 EXAMINER BULGRIN: Sure. 21 MS. FLEISHER: I am going to do 22 Environmental Intervenors 4 and 5 both at once to 23 save time. With 4 they are two sheets from a Duke 24 electric tariff. 4 would be the infrastructure 25 modernization rider, and 5 would be rider DCI. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 186 1 (EXHIBITS MARKED FOR IDENTIFICATION.) 2 EXAMINER BULGRIN: Okay. Just to clarify 3 the one that's rider DR-IM is Environmental 4 Intervenor Exhibit 4. 5 MS. FLEISHER: Correct. 6 EXAMINER BULGRIN: And rider DCI is 7 Exhibit 5. 8 MS. FLEISHER: Correct. 9 EXAMINER BULGRIN: Thank you. 10 Q. (By Ms. Fleisher) Mr. Donlon, the Exhibit 11 4, rider DR-IM, is that what you were referring to 12 earlier as Duke's SmartGrid rider? 13 A. Yes. I am pretty sure it is, yes. It 14 looks like the right dollar amount too. 15 Q. And are you familiar with Duke's 16 distribution capital investment rider? 17 A. Yes. 18 Q. Okay. And it says here "All retail 19 jurisdictional customers shall be assessed a charge 20 of 9.183 percent of the customer's applicable base 21 distribution charges." Are you -- do you happen to 22 know what that might translate to into a dollar 23 amount roughly? 24 A. No. As of October, it would have been 25 less than what the October energy efficiency rider ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 187 1 is, if my memory is correct from this morning, but I 2 don't know what exactly the charge is. Unfortunately 3 I don't have Duke's base, base key. 4 Q. And do you know whether there is a cost 5 cap on either of these riders? 6 A. No, there is not. 7 Q. So talk to you -- 8 A. Actually -- 9 Q. Go ahead. 10 A. These -- well, some of -- some companies' 11 distribution capital investment riders, DCI, DIRs, 12 they all are -- they are all named differently and, 13 you know, we don't keep them all completely 14 consistent between the companies but most of them do 15 actually have a cap that they can accrue over time, 16 so I don't know specifically about Duke's, but I do 17 know other utilities do have caps on what the annual 18 increase is on a D -- I am thinking particularly of 19 AEP's DIR which does have one. I think I would 20 assume Duke's does too, but I honestly don't know if 21 Duke's does. 22 Q. And to be clear, you said a cap on the 23 annual increase? 24 A. Yes. 25 Q. And to turn to the efficiency rider for a ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 188 1 second, because I think we've established but just to 2 lay some foundation, that includes the costs of 3 Duke's efficiency programs as well as shared savings, 4 correct? 5 A. The cap includes shared savings and 6 program costs, correct. 7 Q. And I'm speaking specifically of the 8 actual rider. That does not capture what the benefit 9 to customers might be from the programs, correct? 10 A. Can you restate that? 11 Q. If a customer is saving money, for 12 example, through participation in Duke's programs, 13 that wouldn't be reflected in the rider on their 14 bill, correct? 15 A. Correct. 16 Q. And would you agree that Duke's 17 efficiency programs do offer benefits to 18 participants? 19 A. Some participants. 20 Q. Do you know how much savings a 21 participant might get under any programs in the 22 proposed plan or on average? 23 A. That's going to be very dependent on the 24 customer, how they use the program, when the program 25 is, so not exactly. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 189 1 Q. Do you know how many Duke customers are 2 projected to participate in the programs for the 3 proposed plan? 4 A. Not off the top of my head. 5 Q. Do you have any sense of the proportion? 6 Half? Fewer than half? 7 A. I honestly don't know. 8 Q. Is that something staff considered in 9 conceiving the cost cap? 10 A. I'm sure my staff looked into that. I 11 just don't have those numbers off the top of my head. 12 Q. So you can't testify to that. 13 A. No. 14 Q. Did you do -- did staff do any analysis 15 of how many fewer customers might participate in 16 Duke's efficiency programs under the 3.5 percent cap? 17 MR. HEALEY: Objection, assumes facts not 18 in evidence. There is no evidence that fewer 19 customers will, in fact, participate under the cap. 20 Q. I believe I said "might participate." 21 EXAMINER BULGRIN: You can answer. 22 A. I don't perceive that happening unless 23 the company has to adjust some of their programs, 24 either cut a program or not. But that's a management 25 decision from there. So from a customer survey or ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 190 1 something like that, no, we did not do that. 2 Q. Are you familiar with the idea of 3 wholesale market price suppression caused by 4 efficiency programs? 5 A. Yes. 6 Q. And is it fair to translate that into 7 laymen's terms as meaning that if efficiency programs 8 reduce electricity consumption, that suppliers will 9 have to buy less electricity on the wholesale market? 10 Let's start with that as Step I. 11 A. I would say that it's -- on a wholesale 12 level that when there is less energy to produce -- 13 or, that is, the demand curve is reduced, then the 14 supply curve is also reduced or actually the 15 equilibrium like shifts. 16 Q. And as a result, you're eliminating the 17 need to purchase the most expensive supply of 18 electricity, supply services; is that correct? 19 A. On the wholesale market. 20 MS. FLEISHER: And may I approach with 21 Environmental Intervenors 6? 22 EXAMINER BULGRIN: Sure. 23 MS. FLEISHER: February 26, 2015, letter 24 from the Public Utilities Commission to the Ohio 25 legislature which may look familiar to you. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 191 1 (EXHIBIT MARKED FOR IDENTIFICATION.) 2 Q. (By Ms. Fleisher) Mr. Donlon, does this 3 letter look familiar to you? 4 A. Yes, it does. 5 Q. Does it appear to you to be an authentic 6 copy of a letter sent from the Ohio Public Utilities 7 Commission to the General Assembly dated February 26, 8 2015? 9 A. Yes, it does. 10 Q. And did you participate in preparation of 11 this letter? 12 A. Yes, I did. 13 Q. And can you turn to page 12. 14 A. I am there. 15 Q. You are there, yep. You see a section 16 titled "Market price suppression"? 17 A. Yes. 18 Q. Okay. And is this -- if you need to take 19 a moment to read this through. No, okay. And does 20 this discussion reflect the concept of market price 21 suppression that you and I were just discussing 22 previously? 23 A. In the wholesale market, yes, it does. 24 What it doesn't do is the next step to how that 25 actually translates into the retail market. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 192 1 Q. And did staff do any analysis of 2 wholesale price suppression benefits from Duke's 3 efficiency programs in the past? 4 A. So the only study that I am aware of that 5 we actually did the price suppression in the 6 wholesale market was at this point. Our modeling 7 technology is only able to really do more of a PJM 8 standpoint so this is across the entire PJM market. 9 Q. Okay. So staff has done no analysis of 10 what the potential effects of Duke's efficiency 11 programs might be on residential customers' bills 12 through this phenomena of wholesale market price 13 suppression? 14 A. Staff's tech -- our forecasting ability 15 does not allow us to get into the residential piece 16 of it. We don't have -- you really need more of a 17 bottom up and this is a top down forecasting tool and 18 it's on the -- when we ran this, this was across the 19 PJM region of energy efficiency so not on an 20 individual utility-by-utility basis. But to get down 21 to the actual residential and how it impacts, we 22 really needed -- staff would need a bottom up 23 forecasting tool, and we don't have that technology. 24 Q. And under the Commission's rules, we all 25 use the total resource cost estimate to determine ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 193 1 cost effectiveness of efficiency programs, correct? 2 A. Correct. 3 Q. And is it fair to say that the total 4 resource cost test tells you whether in the aggregate 5 a plan or program or whatever you are applying it to 6 will save more in energy supply costs than the total 7 costs of the plan or program? 8 A. What it does is it takes the cost and 9 then the lifetime projected energy savings and 10 calculates what the energy savings on a dollar per kW 11 would be so but that looks at the life of the 12 project, not necessarily what someone is saving to 13 that. 14 Q. And as applied in practice, that does not 15 capture any wholesale market price suppression 16 effects, correct? 17 A. It does not. 18 Q. And as applied in practice in Ohio, it 19 does not include any natural gas savings, correct? 20 A. It does not. 21 Q. And you testified that the energy 22 efficiency -- the annual energy efficiency benchmark 23 goes to 2 percent in later years, correct? 24 A. 2021 or 2022, I think. 25 Q. It is 2021. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 194 1 A. All right. 2 Q. And do you know at this point whether 3 Duke may need to use banked savings from the 2017 to 4 2019 plan period to meet that benchmark in future 5 years? 6 MR. HEALEY: Objection, speculation, your 7 Honor. 8 MR. JONES: Beyond the scope of this 9 plan, your Honor. It's not relevant. 10 EXAMINER BULGRIN: I'll overrule. You 11 can answer, if you know. 12 A. Seeing as Duke has in the past been 13 willing to use their bank, I could see them budgeting 14 a plan to use their banked savings in the future. 15 Q. And going to your testimony page 4. 16 A. I'm there. 17 Q. Hold on. I did not mean page 4. I meant 18 page 6. Sorry. Skipping around a little. Trying 19 not to duplicate. I believe you and Ms. Watts 20 discussed on line 99 staff's evaluation that a 3.5 21 percent cost cap would provide price security; is 22 that correct? 23 A. Correct. 24 Q. And did staff analyze whether alternative 25 percentages would provide price security for ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 195 1 ratepayers? 2 A. Yes, we reviewed various different 3 scenarios and percentages. 4 Q. And can you tell me why -- whether any of 5 those various other scenarios in staff's judgment 6 would provide price security? 7 A. We felt that 3-1/2 was -- resulted in the 8 best, again, balance between allowing the company to 9 be able to based on history and other -- history and 10 different factors to balance what staff is falling 11 under of -- or always trying to gauge of -- and I 12 like when I use later of risk mitigation better than 13 price security but risk mitigation to the consumers 14 in allowing the company the ability to meet the 15 mandate and potentially achieve shared savings if 16 they so desire. 17 Q. And when you mentioned history there, is 18 that referring to the spending and savings results in 19 Staff Exhibit 4 in that table? 20 A. Correct. 21 Q. Okay. And in those prior years the 22 underspending, where staff has found that there was 23 underspending, there was no cost cap applicable in 24 those years, correct? 25 A. Correct. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 196 1 Q. And are you aware that Duke has a 2 stakeholder collaborative process? 3 A. I am. 4 Q. Okay. And are you aware that the 5 collaborative has quarterly meetings? 6 A. I am. 7 Q. And has staff participated in those 8 meetings and the collaborative process as a whole? 9 A. They have definitely attended. 10 Q. Is it fair to say that part of the 11 purpose of the collaborative is to provide various 12 stakeholders including staff with input on Duke's 13 efficiency programs? 14 A. I think that's fair. 15 Q. Are you aware of any programs that staff 16 has suggested Duke modify in that collaborative 17 process? 18 A. I'm not aware of that level of detail. 19 Q. To your knowledge did staff recommend a 20 cost cap on programs in that collaborative process? 21 A. No. The cost cap came up through 22 settlement negotiations and discussions through this 23 hearing, or this case filing. 24 Q. Are you familiar with the process that 25 Duke uses to come up with the projected costs and ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 197 1 savings for its portfolio plan? 2 A. Me particularly, no. 3 Q. But I think you mentioned you've reviewed 4 their market potential study? 5 A. At a very high level, my staff has 6 reviewed it in much greater detail. 7 Q. And the staff hasn't offered any critique 8 of Duke's assumptions regarding projected costs and 9 savings for the 2017 to 2019 plan, correct? 10 A. We are not taking a stance on the market 11 potential study. 12 Q. And in your discussion with Ms. Watts, I 13 think you talked about an example of LED costs coming 14 down over some past time period? 15 A. I did mention that. 16 Q. Do you know whether LEDs are a product 17 that is subsidized by energy efficiency programs in 18 Ohio? 19 A. In some cases they are and some cases 20 they aren't. 21 Q. Okay. Do you know whether LEDs are 22 subsidized through energy efficiency programs across 23 the United States? 24 A. I do not. 25 Q. Do you know whether those subsidies have ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 198 1 helped develop the market for LEDs? 2 A. I am assuming it probably has. 3 Q. And turning back to page 6 of your 4 testimony, lines 100 to 101. 5 A. Yes. 6 Q. You testified that that cost cap did not 7 hinder Duke's amount to meet or exceed their 8 statutory benchmarks. Other than the historical 9 analysis that we've discussed regarding past 10 programs' spending and savings results, is there any 11 other analysis that was done to support this 12 statement? 13 A. The knowledge and expertise of my staff 14 and their years of experience went into that as well, 15 but as for a forecast or modeling forward, no. 16 Q. Do you believe that Duke will be able to 17 achieve the same level of energy savings under the 18 cap as is projected under the proposed plan? 19 A. I think that's a possibility, yes. 20 Q. And I think we've used this terminology 21 before, but do you know what I mean first year 22 kilowatt-hour cost of savings? 23 A. Is that the acquisition costs? 24 Q. Correct, yes. 25 A. Yes. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 199 1 Q. Okay. And did staff do any analysis of 2 the acquisition costs under the proposed cap to 3 support the statement on page 6, lines 100 to 101, of 4 your testimony? 5 A. Yes. I think I said earlier that if I 6 remember off the top of my head, the acquisition 7 under the cap would be roughly $140 per 8 megawatt-hour. 9 Q. Okay. And did staff analyze what 10 programs Duke could implement at that cost? 11 A. Again, staff feels that's a management 12 decision for Duke to evaluate. We typically -- I 13 don't get too involved in the individual programs. 14 Q. Okay. And staff hasn't done any analysis 15 of how Duke might alter its programs to comply with 16 the proposed cap, correct? 17 A. Again, staff feels that's a management 18 decision so, you know, different things like putting 19 floor -- agreeing to floors in various programs can 20 cause problems with it, but we feel that's a 21 management decision by the company. 22 Q. Are you generally familiar with the 23 programs in the proposed plan? 24 A. Generally, my staff is much more on each 25 individual one, but generally I have an understanding ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 200 1 of some of the programs, many of the programs. 2 Q. And so, for example, would you be aware 3 of how much program savings are projected to come 4 from residential behavior programs? 5 A. No. I don't have that level of expertise 6 on the stand at least. 7 Q. We all have more expertise off the stand. 8 A. Pretty way to phrase that. 9 Q. Would you support an efficiency program 10 portfolio that was optimized to achieve annual 11 savings goals at the lowest possible cost regardless 12 of the programs in that portfolio plan? 13 A. From staff's standpoint it's really we 14 are agnostic to the individual programs and let the 15 companies manage that on their own. 16 Q. So you are focused on costs alone? 17 A. Not costs alone. I mean, obviously we 18 participate in the programs. We talk and we discuss 19 things with the other parties. But from very rarely 20 in these cases does staff get involved in very 21 specific programs. Now, we may take a stance on 22 certain aspects of them depending on the programs, 23 but for the most part we allow the company to manage 24 them and intervenors, who have specific stakes in the 25 various programs, to manage that. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 201 1 Q. Do you believe it's in the public 2 interest to have a portfolio that provides a balance 3 of cost effective residential and commercial programs 4 to a wide range of customer types? 5 THE WITNESS: Can you reread that, 6 please. 7 (Record read.) 8 A. The staff, it's perspective is that often 9 I think that sounds like a good idea looking at it 10 which individual lines depend on it, but it doesn't 11 mean a program that doesn't necessarily do that would 12 be bad either. So I think staff is still neutral. 13 Q. When staff put a little more context to 14 it, for example, would staff support a portfolio plan 15 that did not offer programs for small businesses? 16 A. Staff would have to evaluate that program 17 and really see what the other benefits are. 18 Q. Do you believe that programs that produce 19 long-term savings provide added value over programs 20 that produce short-term savings? 21 A. Depends for who. 22 Q. For the participant in the program. 23 A. The individual participant it's cost -- 24 cost/benefit analysis. I guess it's dollars per 25 savings so a short term and you get a return on $20 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 202 1 on the short term versus a long term that only 2 returns, you know, at the end of the day 10 cents, 3 maybe not. It depends. 4 Q. You are familiar with the concept of 5 measure life that I think Ms. Watts was describing 6 earlier. 7 A. Generally. 8 Q. And the idea that some efficiency 9 measures last longer that others, correct? 10 A. I'm sorry. I blanked. 11 Q. I can just repeat it. Who -- 12 A. Sorry. 13 Q. No problem. The idea is that some energy 14 efficiency measures last longer than others, correct? 15 A. Yes. 16 Q. And we've talked about first year 17 kilowatt-hours savings. We can also calculate 18 lifetime kilowatt-hours, or costs rather, correct? 19 A. Calculate the lifetime costs or lifetime 20 savings? 21 Q. Lifetime costs per kilowatt-hour. Sorry 22 I wasn't clear. 23 A. So the lifetime costs, yes, correct, you 24 can calculate that. 25 Q. Okay. And that accounts for the measure ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 203 1 life by taking the total costs and net lifetime 2 savings, correct? 3 A. Yes. 4 Q. And the cost cap that you've proposed 5 accounts for first year kilowatt-hour costs, correct? 6 Or strike that. 7 The costs cap that you proposed applies 8 to first year kilowatt-hour costs. 9 A. No. It applies to the program costs. 10 The program costs are actually the rebates or the 11 incentives being paid out so, and then if you add in 12 energy savings, energy savings is calculated on 13 the -- that's where -- the shared savings my 14 understanding is actually all of the energy savings 15 of the lifetime; so, no, I don't think that's 16 correct. 17 Q. Let's take a step back because I think 18 we're not on the same page on this. 19 A. Okay. 20 Q. So Duke's programs have to achieve an 21 annual benchmark, correct? 22 A. Correct. 23 Q. And that benchmark is based on first year 24 savings from the programs, correct? 25 A. I would have to check that out. ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 204 1 MR. JONES: Your Honor, I would have to 2 object to that question. I don't think that's a -- 3 for the record what she's stating for the question is 4 a basis. 5 MS. FLEISHER: He is testifying as a 6 staff expert on the cost cap, and the cost cap 7 applies to programs. It applies to how Duke's going 8 to meet its benchmark. How the benchmark is measured 9 is relevant. If he doesn't know the answer. 10 EXAMINER BULGRIN: Yeah, I'll allow it. 11 You can answer. 12 THE WITNESS: I think I already did. 13 EXAMINER BULGRIN: I thought you did. 14 MS. FLEISHER: Okay. 15 Q. (By Mr. Fleisher) I think you have, in 16 fact, answered that, so I'll move on. If you can 17 turn to page 8 of your testimony, lines 137 to 139. 18 A. I'm there. 19 Q. Okay. And here you testify that "Duke is 20 not required to use the most advanced and cutting 21 edge energy efficiency products available on the 22 market." I was just wondering whether you had -- you 23 were meaning to refer to any specific examples of the 24 advanced or cutting edge energy efficiency products. 25 A. No. This goes back to what Senate Bill ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 205 1 310 now allows and that 310 actually allows for it to 2 be as -- the higher of as found or code. So that 3 means it doesn't always have to be everything in the 4 newest technology and the next thing on the market, 5 so you can use some things that are further along in 6 the product life cycle is really what that more 7 references. 8 MS. FLEISHER: Give me one moment. 9 That's it. Thank you very much. 10 EXAMINER BULGRIN: Okay. Mr. Dove, 11 anything? 12 MR. DOVE: No. 13 MR. JONES: Your Honor, could I just have 14 3 minutes? 15 EXAMINER BULGRIN: Sure. 16 (Recess taken.) 17 EXAMINER BULGRIN: Let's go back on the 18 record. 19 Mr. Jones. 20 MR. JONES: Thank you, your Honor. Your 21 Honor, staff has no further questions. 22 EXAMINER BULGRIN: Oh, excellent. 23 Thank you, Mr. Donlon. 24 Any objection to the admission of Staff 25 Exhibit 1? ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 206 1 MS. WATTS: No objection. 2 EXAMINER BULGRIN: Hearing none, it will 3 be admitted. 4 (EXHIBIT ADMITTED INTO EVIDENCE.) 5 EXAMINER BULGRIN: And we also have at 6 this point, well, EI Exhibits 4, 5, 6 and Company 7 Exhibits 1, 2, 3, and the Joint Exhibits 1 and 2. 8 All of those will be admitted. 9 (EXHIBITS ADMITTED INTO EVIDENCE.) 10 EXAMINER BULGRIN: And let's go off the 11 record and talk about briefs. 12 (Discussion off the record.) 13 EXAMINER BULGRIN: Let's go back on the 14 record. 15 So Duke has requested to file rebuttal 16 testimony which they are going do by March 7, and we 17 will schedule the rebuttal, the hearing, for 18 Wednesday, March 15, at 10:00? 19 Okay. Very good. Then we are concluded 20 for today, and we'll see you all on March 7 -- 15. 21 (Thereupon, at 4:14 p.m., the hearing was 22 adjourned.) 23 - - - 24 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481 207 1 CERTIFICATE 2 I do hereby certify that the foregoing is 3 a true and correct transcript of the proceedings 4 taken by me in this matter on Monday, February 27, 5 2017, and carefully compared with my original 6 stenographic notes. 7 8 _______________________________ 9 Karen Sue Gibson, Registered Merit Reporter. 10 11 (KSG-6323) 12 - - - 13 14 15 16 17 18 19 20 21 22 23 24 25 ARMSTRONG & OKEY, INC., Columbus, Ohio (614) 224-9481