Exhibit LABK-12 Page 6 of 27 - Texas

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Exhibit LABK-12Page 6 of 27

100

Parsley Coffin Renner LLPP 0 Box 13366 Austin, TX 78711

Taxpayer I.D. # 27-0934461

invoice description: 2015 CEHE DCRF

Invoice #: 6181 Matter#: 2015 0933

invoice Date: 12/2812015 Matter Desc: 2016 Distribution Cost Recovery Factor (DCRF)

Invoice Total; $297,00 Main Assignee: Bundage, Stephanie

Page 1 of 4


101

Invoice Detail

Fees

Performed By Date Hours Rate Total DescriptionCoffin, Ann 11/04/2016 0.60 $495.00 $297.00

Matter Total: 0.60 $297,00

Page 2 of 4


102


Lawyer Summary

Performed By Rate Hours Total Fees

Coffin, Ann $495,00 0.60 $297.00

Sum: 0.60 $297.00

Expenses

Date Description Amount

Total Expenses:

Page 3 of 4

103

Fees / ExpenseSummary

Fees: $297.00Expenses:

Total Amt Due: $297.00

Page 4 of 4


104


Taxpayer I.D. # 27-0934461

Invoice Description: 2016 CEHE DCRF

invoice #: 6175 Matter #: 2015 0933

invoice Date: 02/17/2016 Matter Desc: 2016 Distribution Cost Recovery Factor (DCRF)

Invoice Total: $262.50 Main Assignee: Bundage, Stephanie

Page 1 of 4


105

Invoice Detail

Fees

Performed By Date Hours Rate Total DescriptionCoffin, Ann 01/22/2016 0.50 $525.00 $262.50

Matter Total: 0,50 $262.50

Page 2 of 4


106


Lawyer Summary


Coffin, Ann $525.00 0.50 $262.50

Sum: 0.50 $262.60

Expenses

bate Description Amount

Total Expenses:

Page 3 of 4

107

Fees / ExpenseSummary

Fees: $262.50Expenses:

Total Amt Due: $262.60

Page 4 of 4


108


Taxpayer J.D. # 27•0934461

Invoice Description: 2016 CEHE DCRF

Invoice #: 6193 Matter #: 2015 0933

Invoice Date: 03/10/2016 Matter Aesc: 2016 Distribution Cost Recovery Factor (DCRF)

Invoice Total: $27,225,20 Main Assignee: Bundage, Stephanie

Page 1 of 6


109

Invoice Detail

Fees

Performed By Date Hours Rate Total DescriptionSantos, Mark 02/02/2016 0.20 $410.00 $82.00

Coffin, Ann 02/04/2016 0.60 $525.00 $315.00

Santos, Mark 02/04/2016 0.30 $410.00 $123.00

Santos, Mark 02/04/2016 1.60 $410.00 $656.00

Santos, Mark 02/04/2016 0.60 $410.00 $246.00

Santos, Mark 02/05/2016 0,70 $410.00 $287.00

Santos, Mark 02/05/2016 D.30 $410.00 $123.00

Santos, Mark 02/08I2016 0.60 $410.00 $206.00

Coffin, Ann 02111/2016 0.20 $525.00 $105.00

Coffin, Ann 02/11/2016 0.20 $525,00 $105.00

Coffin, Ann 02/11/2016 1.80 $625.00 $945.00

Santos, Mark 02/11/2016 1.80 $410.00 $738.00

Santos, Mark 02/1112016 1.40 $410.00 $574.00

Santos, Mark 02/12/2016 1.80 $410.00 $738.00

Coffin, Ann 02/15/2018 0.20 $525A0 $105.00

Page 2 of 6


110

Fees

Performed By Date Hours Rate Total DescriptionCoffin, Ann 02/1612016 4.10 $525.00 $2,152.50

Santos, Mark 02/15/2016 3.10 $410.00 $1,271.00

Coffin, Ann 02/16/2016 0.40 $525.00 $210,00

Santos, Mark 02/16/2016 2.20 $410.00 $902.00

Coffin, Ann 02/17/2016 0.50 $525.00 $262.60

Coffin, Ann 02/17/2016 1.10 $525.00 $577.50

Coffin, Ann 02/17/2016 1.40 $526.00 $735.00

Coffin, Ann 02/18/2016 0.90 $626.00 $472.50

Santos, Mark 02/18/2016 0,20 $410.00 $82.00

Santos, Mark 02/18/2016 0.60 $410.00 $246.00

Santos, Mark 02/18/2016 0.20 $410.00 $82.00

Santos, Mark 02/18/2016 0.30 $410.00 $123.00

Coffin, Ann 02/22/2016 1.10 $625.00 $577,50

Coffin, Ann 02/22/2016 0.40 $626.00 $210.00

Santos, Mark 02/22/2016 1,70 $410.00 $697.00

Santos, Mark 02/22/2016 2.20 $410.00 $902.00

Coffin, Ann 02/23/2016 6.00 $625.00 $3,160.00

Coffin, Ann 02/23/2016 3.60 $525.00 $1,837.50

page 3of6


111

Fees

Performed By

Santos, Mark

Santos, Mark

Santos, Mark

Santos, Mark

Santos, Mark

Coffin, Ann

Santos, Mark

Santos, Mark

Matter Total:

Date Hours Rate Total Description

02/23/2016 6.00 $410.00 $2,460,00

02/23/2010 3.60 $410,00 $1,435.00

02/24/2016 1.40 $410.00 $574.00

02/25/2016 1.10 $410.00 $451.00

02/25/2016 0.30 $410.00 $123.00

02/26/2016 1.20 $625.00 $630.00

02/26/2016 1.60 $410.00 $656.00

02/26/2016 2.10 $410.00 $861,00

69.30 $27,027.00

Page 4 of 6


112


Lawyer Summary


Coffin, Ann $625,00 23.60 $12,390.00Santos, Mark $410.00 35.70 $14,637.00

Sum: 59.30 $27,027.00

Expenses

Date Description Amount02/23/2016 Mileage - M. Santos - Travel to Houston for DCRF meetings $178.200203/2016 Out-of-(own travel - Parking - M. Santos - Travel to Houston for DCRF meetings $20.00

Total Expenses: $198.20

Page 5 of 6

113

Fees I ExpenseSummary

Fees: $27,027.00Expenses: $796.20

Total Amt Due: $27,225,20

Page 6 of 6


114


Concur - Travel and Expense Page 1 of I

TOP TOP ToPFAX COVER PAGE

see instructions below).^....r.^. ...Y.^.^^ ..^r.Fax this page and your receipts to:$66-428-9026 Inside US/Canada.............. ......................-..............-̂...,.................. '--•-- ................. ............. _..._.................... ....... .................... .... ..... ................................. ............ ............... .__...... ..^,^Report summary^n^ ---

^ ^•-^ Report Name : TER Austin, TX_02/16 01......`r...rEmployee Name : Kirk, Mary A.

- - Report Id., F6C46D691D96491A9EA0.^..^.^....,. ..^........... .Employee ID: 00022589

Company ID: 02498...^..^^.^..,^,....^ ..

- Report Total : $501.40

.^^..^. ..^^.. ^,.^...^ .,. Amount Due Employee ; $179.82

Amount Due Company Card : $321.68^^^ ^.^......-...^^ ..^,..^^ ........y»....^.. ^^......

_ r---^-- Receipts to Faxr" 07J11 /2016; Hotel -Overnight Rooms; $288.04;

I,^®/02/11/2016; Mileage Relmbursement; $179.82;

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115


Page 1 of 2

Expense Report

Report Name : TER .Austin, TX 02i16_04........ ........... .....__. ... __........... . ............................... ......... .., ............ ........ .... ...... ........ .......... ..............

Employee Name : Kirk, Mary A.

Employee to : 00D22589

Default Approver : Colvin, Kristie

Report Header -

Policy : General Expense &Reimbursement Policy

Business Purpose : Meeting - PUG Staff

Report Key 385443

Report Id F6C46D691D95491A9EA0

Report Date : 02/25/2016

Cost Center : 125098 (Finan Acctg & Report)

Approval Status : Not Submitted

Currency : US, Dollar

Submitted by Delegate : No

Transaction Expense Type Business Vendor Vendor Name City Payment AmountDate Purpose Type

Hotel - Overnight DOUBLETREE DOUBLETREE02111/2016 Overnight Stay SUITES ASTN SUITES ASTN Austin OnePay $288.04Rooms

DCRF

Mileage Filing02/11/2016

Reimbursement Meeting Cash $179.82with PUCStaff

Allocations : 100.00% ($179.82) 125096

https://www.concursolutlons.com/expense%lient/print_cpr.asp7type=1004&opt-PAR RE... 2/29/2016

:.'

116


Page 2 of 2

02/11/2016 Travel Meal Dinner BUC-EE'S #28 BUC-EE'S #28 OnePay $11.54Allocations : 100.00%($11.64)125096

02/1112016 Travel Meal Brpakfa¢t DOUBLETREE DOUBLETREEAUSTIN Fe AUSTIN 1713 Austin OnePay $22.00

Allocations : 100.00% ($22.00)125096

..... ...... ................._...... ...... .. ..... ....... .. ..... .... ..,.. ..........................- - -......-----.. . .---..... ..... .............Note: The sum of allocation amounts may not exactly match the expense amount due to rounding.

Report Total: $501.40

Total Amount Ciaimed : $501.40

Amount Approved : $501.40

Company Disbursements

Amount Due Employee : $179.82

Amount Due Company Card : $321,56

Total Paid By Company : $501.40

https://wcvw.ooiaoursolutions.com/expense/client/print cpr.asp?type=1004&opt=PAR RE... 2/29/2016

117


KIRK MARY A

Confirmation Number: 82800032

^ DOUBLETREE SUITES 13Y HILTON AUSTIN

303 WEST 157H

AUSTIN, TX 78701

DC)1,1I31,E7'RFc United Slates of Americaof ".t*"" TELEPHONE 612-479-7000 •FAX612-478-3562

Reservationswww.doublelree.cem or 1•800-222 TREE

Room No: 9061NQ2KArrive] Date: 2/10/2016 5:36:00 PMDeparture Date: 2111/2016 8:30:00 AMAdult/Child: 1/0Cashier ID: . . . . . KIR/KIRSTEN . . .. .Room Rete; 209.00AL:HH/IVAT pFolio NNCha 672407 A

DOUBLETREE SUITES BY HILTON AUSTIN 2/28/201610:47:00 AM

DATE REF NO DESCRIPTION CHARGES2110/2016 3680421 ROOM SERVICE 41703 $28,202l10/2016 3680695 GUEST ROOM EXEMPT $209.002/1012016 3680895 STATETAX $12.542/1012016 3680095 CITY TAX $18,812/1012016 3680731 VALET PARKING $18.002/1012016 3680731 SALES TAX $1.492/1112016 3680936 M0'0246 ($288.04)

Page:1

118


GNP 161 (1-2007) COMPANY NAMECNP SERVICE COMPANY, LLC

PERSONAL VEHICLE MILEAGE REPORT

4-. WWOF-

119


.................... ..................................... ........... .... ...... .......... ^..... ............. ... ........... ......... ......................... ........... ...f...

1700 How 71 EastBastrop TX

7,3602979-:238-6390

DLX SN WRAP $6,60RSTD NUTS 1 BAG $4.40

----------sub Total $11.00

'fax $0.54

Total $11.54FlasturcardFlept: $11.54

Change $V,00

Mas'tercardFleetCard Num (S) XXYO(XXXXXXXX0240T9nqinal 800000075508101Approval 066770

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15th Street Cafe303 W, 15th Street

Austin, Texas 78701512.478.7000

2/11/2016 8:03 AM

Check: 1930Table: 10/2Server: 10011 JellyCard Type: MasterCardAcct Num: *^^*********0248Auth Code: 082791Info; 774607799

Amount: :$ 19.43

TIP:

TOTAL;

SIGN' OM

By signing, I agree to pay theamount above per the rules of my

cardholder agreement.

I

AWN,

UOUBLETREE................. ........................JI.Y..H.II.I.- ..........................................

... ^...... ..

15th Street Cafe303 Y. 15th Street

Austin, Texas 78701512,478,7000

10011 Jelly--------------------

CHK 1930 TBL 10/2---------

GST 12/11/2016 7:47 AM

1 Full Breakfast --------------.95 --17.95

Subtotal $17.95Sales Tax $1.48

Total Due 43

TIP :

TOTAL:

ROOM:

NAME!

SIGN:

121

STATE OF TEXAS §

§COUNTY OF HARRIS §

AFFIDAVIT OF LAURIE A. BURRIDGE-KOWALIK

BEFORE ME, the undersigned authority, on this day personally appeared Laurie A.

Burridge-Kowalik, who being by me first duly sworn, on oath, deposed and said the following:

"My name is Laurie A. Burridge-Kowalik. I am of sound mind and capable of makingthis affidavit. The facts stated herein are true and correct based on my personalknowledge. My current position is Manager of Rates for CenterPoint Energy ServiceCompany, LL C.

2. The foregoing direct testimony and the attached exhibits have been prepared by me orunder my direct supervision and are true and correct to the best of my knowledge,"

Further affiant sayeth not.

4Laurie A. B e-K alik

SUBSCRIBED AND SWORN TO BEFORE ME on this ht- day of April, 2016.

abla- A 9-axNotary Public in and for the State of Texas

^ ` • ' ALICE S HARTNotary PUN; gM. otreM^,...__ ^^^sor•^r,zoia

122

DOCKET NO. 45747

APPLICATION OF CENTERPOINT §ENERGY HOUSTON ELECTRIC, §LLC FOR APPROVAL TO AMEND §ITS DISTRIBUTION COST §RECOVERY FACTOR PURSUANT §TO 16 TEX ADMIN. CODE §25.243 §AND TO RECONCILE DOCKET NO. §44572 REVENUES §

PUBLIC UTILITY COMMISSION

OF TEXAS

DIRECT TESTIMONY OF

MARY A. KIRK

FOR

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC

April 04, 2016

123

TABLE OF CONTENTS

I. POSITION AND QUALIFICATIONS .........................................................................1

II. PURPOSE OF TESTIMONY ........................................................................................2

III. REQUIREMENTS OF DCRF APPLICATION ............................................................4

IV. BACKGROUND OF DCRF PROCEEDINGS .............................................................9

V. CALCULATION OF REVENUE REQUIREMENT ..................................................10

VI. MARGIN TAX ............................................................................................................23

VII. RECONCILIATION OF DOCKET NO. 44572 ..........................................................29

VIII. CONCLUSION ............................................................................................................3 3

124

TABLE OF EXHIBITS AND WORKPAPERS

Exhibits Descriptions

Exhibit MAK-01 Mark A. Kirk Direct Testimony in Docket 44572

Exhibit MAK-02 Edison Electric Institute Property Accounting Members Luminaire

Survey Results

Exhibit MAK-03 S.B. 1693 Enrolled Bill Analysis, 82°d Leg., R.S.

Exhibit MAK-04 Margin Tax Illustration of Change in Recovery Methodology

Exhibit MAK-05 Project No. 42079 Setting Interest Rates for Calendar Year 2015

Exhibit MAK-06 Project No, 45319 Setting Interest Rates for Calendar Year 2016

Workpapers Descriptions(as provided in CD)

WP DCRF Filing Schedules-2016

WP D44572 DCRF Filing Schedules

Docket No. 45747 Workpapers

Docket No. 44572 Schedules

WP D44572 WP DCRF Filing Schedules Docket No. 44572 Workpapers

WP D44572 Revised DCRF FilingSchedules

WP D44572 Revised WP DCRF FilingSchedules

WP Overhead Calculations

WP Luminaire Replacement Cost

Reconciliation of Docket No. 44572 Schedules

Reconciliation of Docket No. 44572Workpapers

Calculation of Capitalized ConstructionOverhead

Luminaire Replacement Cost

125

Page 1 of 34

1 DIRECT TESTIMONY OF MARY A. KIRK

2 I. POSITION AND QUALIFICATIONS

3 Q. WHAT IS YOUR NAME, POSITION, AND BUSINESS ADDRESS?

4 A. My name is Mary A. Kirk. I am Director of Financial Accounting for CenterPoint

5 Energy Service Company, LLC ("CenterPoint Energy"). My business address is

6 1111 Louisiana Street, Houston, Texas 77002.

7 Q. DESCRIBE YOUR EDUCATIONAL BACKGROUND, AS WELL AS

8 YOUR BUSINESS AND PROFESSIONAL EXPERIENCE.

9 A. I graduated from the University of Houston-Clear Lake with a Bachelor of

10 Science degree in Accounting. I began my career at CenterPoint Energy, Inc.

11 ("CNP") and its predecessors in 1991. I began my role as Manager of Business

12 Services in October 2006 and was promoted to Division Director in 2007. In

13 April 2009, I became Finance Director of Gas Reporting and Performance for

14 CNP, and in July 2012 I became Director of Financial Accounting for CenterPoint

15 Energy. I am a Certified Public Accountant in the State of Texas.

16 Q. WHAT ARE YOUR RESPONSIBILITIES AS DIRECTOR OF

17 FINANCIAL ACCOUNTING FOR CENTERPOINT ENERGY?

18 A. As Director of Financial Accounting for CenterPoint Energy, I am responsible for

19 the accounting books and records of CNP's regulated gas and electric businesses,

20 including financial accounting for gas and electric, regulatory accounting and

21 reporting, property accounting, and gas cost accounting for these business units.

22 As such, I am responsible for ensuring that CNP has adequate staff, processes and

23 systems in place to meet its financial and regulatory accounting and reporting

24 requirements. In addition, I am responsible for the adequacy of certain internal

Direct Testimony of Mary A. KirkCenterPoint Energy Houston Electric, LLCDistribution Cost Recovery Factor Filing

126

Page 2 of 34

1 controls including compliance with §404 of the Sarbanes-Oxley Act of 2002 as it

2 relates to CNP's regulated operations.

3 Q. ON WHOSE BEHALF ARE YOU TESTIFYING?

4 A. I am testifying on behalf of CenterPoint Energy Houston Electric, LLC

5 ("CenterPoint Houston" or the "Company"), which is a distribution service

6 provider in the Electric Reliability Council of Texas Region.

7 Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE REGULATORY

8 COMMISSIONS?

9 A. Yes. I have testified before the Railroad Commission of Texas in GUD Nos.

10 9791, 9902, and 10432. I have also filed testimony with the Arkansas Public

11 Service Commission in Dockets 10-108-U, and 15-098-U; and filed testimony

12 with the Texas Public Utility Commission ("Commission") in Docket No. 44572.

13 In addition, I have supervised the compilation of accounting information used for

14 periodic reporting requirements and various rate and regulatory proceedings

15 before public utility commissions in the states of Arkansas, Louisiana, Oklahoma,

16 Mississippi and Texas.

17 II. PURPOSE OF TESTIMONY

18 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS

19 PROCEEDING?

20 A. The purpose of my direct testimony is to support the Company's application to

21 Amend its Distribution Cost Recovery Factor ("DCRF") pursuant to Public Utility

22 Regulatory Act ("PURA") §36.210 and 16 Texas Administrative Code ("TAC")

23 §25.243(c). Specifically, my testimony presents the Company's revenue

24 requirement and all supporting schedules and calculations, with the exception of

Direct Testimony of Mary A. KirkCenterPoint Energy Houston Electric, LLC

Distribution Cost Recovery Factor Filing

127

Page 3 of 34

1

2

3

4

5

6

7

8 Q.

9 A.

10

111213141516171819202122232425

Schedules H and J, required by the Commission's Distribution Cost Recovery

Factor Filing Package ("DCRF-RFP") instructions. My testimony also addresses

the Company's DCRF margin tax calculation and an adjustment to the previously

filed DCRF in Docket No. 44572. My testimony establishes, in conjunction with

the testimony provided by Company witnesses Steven C. Greenley and Laurie A.

Burridge-Kowalik, that this filing complies with PURA §36.210,16 TAC §25.243

and the Commission's DCRF-RFP instructions.

WHAT DCRF-RFP SCHEDULES ARE YOU SPONSORING?

I am sponsoring the following DCRF-RFP schedules and the associated

supporting workpapers:

Schedule A Summary of Distribution Cost of Service (DCOS)Schedule B Summary of Distribution Rate BaseSchedule B-1 Distribution Plant-GrossSchedule B-5 Distribution Accumulated DepreciationSchedule B-7 Distribution Accumulated Deferred Federal Income

Taxes (ADFIT)Schedule E- 1 Distribution Depreciation ExpenseSchedule E-2 Distribution Taxes Other than Federal Income TaxesSchedule E-3 Distribution Federal Income TaxesSchedule E-3.7 Plant-Related Accumulated Deferred Federal Income Tax

(ADFIT) BalancesSchedule E-3.10 Distribution Plant Accumulated Deferred Federal Income

Tax (ADFIT) ChangeSchedule K Annual Earnings Report for the Twelve Months Ended

December 31, 2015



128

Page 4 of 34

1 III. REOUIREMENTS OF DCRF APPLICATION

2 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 1 OF THE

3 DCRF-RFP, IS THE INFORMATION PROVIDED TAKEN FROM THE

4 COMPANY'S ACCOUNTS AND RECORDS PRESCRIBED IN THE

5 FEDERAL ENERGY REGULATORY COMMISSION ("FERC") CHART

6 OF ACCOUNTS?

7 A. Yes. The information submitted in this filing is taken from the Company's books

8 and records that are maintained according to the FERC Electric Uniform System

9 of Accounts.

10 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 2, DOES YOUR

11 TESTIMONY SUPPORT THE REQUIRED SCHEDULES AND

12 WORKPAPERS?

13 A. Yes. My testimony supports and adopts the required schedules and workpapers of

14 the DCRF-RFP that I sponsor.

15 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 2, ARE YOUR

16 SCHEDULES AND WORKPAPERS PROVIDED IN NATIVE

17 ELECTRONIC FORMAT INCLUDING ACTIVE EXCEL WORKBOOKS

18 AND ALL LINKED WORKBOOKS, WITH ALL FORMULAS, CELL

19 REFERENCES, LINKS, ETC. INTACT, FUNCTIONING, AND

20 COMPLETE?

21 A.

22

23

Yes, except where Excel data was derived from a non-Excel source and was

directly entered into the Excel spreadsheet. Otherwise all workbooks are "active"

as described in General Instruction No. 2.


129

Page 5 of 34

1 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 3, ARE THE COSTS

2 AND RETURN CALCULATED IN COMPLIANCE WITH 16 TAC

3 §25.243?

4 A. Yes. Only the costs and return that are eligible for recovery under 16 TAC

5 §25.243 have been included in the calculation of the Company's proposed DCRF

6 rates.

7 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 5, HAVE THE

8 SCHEDULES BEEN PREPARED AS NOTED IN THE DCRF-RFP

9 SAMPLE FORMS?

10 A. Yes, with the exception that some schedules may have been modified for

11 Company specifics. As previously stated, all schedules and workpapers are

12 provided in native electronic format including active Excel workbooks and all

13 linked workbooks, with all formulas, cell references, links, etc. intact,

14 functioning, and complete.

15 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 5, NOTES 1 AND 2,

16 HAVE WORKPAPERS BEEN PROVIDED FOR THE ADDITIONS,

17 RETIREMENTS, AND OTHER ADJUSTMENTS FOR EACH YEAR PER

18 FERC ACCOUNT?

19 A. Yes. Additions, retirements, and other adjustments by year are shown in

20 WP/Schedule B-1.1 and WP/Schedule B-5.1.



130

Page 6 of 34

1 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 5, HAVE

2 INDIRECT CORPORATE COSTS AND CAPITALIZED O&M COSTS

3 BEEN EXCLUDED FROM THE DCRF?

4 A. Yes. In accordance with 16 TAC §25.243(b)(3), the Company has excluded

5 indirect corporate costs and capitalized O&M costs from this DCRF Application.

6 Indirect corporate costs are costs that cannot be directly assigned. The Company

7 does not assign indirect corporate costs to capital projects. Rather, the Company

8 only capitalizes corporate costs directly associated with capital projects. Because

9 there are no indirect corporate costs assigned to capital projects, no specific

10 adjustments to exclude such costs needed to be made to the capital investment

11 included in the DCRF application. The Company has also excluded any

12 generation-related costs, transmission-related costs, and any distribution invested

13 capital recovered through a separate surcharge, tracker, rider, or other mechanism.

14 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 5, NOTE 2, HAVE

15 ANY AMOUNTS RECORDED TO NON-DISTRIBUTION ACCOUNTS

16 (FERC 303, 352, 353, 391, AND 397) BEEN INCLUDED IN THE DCRF?

17 A. Yes. However, the Company has included only distribution-related amounts

18 recorded in these non-distribution FERC accounts in accordance with 16 TAC

19 §25.243(b)(3).

20 Q. HOW WERE THESE NON-DISTRIBUTION FERC ACCOUNTS

21 DETERMINED TO BE DISTRIBUTION-RELATED?

22 A. The Direct Testimony of Steven C. Greenley addresses the determination of

23 distribution-related projects included in the Company's DCRF filing.



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I Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 5, NOTE 3, HAVE

2 WORKPAPERS BEEN PROVIDED TO SUPPORT THE ALLOCATION

3 METHODS USED TO DERIVE THE AMOUNTS INCLUDED IN THE

4 REVENUE REQUIREMENT?

5 A. Yes. Where applicable, the schedule workpapers support allocations used within

6 the calculation of the revenue requirement.

7 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 5, NOTE 4, HAS

8 THE COMPANY'S MOST RECENT ANNUAL EARNINGS REPORT,

9 PURSUANT TO 16 TAC §25.73(b), BEEN PROVIDED?

10 A. Yes. The Company has prepared the most recent annual earnings report for

11 calendar year ended December 31, 2015, in accordance with 16 TAC §25.73(b)

12 and attached as Schedule K. The annual earnings report, any proposed

13 adjustments, updates, and workpapers have been provided in Excel format with

14 all workbooks and all linked workbooks having all formulas, cell references,

15 links, etc., intact, functioning, and complete.



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1 Q. WITH RESPECT TO THE ANNUAL EARNINGS REPORT FOR

2 CALENDAR YEAR ENDED DECEMBER 31, 2015, IS THE COMPANY

3 EARNING MORE THAN ITS AUTHORIZED RATE OF RETURN USING

4 WEATHER-NORMALIZED DATA, PURSUANT TO 16 TAC

5 §25.243(e)(4)?

6 A. No. As shown on the attached Schedule K [Schedule III, Column (3), Line 35]

7 the Company has calculated a rate of return using weather-normalized data of

8 7.16%, which is below the authorized rate of return of 8.21 %.1

9 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 6, DO THE

10 AMOUNTS APPROVED IN THE COMPANY'S LAST

11 COMPREHENSIVE BASE-RATE PROCEEDING CORRESPOND TO

12 THE AMOUNTS IN THE FIRST COLUMN IN YOUR SPONSORED

13 SCHEDULES OF THE DCRF-RFP?

14 A. Yes. The Company has included Exhibit LABK-2 in the direct testimony of Ms.

15 Burridge-Kowalik, which reflects the distribution amounts approved as part of its

16 last comprehensive base-rate proceeding in Docket No. 38339. The amounts in

17 column (1) of my sponsored schedules begin with the approved amounts from

18 Docket No. 38339 with the exception of Schedule E-3.7, which is the Company

19 total year-end book balance for ADFIT as defined in DCRF-RFP general

20 instructions.

Application of CenterPoint Energy Houston Electric, LLC for Authority to Change Rates, Docket No.38339, Order on Rehearing at Finding of Fact 75A (June 23, 2011).



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1 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 6, HAS THE

2 COMPANY PROVIDED A COMPARISON THAT SUMMARIZES THE

3 DCRF AND DCRF UPDATES APPROVED BY THE COMMISSION

4 SINCE ITS LAST COMPREHENSIVE BASE-RATE PROCEEDING?

5 A. Yes. Company Witness Ms. Burridge-Kowalik provides a comparison in Exhibit

6 LABK-3 that summarizes the DCRF and DCRF updates previously approved

7 since the Company's last comprehensive base-rate proceeding.

8 Q. IN REFERENCE TO GENERAL INSTRUCTION NO. 7, HAS THE

9 COMPANY PROVIDED A HISTORY OF THE DCRF'S RATES

10 APPROVED IN PREVIOUS DCRF FILINGS?

11 A. Yes. In Exhibit LABK-4, Company Witness Ms. Burridge-Kowalik provides the

12 proposed rates within this DCRF application and a history of the DCRF's rates

13 previously filed since the Company's last comprehensive base-rate proceeding in

14 Docket No. 38339.

15 IV. BACKGROUND OF DCRF PROCEEDINGS

16 Q. HAS THE COMPANY PREVIOUSLY FILED A DCRF APPLICATION?

17 A. Yes, the Company filed a DCRF application in Docket No. 44572, with an

18 investment period of January 1, 2010 through December 31, 2014. The

19 application was resolved by an Unopposed Stipulation and Settlement Agreement

20 ("Settlement Agreement") that was approved by the Commission in a final order

21 issued on August 5, 2015.


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1 Q. WHAT IS THE INVESTMENT PERIOD IN THE CURRENT DCRF

2 APPLICATION?

3 A. The current application investment period is January 1, 2010 through December

4 31, 2015.

5 V. CALCULATION OF REVENUE REQUIREMENT

6 Q. PLEASE DESCRIBE THE INCREASE IN DISTRIBUTION RATE BASE

7 ON SCHEDULE B OF THE DCRF-RFP.

8 A. 16 TAC §25.243(b)(3) describes distribution invested capital as distribution plant,

9 distribution-related intangible plant, and distribution-related communication

10 equipment and networks properly recorded in FERC accounts 303, 352, 353,

11 360-374, 391, and 397. Net distribution invested capital is then derived by

12 subtracting associated accumulated reserves and adjusting for distribution-related

13 accumulated deferred federal income taxes. Schedule B shows an increase in net

14 distribution invested capital of $689,351,015, which was calculated by taking the

15 difference between the calculated distribution rate base at December 31, 2015,

16 and the approved distribution rate base in Docket No. 38339.

17 Q. WHAT RATE OF RETURN WAS APPLIED TO THE INCREASE IN THE

18 COMPANY'S DISTRIBUTION RATE BASE ON SCHEDULE B?

19 A. As discussed in the direct testimony of Ms. Burridge-Kowalik, the Company is

20 required to calculate an alternative after-tax rate of return per 16 TAC

21 §25.243(d)(2). The alternative after-tax rate of return is 7.54% as shown on Ms.

22 Burridge-Kowalik's WP/Schedule J-3.2.


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1 Q. HOW WAS THE RETURN ON INCREMENTAL RATE BASE

2 CALCULATED ON SCHEDULE B?

3 A. The incremental increase in distribution rate base was multiplied by the

4 alternative after-tax rate of return to determine the incremental return on

5 distribution rate base shown on Schedule B of $51,977,067.

6 Q. PLEASE DESCRIBE THE INCREMENTAL INCREASE IN

7 DISTRIBUTION COST OF SERVICE SHOWN ON SCHEDULE A.

8 A. The Company followed the DCRF formula outlined in 16 TAC §25.243(d)(1) in

9 calculating the distribution cost of service on Schedule A. Therefore, per 16 TAC

10 §25.243(d)(1), the following costs are included in the Company's incremental

11 distribution cost of service on Schedule A:

12 • Depreciation expense, as related to gross distribution invested capital;

13 • Federal income tax, as related to net distribution invested capital; and

14 • Other taxes, as related to net distribution invested capital and exclusive of15 municipal franchise fees.

16 The incremental values of these allowable expenses are then combined with the

17 incremental return on distribution rate base, from Schedule B, resulting in the

18 Company's incremental distribution revenue requirement of $133,904,269.

19 Q. PLEASE DISCUSS THE INCREMENTAL DEPRECIATION EXPENSE

20 INCLUDED IN THE COMPANY'S DCRF-RFP.

21 A. The incremental depreciation expense is calculated on Schedule E-1. The

22 depreciation rates approved in Docket No. 38339 are shown in column (5). These

23 rates are applied to the incremental increase in gross plant in service attributable

24 to the additions in distribution capital.



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1 Q. PLEASE DISCUSS THE CALCULATION OF PROPERTY TAXES IN

2 THE COMPANY'S DCRF-RFP.

3 A. The property tax attributable to distribution investment was determined by taking

4 the amount of property tax functionalized to distribution in Docket No. 38339 and

5 adding to it the increase in property tax attributable to the net distribution plant

6 additions from January 1, 2010 to December 31, 2015. The computed

7 incremental distribution property tax is added to the property tax functionalized to

8 distribution in Docket No. 38339 for the total distribution property tax presented

9 on Schedule E-2. This increase was calculated by applying a net plant factor to

10 the net plant additions on WP/Schedule E-2. 1.

11 Q. WHAT METHOD DOES THE COMPANY UTILIZE FOR THE MARGIN

12 TAX?

13 A. Under the Texas Margin Tax statutes, an entity is allowed to reduce its taxable

14 revenues by the greater of. (1) its allowable Cost of Goods Sold ("COGS")

15 deduction under Texas Margin Tax statutes; (2) certain employee compensation;

16 or (3) 30% of total revenues. The Company utilizes the COGS method.

17 Q. WHY DID THE COMPANY CHOOSE THE COGS METHODOLOGY IN

18 THE CALCULATION OF ITS MARGIN TAX?

19 A. Under the Texas Margin Tax statutes, the Company is required to be included in

20 the consolidated Texas Margin Tax return with its parent and other member

21 companies of the affiliated group. Each member company included in the

22 consolidated group is required to use the same method of reducing its taxable

23 revenues. CNP, the parent, elected to reduce its consolidated taxable revenues by



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1 COGS. This annual election was the most beneficial method for the CNP

2 affiliated group and was, therefore, applied to all companies in the affiliated

3 group, as required by statute. Because Texas Margin Tax statutes have

4 specifically excluded transportation of electricity as an allowable COGS

5 deduction, these costs are not included in the overall COGS reduction to gross

6 revenue in determining the taxable margin. Therefore, the Texas Margin Tax for

7 the Company is based on total revenues.

8 Q. PLEASE EXPLAIN THE MARGIN TAX CALCULATION PRESENTED

9 BY THE COMPANY IN THIS DCRF APPLICATION.

10 A. The DCRF statute contemplates a calculation of the change in distribution

11 invested capital that has occurred since the Company's last comprehensive

12 base-rate proceeding, Docket No. 38339. In the Company's prior DCRF

13 application, Docket No. 44572, the Company calculated Margin Taxes only on

14 incremental revenue related to the change in distribution invested capital. Upon

15 further review of the requirements of 16 TAC §25.243(d) and as approved by the

16 Commission in our last comprehensive base-rate proceeding in Docket No.

17 38339, the Company has updated the calculation of the margin tax, in this DCRF

18 application, based on total revenues.



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Page 14 of 34

1 Q.

2

3 A.

4

5

6 Q.

7

8

9 A.

10

11

12

13

14

15

16

17

18

19

20

Q•

A.

21

22

IS IT APPROPRIATE TO USE TOTAL REVENUES IN THE

CALCULATION OF ITS MARGIN TAX?

Yes. Using total revenues in the calculation of the DCRF Margin Tax is

consistent with the methodology used in Docket No. 38339 and 16 TAC

§25.243(d). The margin tax is further discussed in Section VI of my testimony.

PLEASE DISCUSS THE INCREASE IN INCOME TAXES RESULTING

FROM THE NEW DISTRIBUTION PROJECTS INCLUDED IN THE

COMPANY'S DCRF-RFP.

Federal income tax expense increased due to the increase in the return on rate

base resulting from the addition of the new distribution facilities. The

synchronized interest deduction is related to the increased rate base and was

increased proportionally. WP/Schedule E-3.1 contains the calculation of the

change in synchronized interest. All other components of the distribution federal

income tax calculation are left unchanged from Docket No. 38339.

DID ANY COSTS INCLUDED AS DISTRIBUTION INVESTED CAPITAL

RESULT FROM A CHANGE IN ACCOUNTING RULES OR PRACTICES

SINCE THE COMPANY'S PREVIOUS DCRF FILING IN DOCKET NO.

38339?

Yes, but many of these changes were approved in the Settlement Agreement in

last year's DCRF case. On an annual basis, the Company considers whether

factors outlined in its capitalization policy warrant a change in the accounting for

certain costs. Those factors were satisfied with respect to certain overhead



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1 construction costs and luminaires. These changes resulted in the inclusion of

2 these costs in distribution invested capital.

3 Q. PLEASE DISCUSS THE ACCOUNTING PRACTICE CHANGE

4 RELATED TO CERTAIN OVERHEAD CONSTRUCTION COSTS.

5 A. As discussed in my direct testimony filed in Docket No. 445722, FERC 18 CFR

6 PT 101 Electric Plant Instructions 4. Overhead Construction Costs authorizes a

7 utility to include overhead costs, such as general office salaries and expenses,

8 applicable to construction as a part of its assets. The Company began the analysis

9 of whether an accounting change was warranted in 2013. This analysis was driven

10 by our capitalization policy and the results of an American Gas

11 Association/Edison Electric Institute accounting committee survey. Consistent

12 with the FERC Instruction, the Company, in 2014, began to include a portion of

13 CNP's Property Accounting and Accounts Payable departments in overhead

14 construction cost.

15 The survey results also showed that other utilities capitalized Call Center costs

16 where the calls were directly related to new construction and new meters. Again,

17 consistent with this FERC Instruction, the Company, in 2013, researched to

18 determine whether calls related to new construction could be separately identified.

19 It was not until early 2015, that it was determined the Customer Vision Platform

20 ("CVP") system provided the functionality to separately identify the Call Center

21 new construction related activities. In 2015, the Company began to include in

2 Exhibit MAY,-0 1.



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1 overhead construction cost a portion of CNP's Call Center department that

2 interfaces directly with new construction and new meter calls.

3 Q. WHY IS IT REASONABLE TO INCLUDE COSTS FOR WORK

4 PERFORMED BY CNP'S PROPERTY ACCOUNTING AND ACCOUNTS

5 PAYABLE DEPARTMENTS IN CONSTRUCTION OVERHEAD?

6 A. The Property Accounting department is solely responsible for maintaining CNP's

7 financial records for fixed assets from the point of acquisition or construction to

8 the point of retirement or disposal. The fixed asset records are based on data

9 contained in capital work orders provided by Electric Operations. Due to the high

10 transaction volume, programs have been developed that automate unitization

11 throughout the fixed asset life cycle. Manual processing is still required for

12 certain types of capital work and for error resolution. The time devoted to manual

13 processing of distribution work orders by Property Accounting personnel is

14 charged to distribution construction overhead. Likewise, the Accounts Payable

15 department is responsible for processing the high volume of invoices for CNP's

16 capital work orders. Because these departments support construction activities, it

17 is reasonable to assign the costs associated with this support to construction

18 overhead as authorized by FERC.

19 Q. HOW DO THE PROPERTY ACCOUNTING AND ACCOUNTS PAYABLE

20 DEPARTMENTS CHARGE TIME TO DISTRIBUTION CONSTRUCTION

21 OVERHEAD?

22 A. All Property Accounting personnel who perform manual unitization are required

23 to track the amount of time spent analyzing and unitizing distribution work



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1 orders. At the end of every week, each employee identifies the number of hours

2 that were devoted to manual unitization and codes their time directly to the

3 distribution construction overhead order.

4 Accounts Payable costs charged to the Company are apportioned to capital

5 based on the Company's expected capital spending. These capital costs are

6 further allocated to distribution construction overhead based on the number of

7 hours that were devoted to manual unitization by the Property Accounting

8 department for capital work.

9 Construction overhead charges are then applied to eligible distribution

10 construction work orders.

11 Q. WHY IS IT REASONABLE TO INCLUDE COSTS FOR WORK

12 PERFORMED BY CNP'S CALL CENTER IN CONSTRUCTION

13 OVERHEAD?

14 A. The Call Center department is solely responsible for CNP's communication with

15 customers' inquiries related to new construction and new meters for electric

16 utility via telephone and internet. Because the department supports new

17 construction activities, it is reasonable to assign the costs associated with this

18 support to construction overhead as authorized by FERC.

19 Q. HOW DOES THE CALL CENTER DEPARTMENT CHARGE TIME TO

20 DISTRIBUTION CONSTRUCTION OVERHEAD?

21 A. Specific call center personnel are responsible for handling all communications

22 related to new construction and new meters. These personnel are required to track

23 the amount of time spent handling customers' inquiries. At the end of the week,


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1 each employee identifies the number of hours that were devoted to handling

2 inquiries related to new construction and new meters and codes their time directly

3 to applicable work orders. These work orders settle to construction overhead

4 orders based on the actual monthly permit/builder count.

5 Once all charges are collected in construction overhead work orders, the

6 accounting system allocates construction overhead charges as a whole to eligible

7 distribution construction work orders based on a percentage of the expenditures

8 charged to that work order in Construction Work in Progress (CWIl').

9 Q. ARE THESE COSTS FOR PROPERTY ACCOUNTING, ACCOUNTS

10 PAYABLE, AND THE CALL CENTER PROPERLY RECOVERED

11 THROUGH THE DCRF?

12 A. Yes. The Company has properly included these costs in overhead construction

13 capital costs according to FERC guidelines for Overhead Construction Costs. In

14 addition, the only overhead construction capital costs included in this filing are

15 those charged to projects that have been recorded in the FERC accounts approved

16 for use under 16 TAC §25.2433.

17 Q. HOW DOES THE COMPANY DEFINE A STREETLIGHT LUMINARY?

18 A. As discussed in Docket No. 44572, a streetlight luminary consists of the fixture

19 attached to the pole or arm, the head, wiring, bulb and photo cell.

3 See Workpaper Overhead Calculations for overhead construction capital costs included in this filing.


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1 Q. DO LUMINAIRES QUALIFY FOR CAPITALIZATION UNDER FERC

2 ACCOUNTING AND CNP'S CAPITALIZATION POLICY?

3 A. Yes. FERC Account 373 Street Lighting and Signal Systems allows for the

4 capitalization of luminaires. Luminaires installed with the pole and bracket, as

5 one unit, have always been capitalized. CNP's capitalization policy also supports

6 the capitalization of luminaire replacements given changes in technology and the

7 relative replacement dollar value to the current retirement unit.

8 Q. WHEN DID LUMINAIRE REPLACEMENTS BEGIN TO BE

9 CAPITALIZED AND WHY?

10 A. Luminaire replacements became a separate retirement unit on January 1, 2014.

11 Pursuant to the CNP capitalization policy, additions or changes to retirement units

12 are re-evaluated when changes in technology occur or there is a notable change in

13 material costs. Consistent with this policy, the Company, in 2013, evaluated

14 whether luminaires should be capitalized to FERC Account 373. This evaluation

15 was triggered by the fact that the Company began, in 2013, to experience a

16 change in luminary technology and related increases in material costs that no

17 longer qualified luminaires as a minor material item.

18 Historically, the Company used three types of luminaire/lamp technology:

19 (1) Mercury Vapor, which was discontinued for new street lights after December

20 31, 1982; (2) High Pressure Sodium; or (3) Metal Halide. In 2013, the Company

21 began offering new Light Emitting Diode ("LED") luminaires in residential

22 applications. Compared to the older lighting technologies, the benefits of LED

23 luminaires include longer life and energy savings in the range of 40% to 60%, but


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Page 20 of 34

1 they also have higher installation costs than older technology luminaires, which

2 average $173 per luminaire. With LED technology, luminaires will have a much

3 longer service life relative to the lighting standard and the replacement cost will

4 be approximately $527 per luminaire.

5 Q. IS THE TREATMENT OF LUMINAIRE REPLACEMENTS AS A

6 RETIREMENT UNIT CONSISTENT WITH INDUSTRY PRACTICE?

7 A. Yes. CNP polled Edison Electric Institute ("EEI") Property Accounting Members

8 to determine how other regulated utilities treat luminaire replacements. Fourteen

9 of the seventeen utilities that responded indicated that they currently capitalize

10 luminaire replacements. See Exhibit MAK-02 for the EEI survey results.

11 Q. WHY ARE THE COSTS ASSOCIATED WITH THE CAPITALIZATION

12 OF LUMINAIRE REPLACEMENTS APPROPRIATE FOR RECOVERY

13 THROUGH THE DCRF?

14 A. As I mention above, the Company followed the CNP capitalization policy in

15 recognizing the luminaires as a separate retirement unit based on a change in the

16 technology and the related increases in material costs. In addition, the Company

17 followed FERC guidelines for including the cost of luminaires in FERC Account

18 373. Because FERC Account 373 is eligible for inclusion in the DCRF, it is

19 appropriate for the Company to include these costs in distribution capital

20 investment as defined in 16 TAC §25.243(b)(3).

21 In addition, as shown in Exhibit MAK-03, recovery of luminaire

22 replacement costs as a retirement unit is consistent with the intent of PURA

23 §36.210 in light of the new technology for street light luminaires. Specifically,


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I the bill analysis accompanying PURA §36.210 makes clear that "...funding a

2 modem and reliable electrical grid depends on a regulatory structure that both

3 allows utilities to keep pace with evolving demands and technology, and provides

4 for timely cost recovery." This is also consistent with the treatment of luminaires

5 contemplated in Docket No. 42742, which addressed the Company's application

6 to amend its lighting service tariff to add new street lighting options. As noted in

7 the Company's application in that proceeding and in the Commission's Final

8 Order dated November 14, 2014, the Company did not seek recovery of those

9 costs at that time, but rather agreed to allow the costs associated with this

10 initiative to be addressed in the Company's next DCRF and base rate proceedings.

11 Q. WERE THESE ACCOUNTING CHANGES APPROVED IN THE

12 COMPANY'S PRIOR DCRF FILING?

13 A. The signatories to the Settlement Agreement in the Company's prior DCRF filing,

14 Docket No. 44572, agreed to the capitalization of LED streetlight luminaire costs,

15 as discussed in the respective application, and agreed that those costs are eligible

16 for recovery through the DCRF4.

17 Q. ARE THERE ANY OTHER ACCOUNTING MATTERS THAT YOU

18 WISH TO ADDRESS?

19 A. As I mention in my direct testimony in Docket No. 44572, I made the

20 Commission aware of two new accounting-related matters that have occurred

21 since Docket No. 38339. These matters related to capitalization of program

4 Application of CenterPoint Energy Houston Electric, LLC for Approval of a Distribution Cost RecoveryFactor Pursuant to P. U. C. Substantive Rule 25.243, Docket No. 44572, Order, Finding of Fact 37 (August5, 2015). See Workpaper Luminaire Replacement Cost for distribution capital investment associated withluminaire replacements.



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1 assessment (underground cable life extension) costs that the Company adopted

2 consistent with FERC guidance regarding one-time capital assessment programs

3 and to the Company's systematic ability to use FERC 106 (Completed

4 construction not classified, or "CCNC") based on an accounting system upgrade

5 that was completed in 2014.

6 The Company has no additional accounting matters to make the Commission

7 aware of since the Company's previous DCRF filing in Docket No. 44572.

8 Q. WERE THESE ACCOUNTING MATTERS APPROVED IN THE

9 COMPANY'S PRIOR DCRF FILING?

10 A. The signatories to the Settlement Agreement in the Company's previous DCRF

11 filing, Docket No. 44572, agreed to the capitalization of underground cable life

12 extension costs and agreed that those costs are eligible for recovery through the

13 DCRFS.

14 The signatories also agreed to the inclusion of distribution investment eligible for

15 recovery under FERC 106 and agreed that those costs are eligible for recovery

16 through that respective DCRF6.

5 Application of CenterPoint Energy Houston Electric, LLC forApproval ofa Distribution Cost RecoveryFactor Pursuant to P. U. C. Substantive Rule 25.243, Docket No. 44572, Order, Finding of Fact 38 (August5, 2015)

6 Application of CenterPoint Energy Houston Electric, LLC forApproval of a Distribution Cost RecoveryFactor Pursuant to P. U. C. Substantive Rule 25.243, Docket No. 44572, Order, Finding of Fact 39 (August5, 2015)



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1 Q. HAS THE COMPANY MADE ANY MATERIAL CHANGE IN THE

2 UNDERGROUND CABLE LIFE EXTENSION PROGRAM IDENTIFIED

3 IN THE DCRF APPLICATION?

4 A. No. As Mr. Greenley's testimony notes, there have been no material changes to

5 the underground cable life extension program.

6 VI. MARGIN TAX

7 Q. PLEASE EXPLAIN THE REQUIREMENTS OF 16 TAC §25.243(d) WITH

8 RESPECT TO THE CALCULATION OF OTHER TAXES IN THE DCRF

9 FILING?

10 A. The formula for the Current Other Taxes and description are as follows:

11 (OTc - OTrc)1213 OTC = Current Other Taxes (taxes other than income taxes and taxes14 associated with the return on rate base), as related to Current Net15 Distribution Invested Capital, calculated using current tax rates and the16 methodology from the last comprehensive base-rate proceeding, and not17 including municipal franchise fees. [emphasis added]1819 OTrc = Other Taxes, as related to Net Distribution Invested Capital from20 the last comprehensive base-rate proceeding, and not including municipal21 franchise fees. [emphasis added]2223 Q. DOES THE COMMISSION'S TREATMENT OF THE MARGIN TAX

24 ISSUE IN DOCKET NO. 38339 DICTATE HOW THE MARGIN TAX

25 CALCULATION IS CALCULATED IN THIS FILING?

26 A. Yes. Two portions of the Proposal for Decision (PFD) in Docket No. 38339 are

27 relevant. At page 18, the PFD states,

28 "The privilege year is the equivalent of the service period - it is the period29 that covers the timeframe that electricity is provided to the customer48. In30 this case, the evidence establishes that the SFT is paid for the privilege



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1 period of the calendar year in which the payment is made and the report is2 due, regardless of when the accounting accrual for the cost occurs."

3 At page 19, the PFD notes,

4 "The evidence further demonstrates that it is not unusual for a franchise to5 have a period for the tax base that is different than the service period, as is6 the case with SFT52."

7 The privilege year/service period decision in Docket No. 38339 is critical when

8 calculating the correct incremental margin tax number in this case. As the

9 Company explained in Docket No. 38339, its Texas margin tax payment on May

10 15 of any given year relates to the service provided during that calendar year (i.e.,

i l the May 15, 2009 test year payment in Docket No. 38339 relates to the 2009

12 privilege or service period). The tax base is the taxable entity's margin on the

13 year prior to the service period year. Therefore, the payment on May 15 of any

14 given year relates to the tax base from the prior calendar year (i.e., in Docket No.

15 38339, the May 15, 2009 test year payment relates to 2009 service, but is based

16 on the tax base from 2008).

17 In Docket No. 38339, the Commission approved this methodology for calculating

18 Texas margin tax and, thus, Company's current rates were set using this formula.7

19 Q. APPLYING THE DOCKET NO. 38339 METHODOLOGY, WHAT IS THE

20 CORRECT SERVICE PERIOD AND TAX BASE TO USE IN THE DCRF

21 TEXAS MARGIN TAX CALCULATION?

22 A. As discussed previously, the rule specifically states to use the methodology from

23 the last comprehensive base-rate proceeding. The application of the Docket No.

7Commission Docket No. 38339, Order on Rehearing, June 23, 2011, FOF 161-165.



149

Documents

Exhibit LABK-12 Page 6 of 27 - Texas