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Excel Cost of ServiceExcel Cost of ServiceModelModel

Detroit EdisonMarty Heiser

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Overview Overview TimelinePurpose of Cost of ServiceUnbundling ConventionsFlow DiagramFeatures of the ModelOverview of ReportsReport HierarchyDemonstrationQuestions

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Timeline for COS CollaborativeTimeline for COS Collaborative

12/20/05 Unbundling Order initiated COS Collaborative

2/15/06 Distributed DECo model to Staff and Consumers

3/27/06 Met with Staff and Consumers and agreed to use DECo model as basis

4/21/06 Distributed DECo and Consumers models to parties

5/18/06 Received comments from AG and ABATE

8/10/06 Received comments from Staff

9/1/06 Responded to AG comments

9/8/06 Received AG Reply

9/15/06 Responded to Staff comments

12/1/06 Distributed models with Staff comments incorporated

1/5/07 Present overview of model to interested parties in Lansing

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Purpose of Cost of ServicePurpose of Cost of Service Allocate the Company’s revenue deficiency

calculation to rate classes in a manner that reflects cost causation

Provide Jurisdictional split for ratemaking

Functionally split revenue requirement

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Unbundling ConventionsUnbundling Conventions

Model contains separate tabs for each function and one that totals results:– Production (includes transmission)– Distribution (includes customer service)– Total (sum of Production + Distribution)

Allocators– Production Excludes Electric Choice– Distribution Includes Electric Choice

Class Class1 . . . . . .11

Allocation SchedulesColumn HeadingsColumnar InputsColumns Correspondto Reports

FunctionalizationPROD DIST

FunctionalizesTotal CompanyData

Displays Allocators + =Displays TotalCalculated Results Row Descriptions

Rows Correspondto Reports

Input 2

Input 1 PROD

ProductionAllocation,

Direct AssignmentTo Rate Classesand Deficiency

Calculationin Report Format

DistributionAllocation,

Direct AssignmentTo Rate Classesand Deficiency

Calculationin Report Format

PROD + DISTSummation

and DeficiencyCalculation

in Report Format

DIST TOTAL

Column Heading , External Allocation Schedules, Direct Inputs

Data Inputs,Row Descriptions

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COS Flow DiagramCOS Flow Diagram

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Input 1 WorksheetInput 1 Worksheet

Desc Input TotElect Source Funct Fctr

Prod Dist AllocTot

AllocProd

AllocDist

AllocDesc

Areas WithinSheet

Report Input Area (Active - Source of Descriptions & Report Names)

InputstoFunctWkSh

Count

Line Number

Allocation Table (Active - Source for Descriptions only)

Input 1

Column Index (Inactive)Functionalization Factors (Active)

Masks (Inactive)

Scenario Flags (Active)

Headings (Inactive)

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Input 2 WorksheetInput 2 Worksheet

Description Rounding Input Alloc C1 C2 … … C22

INPUT 2

Column Index (Active - Source)Functionalization (Inactive)Masks (Active - Source)

Scenario Flags (Inactive)Headings (Active - Source)

Areas WithinSheet

Reports (Inactive)

Report Format

Count

Line Number

Page 1 Pgs 2 - 4

Allocation Table (Active - Source of Direct Inputs)

HeadingsSource of

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Function WorksheetFunction Worksheet

Description Rounding Input Alloc C1 C2 … … C22

Areas WithinSheet

Reports (Active) Displays Basis for Allocators

Report Format

Count

Line Number

Page 1 Pgs 2 - 4

Allocation Table (Active - Calculates Internal Allocators)

PRODUCTION

Column Index (Active - drawn from Input 2)Functionalization (Inactive)Masks (Active - drawn from Input 2)

Scenario Flags (Inactive)

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Features of the ModelFeatures of the Model Employs known and measurable (K&M) change approach

for the test year. K&M changes are comprised of changes to Ratebase, Capital Structure, and Net Operating Income

WYSIWG (what you see is what you get) Output from each tab (Total, Prod & Dist) consists of

forty eight 4 page reports (192 pages each) Standard Page size is 11 columns x 54 rows Input cells are bold and shaded green in column D of the

“Input1” tab Internal allocation schedule calculations are performed in

the Prod and Dist tabs Rounding column checks to see that sum of allocated

columns equals the total

Overview of ReportsRETURN > Income Statement, Rev Req, Index of ReturnSummary

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RATEBASE1 > PIS, DepRes, CWIP, Future Use by funct=>Net PlantREVENUE > Revenue from Elect Sales + Misc RevenueRATEBASE2 > Net Plant by function,Workcap, RatebaseDESUM > Depreciation Expense by funtion, voltage levelOTHRTAX > Social Security, Property, MSBT, Misc taxesFEDTAX > Income Tax Provision CalculationADJ1 > Adjustments to IncomeRETURN1 > Additional Revenue Requirements itemizedWRKCAPB > Current Assets minus Current LiabilitiesPIS SUM > Plant In Service by function and voltage levelDRSUM > Depreciation Reserve by function, voltage levelALWANCE > Additions and Deductions to Rate Base itemizedALLOC1 > Input allocation schedules 100-300,800,804,840ALLOC2 > Calculated allocation SchedALLOC3 > Calculated allocation Sched

SupplementalSupport

ALLOC5 > Calculated allocation SchedPIS1 > Plant in ServicePIS2 > Plant in ServicePIS3 > Plant in ServicePIS4 > Plant in ServiceDEPRES1 > Depreciation ReserveDEPRES2 > Depreciation ReserveDEPRES3 > Depreciation ReserveDEPRES4 > Depreciation ReserveCWIP1 > Construction Work In ProgressCWIP2 > Construction Work In ProgressCWIP3 > Construction Work In ProgressCWIP4 > Construction Work In ProgressDEPEXP1 > Depreciation ExpenseDEPEXP2 > Depreciation ExpenseDEPEXP3 > Depreciation ExpenseDEPEXP4 > Depreciation ExpenseOMPRTOT1 > Production O&MOMPRTOT2 > Production O&MOMPRTOT3 > Production O&MOMTOTAL2 > O&MOMTOTAL3 > O&MOMTOTAL4 > O&MSCHEDM > Tax Timing DifferencesOMPRLAB1 > Production LaborOMPRLAB2 > Production LaborOMPRLAB3 > Production LaborOMLABOR2 > LaborOMLABOR3 > LaborOMLABOR4 > Labor

BaseDetail

Hierarchy of Reports"RETURN" Report Line Items

1 Rate Base RATEBASE2> Net Plt by function,

Workcap, Ratebase

2 Revenue REVENUE> Revenue from Elect Sales

+ Misc Revenue

3 Expenses:4 Fuel + Handling5 Purchased Power OMSUMM > O&M Expense by function

6 O & M Expense7 Depreciation DESUM > Depr Exp by funct, volt lvl

8 Reg Debit less Credit Unique input to this report

9 Other Taxes OTHRTAX> SocSec, Property, MSBT

10 Income Taxes11 Amortizations12 Total Expenses

14 AFUDC FEDTAX > Income Tax Provision Calc

15 Net Adjustments ADJ1 > Adjustments to Income

16 Adj Net Oper Income21 Additional Rev Req RETURN1 > Addit'l Rev Req itemized

22 Total Suff/(Defic)

Additional SummaryRETFACT > Cost per unit sales

FEDTAX > Income Tax Provision Calc

Minimum Detail Needed toSupport Deficiency Calculation PIS1 > Plant in Service

PIS2 > Plant in ServicePIS3 > Plant in ServicePIS4 > Plant in ServiceDEPRES1 > Depr Reserve

RATEBASE1 > PIS, DepRes, CWIP, Fut Use=>Net Plant DEPRES2 > Depr ReserveWRKCAPB > Current Assets minus Current Liab DEPRES3 > Depr ReservePIS SUM > PIS by function and voltage level DEPRES4 > Depr ReserveDRSUM > Depr Reserve by function, voltage level CWIP1 > Const Work In ProgALWANCE > Adds and Deducts to Rate Base CWIP2 > Const Work In Prog

CWIP3 > Const Work In ProgCWIP4 > Const Work In ProgDEPEXP1 > Depr ExpenseDEPEXP2 > Depr ExpenseDEPEXP3 > Depr ExpenseDEPEXP4 > Depr Expense

OMPRTOT1 > Production O&MOMPRTOT2 > Production O&MOMPRTOT3 > Production O&MOMTOTAL2 > O&MOMTOTAL3 > O&MOMTOTAL4 > O&M

SCHEDM1 Tax Timing DiffSCHEDM2 Tax Timing Diff

ALLOC1 > Input alloc sched 100-300,800,804,840 OMPRLAB1 > Prod LaborALLOC2 > Calculated allocation Sched OMPRLAB2 > Prod LaborALLOC3 > Calculated allocation Sched OMPRLAB3 > Prod LaborALLOC4 > Calculated allocation Sched OMLABOR2 > LaborALLOC5 > Calculated allocation Sched OMLABOR3 > Labor

OMLABOR4 > Labor

Additional Support Detailed Inputs

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DemonstrationDemonstrationTwo versions

– Section A Historic– Section B Test Year

Hypothetical Changes to Revenue Requirement– Ratebase– O&M