2000 M Street, NW
Suite 715
Washington, DC 20036
Phone: 202-223-5625
Fax: 202-833-5596
Mastering Your First (or Next)
State Public Utility
Commission Hearing
January 21, 2014, 2-5PM
D.C. Public Service Commission,
1333 H Street NW, Suite 700, EastTower
Washington, D.C. 20005
Program Materials
Including Case Study
Presented by
Energy Bar Association (EBA) State Commission Practice &
Regulation Committee and Young Lawyers Committee;
together with
Environment, Energy and Natural Resources
Section of the D.C. Bar
www.eba-net.org
SAVE THE DATE!
EBA ANNUAL MEETING
April 8-9, 2014
Preparing for the Future of the Energy Industry
The Energy Bar Association's Annual Meeting includes two days of sessions on
the U.S. energy markets, nuclear, gas, electric, reliability and so much more!
The Annual Meeting also includes numerous networking opportunities and a
sit down dinner the evening of April 9th.
CLE and Ethics credit approval pending.
Renaissance Hotel
999 Ninth Street, NW
Washington, DC
Registration and Program Details available at
www.EBA-Net.org
2000 M Street, NW, Suite 715, Washington, DC 20036
202.223.5625
www.EBA-Net.org
MASTERING YOUR FIRST (OR NEXT) STATE PUBLIC UTILITY
COMMISSION HEARING
January 21, 2014
AGENDA
2:00 p.m.
2:05 p.m.
2:30 p.m.
2:50 p.m.
Welcome and Introductions: Hon. Betty Ann Kane, Chairman, D.C. Public
Service Commission
Lecture: Top Ten Do’s and Don’ts with Regard to Preparing Witnesses and
Cross-Examination in a Utility Rate Case, Len Anthony, retired General Counsel
of Progress Energy
Question and Answer/Discussion session: Witness Preparation and Cross
Examination, led by Len Anthony with participation from the Bench
Administrative Hearing; In the Matter of UtilityCo’s Application for Approval of
IGCC Facility and for Special Cost Recovery
Entry of Appearances
Presentation of UtilityCo Witness
Cross-examination of UtilityCo Witness
Redirect of UtilityCo Witness
Questions by the Commission for UtilityCo Witness
Presentation of Commercial Customer Group Witness
Cross-Examination of Commercial Customer Group Witness
Redirect of Commercial Customer Group Witness
Questions by the Commission for Commercial Customer Group Witness
(short break if needed)
Oral Arguments in Lieu of Brief
4:15 p.m.
Question Answer/Discussion of the Do’s and Don’ts of State Administrative
Practice, moderated by Delia Patterson, Assistant General Counsel, APPA
5:00 p.m.
Wine and Cheese Reception
5:30 p.m.
Adjournment
i
MASTERING YOUR FIRST (OR NEXT) STATE PUBLIC UTILITY COMMISSION HEARING
Program Materials
Table of Contents
1. Agenda .............................................................................................................................. i
2. Table of Contents .............................................................................................................. ii
3. Faculty Biographies .......................................................................................................... 1
4. Handout: What is CWIP and Why is CWIP a Good Topic to Build a Mock Rate Case
Exercise Around? .............................................................................................................. 3
5. Handout: Top Ten List for Preparing Your Rate Case Witness ........................................ 5
6. Handout: Top Ten List for Preparing Your Cross- Examination ..................................... 6
7. Getting Started: Tips for your first hearing ...................................................................... 7
8. Objections ......................................................................................................................... 8
9. Case Materials ................................................................................................................... 9
A. Application of Public Utility Company, LLC for a Certificate of Public Convenience
and Necessity to Construct an Integrated Gasification Combined Cycle Facility,
Approval of Cost Estimate and Schedule, Approval for Timely Recovery of
Construction Costs
B. Direct Testimony Ralph Zarumba on behalf of Public Utility Company, LLC
C. Direct Testimony of Steve W. Chriss on behalf of the Commercial Customer Group
ii
MASTERING YOUR FIRST (OR NEXT) STATE PUBLIC UTILITY COMMISSION
HEARING
FACULTY BIOGRAPHIES
Betty Ann Kane is Chairman of the D.C. Public Service Commission. Betty Ann Kane is an
experienced public official combining over 30 years of service to the District of Columbia
Government in elected and appointed positions with extensive private sector experience in
regulatory, administrative and public policy matters. Before joining the PSC, Chairman Kane
served as a Trustee and as Executive Director of the District of Columbia Retirement Board. She
served four years as an At-Large member of the DC Board of Education, and was elected to three
terms as an At-Large member of the City Council. Her service on the Council included chairing
the Public Services and Cable Television Committee, with legislative, budgetary and oversight
responsibility for the Public Service Commission, the Office of Peoples Counsel, and the Office
of Cable Television
Paul Roberti is a Commissioner of the Rhode Island Public Utilities Commission. Prior to his
appointment, Mr. Roberti served for 17 years in the Rhode Island Attorney General's Office,
most recently as Assistant Attorney General and Chief of the Regulatory Unit. In that capacity,
he has been involved in hundreds of proceedings involving public utility and energy matters
before the Rhode Island Public Utilities Commission, the Rhode Island Energy Facility Siting
Board, the Rhode Island Supreme Court and the Federal Energy Regulatory Commission
(FERC).
Sheila Tipton is a Board Member of the Iowa Utilities Board, appointed in 2013. For 33 years
prior to joining the IUB, she was involved in the private practice of law, representing public
energy, telecommunications and water utilities, renewable energy developers and customers, as
well as other business entities in certification, siting, ratemaking, rulemaking, merger,
reorganization, compliance, and other litigated proceedings before state and federal
administrative agencies and in the state and federal courts and in appeals of those matters.
Len Anthony is retired from the post of General Counsel of Progress Energy Carolinas. Mr.
Anthony served in Progress’ legal department from 1991 until 2012. As General Counsel, Mr.
Anthony tried all state regulatory matters in North Carolina and South Carolina. He now is a
solo practitioner providing legal, consulting and witnessing services involving utility regulation.
Steve Chriss is Senior Manager, Energy Regulatory Analysis, Wal-Mart Stores, Inc. Mr.
Chriss’ job responsibilities include managing Walmart’s cost risk from changes in utility rates,
intervening in utility rate and policy dockets, and legislative analysis. Prior to joining Walmart,
Mr. Chriss was an Economist and Senior Utility Analyst for the Public Utility Commission of
Oregon. Mr. Chriss has testified in over 90 utility rate and policy proceedings in 34 states and
before two legislative committees.
1
Jeff Genzer is Vice President of Duncan, Weinberg, Genzer & Pembroke, P.C. Mr. Genzer is
the 2013 recipient of the EBA’s State Regulatory Practitioner Award. This award recognizes
innovation and superior advocacy by members of the state utility regulatory bar. Mr. Genzer
has represented numerous clients before state regulatory commissions since the 1980's. He is
the long-time General Counsel to the National Association of State Energy Officials and
his representation in state proceedings spans from New York to Hawaii. Prior to joining
DWGP, Jeff served as Staff Counsel to the Committee on Energy and Environment of the
National Governors Association.
Ralph Zarumba is a Director in the Energy Practice of Navigant with 28 years of experience
specializing in regulatory issues in North America, Europe and Asia. Mr. Zarumba has appeared
as an expert witness in a number of regulatory and legal proceedings addressing the topics of
pricing, cost of service, allocation of energy efficiency costs, functional separation or regulated
and unregulated operations of utility holding companies, asset valuation and regulatory treatment
of Smart Grid investments. He has also assisted clients in other matters including depreciation
studies, transfer pricing mechanisms and evaluation of the results of competitive bidding for
electric generation services. Mr. Zarumba has testified as an expert witness before FERC, the
Massachusetts Department of Public Utilities, the Rhode Island Public Utilities Commission, the
Illinois Commerce Commission, the Wisconsin Public Service Commission, the Ontario Energy
Board, the New York Public Service Commission, and a number of other venues.
2
CONSTRUCTION WORK IN PROGRESS: WHAT IT IS AND WHY THIS
ACCOUNTING TREATMENT IS PERFECT AS A SUBJECT OF A MOCK
ADMINISTRATIVE UTILITY RATE HEARING
Under traditional rate base, rate of return utility regulation, a utility is not allowed to
place capital investments into rate base and earn a return on them until they are “used and
useful,” meaning they are actually providing service to the utility’s customers. Construction
Work in Progress, affectionately known as CWIP, is an accounting and ratemaking procedure
that allows capital expenditures associated with utility plant still under construction to be placed
in to rate base so that they can begin to earn their allowed return without delay.
Allowing CWIP into rate base and adjusting rates accordingly benefits the utility, its
bondholders and shareholders. The rate increase enhances the utility’s cash flow which
improves the utility’s creditworthiness during multiyear construction projects. In addition, the
total capital costs incurred in financing the new plant is reduced because the interest and cash
dividend expenses the utility would otherwise have to fund from the capital markets are avoided.
In the absence of CWIP in rates, these capital costs, known as Allowance for Funds Used During
Construction (AFUDC), would be added to rate base when the plant is placed in to service and
recovered with a return over the life of the plant. Thus, by paying early customers reduce the
rates they would otherwise pay in the future once the plant goes into service and its costs
reflected in rates.
However, inclusion of CWIP in rate base makes current customers pay higher utility bills
to pay for a utility plant that is not being used to serve them. Furthermore, in either case, the
utility’s customers ultimately pay for these financing costs. Either the customers pay for them
early and directly as they are incurred through CWIP in rates, or they reimburse the utility later
for these costs through AFUDC. The question is which option has the lowest net present value.
To answer this question it must be determined which entity, current customers or the utility, has
the lower cost of capital, and the period of time over which customers either avoid paying the
utility because AFUDC is used or have to pay early because CWIP is used. In the absence of
CWIP, the utility must obtain the necessary funds from the traditional debt and equity markets
and the cost of doing so is the utility’s weighted average cost of capital. Once the plant goes into
service, customers must start reimbursing the utility for these costs and pay a return until they
have been completely recovered by the utility. The net present value (NPV) of this stream of
costs must be compared to the NPV of the cost to the utility’s customers if they are required,
because of CWIP in rates, to either borrow the funds to pay the utility or forego the opportunity
cost of not having these funds available to invest. If CWIP is included in rates, customers incur
the lost opportunity costs or interest payment costs associated with the funds they must pay the
utility but they avoid paying the utility’s weighted average cost of capital applied to the AFUDC
that is ultimately added to rate base and recovered over the life of the plant.
Basically, CWIP in rates is a risk mitigation tool that benefits a utility, its bondholders
and shareholders by shifting some risk to the utility’s customers. Whether this risk shifting also
benefits the utility’s customers depends on a number of variables. In addition to the factors
raised above, the issue of whether there are other tools available to the utility to mitigate the risk
of large, long-term capital investments, and the question of whether it is prudent for a utility to
3
invest in plant that the traditional capital markets consider so risky must be considered. Finally,
the issue of whether the capital investment in question must be made in order to meet a statutory
or regulatory requirement, and in the absence of CWIP in rates the utility would not be able to
finance its construction must be evaluated.
4
TOP TEN CROSS-EXAMINIATION TIPS
1. Be prepared. Study the subject matter but more importantly step back and identify the
overall principle at issue.
2. Be polite. Nobody likes a jerk.
3. Only cross a witness if you are fairly confident you can elicit a response that is helpful to
your case. Remember, in utility proceedings every witness is a paid expert. They want
to talk.
4. But, they want to talk about their testimony. Your challenge is to make them talk about
something else that undermines their testimony.
5. Oftentimes, the statements in an opposing witness’ testimony taken in isolation are true.
Take that step back and see if this “true” statement is inconsistent with common sense or
if applied in reverse would they support it. (NC 1986 tax reform act example)
6. Make the witness answer the question you asked, not the question he wants to answer.
“I’m sorry, my question was not clear, the question I am asking you to answer is …..” If
the answer to the question should clearly be “yes” or “no” and the witness seems to be
trying to avoid doing so, “Mr. Witness, the question I just asked you seems to me as
clearly calling for a “yes” or “no” answer. Are you not able to answer in that fashion?
Why not?” This point leads to No. 7 below.
7. Listen, Listen, Listen. Listen as hard as you can to the witness’ answers. Do not think
about your next question, or whether everyone is staring at you, etc., while the wistness is
speaking. Listen. If you know your subject matter and listen, you can demonstrate to the
hearing officers that the witness is being evasive.
8. Listen to the hearing officers. If they interrupt you and start asking the witness questions,
shut up. Let them do your job. Once they finish, do not feel compelled to finish your
prepared questions if they cover the same subjects just addressed by the hearing officers.
9. End on a strong note. Even if you have other points you think you can make, if you have
just delivered a solid shot to the jaw, stop. Of course, this means you plan to pursue your
best point last.
10. Take advantage of a pause. Most people, including witnesses, hate pauses. If a witness
gives a disingenuous answer, pause; see if he or she will start talking again.
5
TOP TEN TIPS FOR WITNESS PREPARATION
1. Be sure the witness knows his subject matter; do mock cross. Do not propose
disingenuous positions.
2. Be sure the witness has never supported a position inconsistent with his testimony.
3. Be sure the witness’ testimony is based upon one or more themes. Themes anchor a
witness. No matter what the question, the witness’ testimony should give him a theme
upon which to base a response.
4. Tell the witness to listen intently to the question. Then answer the question asked, not the
question a smart attorney should have asked or the question the witness wishes had been
asked.
5. Tell the witness to shut up after completing his answer. Do not be fooled by a pause into
volunteering additional information.
6. Tell the witness to pause before answering. This has two benefits: 1) gives the witness’
attorney time to object; and 2) gives the witness time to collect his thoughts.
7. Tell the witness to listen to his attorney’s objection. There is a reason for the objection.
Pick up on it.
8. Tell the witness that re-direct is the time to correct or clear up problems with his
testimony. Trust the attorney. If the attorney is raising an issue, go with him. (To the
attorney, be very certain re-direct is needed before embarking.)
9. Tell the witness to never speculate. If he knows the answer to the question, give it. If
not, say “I do not know.” Do not offer to find the answer and submit it later.
10. Tell the witness to not be evasive. If Tip 1 has been followed, then the witness should be
proud of his position and defend it.
6
GETTING STARTED
1)
2)
3)
4)
Call your witness to the stand.
Give him a moment to get settled.
Wait for him to be sworn in; in some states the attorney swears in the witness (e.g., GA).
Foundation questions:
a. What is your full name?
b. Who is your employer?
c. What is your job?
d. Please briefly describe your duties.
e. How long have you been in that position? (if only for a short while, ask about the
most recent previous position.)
f. Did you cause to be pre-filed direct testimony ____ pages in length?
g. Do you have any changes to that testimony?
h. If I were to ask you the same questions now that are in your pre-filed testimony
would your answers be the same?
i. Move that the witness’ pre-filed testimony be copied or inserted into the record as
if given orally from the stand.
j. Are there any exhibits attached to your exhibits?
k. Were those exhibits prepared by you or prepared under your supervision?
l. Are they correct?
m. Ask the Commission to mark the exhibits as hearing exhibits numbers ______.
You will move them into the record at the completion of the witness’ testimony.
n. Do you have a summary of your testimony that you would like to provide to the
Commission?
o. Please give your summary.
p. The witness is available for cross-examination
7
OBJECTIONS
1) Most objections are overruled. Commissioners, like judges, don’t like their orders to be
overturned. Plus, there are often members of the public or media in the audience who may
believe sustaining an objection is depriving them of important information. As a result,
Commissions more often than not allow the evidence into the record and then give it the weight
it deserves. So, be judicious in objecting.
2) Good objections:
a) If a witness has been asked the same question several times because the lawyer is not
getting the answer she wants, an objection that the answer has been asked and answered is
usually successful.
b) Watch for lawyers attempting to use exhibits they created to cross-exam your witness
or asking questions that assume facts that are not in evidence. Ask to see any cross examination
exhibits before allowing your witness to answer any questions regarding the exhibit. Make sure
your witness has fully reviewed the exhibit before answering any questions about it. If the
exhibit or question assumes a fact that is not in evidence, object. Your witness is not required to
assume something is true or that numbers in an exhibit are accurate.
c) Remember, your witness should never speculate, if he doesn’t know the answer to a
question. DO NOT SPECULATE. Say, “I DON’T KNOW.” So, if he/she is asked a question,
including a hypothetical, he/she should not speculate in answering. In response to a hypothetical
he/she can say “my answer would require speculation, and I am not willing to do so.” You can
object before you witness answers, if it is clear the response requires speculation. You can also
object if the opposing attorney continues on the same topic after the witness has said “I don’t
know.”
d) On re-direct, the attorney often leads the witness. That is clearly objectionable,
although I have rarely had an objection sustained.
e) If a question appears to be seeking information you believe to be irrelevant, rather than
objecting, say something to the effect: “Mr./Madame Chairman, excuse me please, that question
appears to be seeking information that is not relevant to this proceeding, would you please ask
Opposing Attorney to explain his/her purpose in the context of this case?” The opposing
attorney may say, “I don’t have to explain myself; this is part of my cross-examination strategy.”
If the Commission agrees and allows the question, you will need to wait to see if the line of
questions is ever tied back to the subject matter of the case. If not, you can move to strike the
entire line as irrelevant.
8
MASTERING YOUR FIRST (OR NEXT) STATE PUBLIC UTILITY COMMISSION
HEARING
CASE MATERIALS
DISCLAIMER: THE ENCLOSED MATERIALS ARE INTENDED FOR USE IN A MOCK
ADMINISTRATIVE PROCEEDING; THE MATERIALS ARE IN
REFERENCE TO A FICTITIOUS APPLICATION OF A FICTITIOUS
UTILITY. WITNESSES HAVE VOLUNTEERED THEIR TIME TO
PARTICIPATE AND FOR TEACHING PURPOSES MAY HAVE
EXAGGERATED POSITIONS TAKEN ON ISSUES. NOTHING IN
THESE MATERIALS IS INTENDED TO BE TAKEN AS FACT OR
UTILIZED IN ACTUAL PROCEEDINGS.
9