Missouri Cities
TFR Questions Concerning 2015 Update
3nd Set of Questions - (August 21, 2015)
35. With respect to Empire’s response to Question 1, please provide a description of the following
additions and explain why they were included in Transmission Plant.
A.
B.
C.
D.
E.
1000323 - I&R NP Dist Poles Ckt #2712 - $1,596.32
1000541 - I&R 34.5kV Ln 27-0 Hwy 59 Road Move – 94.65
1000581 - Inst 34kV Arresters at SUB #308 - $8,601.83
4000237 - I&R Non-Pri Dist Poles Ckt 4251 - $1,124.47
4000309 – I&R Post Process Dist Pole CKT 3751 - $2,811.94
Response: Projects 1000323, 4000237 and 4000309 overall were Distribution in nature but
included a small portion of work for transmission plant. The amounts indicated above represent
the transmission portion only; the work was combined as a matter of convenience for the
construction designer and work crews. Projects 1000541 and 1000581 were transmission in
function in their entirety. The first as a transmission line road move and the latter as substation
additions to transmission plant (arresters).
36. With respect to Empire’s response to Question 3, please provide a list of the 2014 General Plant
additions and retirements that includes the amount and description for each addition and
retirement.
Response: Please see the accompanying Excel worksheet titled
TFR_Question_36_2014_General_Plant_ Additions_Retirements.xlsx
37. With respect to Empire’s response to Question 4 and the table presented below, please explain
why the Reported Transmission Depreciation Reserve, Ending Balance does not match the
Calculated Transmission Depreciation Reserve, Ending Balance.
Description
$
Transmission Depreciation Reserve – Beg. Bal. (FERC Form 1)
Depreciation Expense (Empire Workpaper – 2014 Form 1 Pg 336 Recalc Using FERC Rates Only)
Transmission Retirements (FERC Form 1)
Calculated Ending Balance (Calculated Amount)
Reported Transmission Depreciation Reserve – Ending Bal. (FERC Form 1)
Difference
86,298,567
4,910,250
-1,262,159
89,946,658
87,728,418
2,218,240
Response: The calculation shown below steps through the change in reserve balance for
Transmission plant beginning with 2013 year-end balance through 2014 year-end balance.
Transmission Beginning Reserve
Add Back 2013 Year-End RWIP
Reduce by 2014 Retirements
Reduce by 2014 Net Salvage (1)
86,298,567.00
1,696,860.00
(1,262,159.00)
(704,789.00)
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Missouri Cities
TFR Questions Concerning 2015 Update
3nd Set of Questions - (August 21, 2015)
Add 2014 Reserve Transfer (1)
Add 2014 Depreciation Expense (2)
Reduce by 2014 Year-End RWIP
Transmission Ending Reserve
24,708.00
6,448,457.00
(4,773,227.00)
87,728,417.00
(1) Impact of Net Salvage and Transfers omitted from your calculation
(2) Actual Provision for Depreciation is calculated using rates for all jurisdictions
(blended rates)
38. With respect to Empire’s response to Question 18, it appears that the General Plant
Depreciation Expense of $5,579,203 (Appendix A, line 68) was not reduced by the Vehicle
Depreciation Reclass Amount of $2,228,196 resulting in a net amount of depreciation expense
of $3,351,007. Please explain why the General Plant Depreciation Expense was not reduced?
Response: This appears to be a formula input error resulting from the depreciation reclass
amount being listed below the company total as a reconciling item as opposed to below the
General Plant subtotal. We concur that the input for General Plant Depreciation Expense should
be $3,351,007. Because the TFR has already become effective, this correction will be reflected in
the 2016 annual update.
39. With respect to Empire’s response to Question 12,:
a. For the $70,880.03 quarterly assessment, please provide the following for NERC and SPP
separately: (i) identify the FERC account to which the assessment was recorded; and (ii)
provide a description of the method used to compute the assessment.
b. For the Schedule 1a assessment of $2,846,670.12, please identify the FERC account to
which the assessment was recorded; and (ii) provide a description of the assessment
and the method used to compute the assessment.
Response:
a. The NERC quarterly assessment of $70,880.03 was determined by the SPP pursuant the FERC
accepted Amended and Restated Delegation Agreement (A&R DA) between NERC and SPP. The
calculation is made annually and invoiced quarterly to EDE by SPP and accounted for in
557410. The method is based on a Net Energy for Load method and described in the attached
excerpts from the A&R DA Exhibit E. Additional details of the calculation are provided below.
NERC makes the assessment calculations each year as part of the annual budgetary
process. Each Load Serving Entity (LSE) in the SPP RE footprint is assigned a portion of the SPP
RE budget as well as a proportionate share of NERC’s budget. Each LSE’s assessment is allocated
based on their Net Energy for Load (NEL). Due to the long development and regulatory approval
process for the budgets, the NEL data is two years behind the budget that is being allocated. For
example, the 2014 NEL data that was collected earlier this year will form the allocation basis for
the 2016 SPP RE and NERC budgets to LSEs.
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Missouri Cities
TFR Questions Concerning 2015 Update
3nd Set of Questions - (August 21, 2015)
Specific details of the NERC assessment process and information can be found on NERC’s website
with the following links provided below describing the 2014, 2015 and 2016 assessments and
associated spreadsheets. These spreadsheets show the calculations for all regions and all LSEs.
Therefore for example, by referencing page 5 of the 2015 Assessment, EDE reported 2013 NEL
data of 5,314,658 MWhs. This equates to 2.453% of SPP RE’s total NELs of 216,655,989
MWHs. On page 11, the SPP RE’s total NELs was 5.469% of the U.S. total NELs of
3,961,433,109,118. This results in EDE’s NEL 0.134% of the U.S. total.
Allocating SPP RE’s 2015 Annual Assessment of $9,680,648 to EDE yields $237,469 which can be
found on the 2nd page 5 of the file. It also shows EDE’s allocation of NERC’s budget to be
$67,143 for a combined SPP RE + NERC Assessment total of $304,612. Breaking this down into
quarterly settlements yields $76,143.
The 2014 quarterly assessment of $70,880.03 for EDE was determined using the exact same
methodology as the 2015 example.
2014
Assessment: http://www.nerc.com/gov/bot/FINANCE/2014%20NERC%20Business%20P
lan%20and%20BudgetFinal/Appendix%202-2014_Assessment_Schedule.pdf
2015
Assessment: http://www.nerc.com/gov/bot/FINANCE/2015nercbsnsplnbgt/2015%20Asse
ssments%20_Appendix%202.pdf
2016
Assessment: http://www.nerc.com/gov/bot/FINANCE/2016NERCBusinessPlanandBudge
t/August%2012%202015%20FAC%20Meeting%20Agenda%20Item%202%20b%20iii%2
0-%202016%20Assessments.pdf
b. i) 565414; ii) The calculation for the monthly charge is the average of the prior year’s monthly
coincident peaks multiplied by the SPP Schedule 1A rate (~0.38) multiplied by the hours in the
month (e.g. 855MW * 0.38 * 744January)
40. FERC Form 1 page 450.1 includes notes for page 300, line 21 that show a detailed listed of
electric revenues recorded in Account 456 (Total revenue is $1,797,833.97). With regard to the
revenues listed, please provide the following:
a. A description of each revenue item and identify the function it is related to (i.e.
production, transmission etc.).
b. For each item that is transmission related, identify where in the 2015 Update the revenue
amount has been included.
c. If a transmission related revenue has not been included in 2015 Update, please provide an
explanation as to why such amounts were not revenue credited.
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Missouri Cities
TFR Questions Concerning 2015 Update
3nd Set of Questions - (August 21, 2015)
Response:
a. See attached pdf labeled: “TFR Response #40a.pdf (2015 Ann Update)”.
b. The items labeled “Misc revenues” are associated with Retail Customer Revenues for
Returned Check Fees and Sales Tax collection Remuneration; and do not appear in the TFR
or GFR.
The items labeled “Renewable Energy Credits” are generation related and do not appear in
the TFR, but are credited in the GFR on Worksheet D, Page 1, Line 4.
The items labeled “Plum Point Transmission Credits” are related to both Transmission and
Production and are associated with revenues derived from Empire’s Intangible Investment in
the Plum Point Interconnection Facilities (Switching Station) constructed and owned by
Entergy to transform and transmit the output of the Plum Point Power Plant through the
Entergy system and into the SPP system. The calculations of the transmission portion of the
allocations to be included in the TFR template is described in EDE’s response to TFR
Information Request #13d. Similar calculations will be made for appropriate inclusion in the
GFR template.
The items labeled “Wholesale Distribution Charges” are the revenues Empire receives from
the individual on-system wholesale customers for owning, operating, and maintaining the
direct assigned distribution substations, meters, and related distribution facilities at each of
these customers’ Points of Receipt. Since these revenues are not related to transmission, no
credit adjustments are included in the TFR or GFR templates.
c. See response to item 40b, above.
41. With respect to Empire’s response to Question 17, please provide a detailed description of the
methodology and supporting documentation used to allocate Empire’s costs between Accounts
561.4 and 556.4.
Response: 50% of 1st Class Transmission Operations/Dispatchers time/labor is allocated to
561.404 as well as 50% of the EMS Engineer, 50% of the Sr. EMS Project Engineer’s
time/labor and 50% of the Sr. Administrative Assistant for Transmission Policy and
Compliance is allocated to the aforementioned account. As referenced in the initial response
above, the additional 6% can be attributed to normal annual union and non-union wage
increases and overtime but also the allocation of additional time/labor to 561.4 due to
time/labor reporting and actual work activities related to the operation of the SPP Integrated
Marketplace.
42. With respect to Empire’s response to Question 19 and 26, adjusting 2014 A&G Salaries of
$12,009,587 down by the $900,000 adjustment recorded in 2014 to $11,109,587, the increase in
salaries from 2013 ($9,748,388) is approximately 14%.
Please provide supporting
documentation for the 14% increase in A&G Salaries and the $900,000 adjustment, including
any allocation of parent or affiliate A&G Salaries.
4
Missouri Cities
TFR Questions Concerning 2015 Update
3nd Set of Questions - (August 21, 2015)
Response: See the following attachments:
40_FERC Form 1 p 323 acct 920.xlsx
40_TFR DR 19 and 26 Support.xlsx
43. With respect to Empire’s response to Question 23 and 30, please explain how the accruals in
Account 925 were adjusted and provide the supporting documentation for the adjustments.
Response: The supporting documentation for the calculation of the adjustments contains
sensitive information, much of which is covered by HIPAA. Given the sensitive nature of the
information, documentation supporting the adjustments, beyond what has been supplied, can’t
be provided. Below is a detailed description of how the accrual process is calculated.
The 228.2 accounts are injuries and damages reserve accounts. The current month activity in the
228 accounts (including adjustment to the reserve) are spread during the allocation process 50%
to capital projects that have labor and 50% to the appropriate 925, injuries and damages,
expense account. Other direct monthly charges to the 228 accounts are relatively small dollar
charges for damage to property and worker’s compensation payments.
On a quarterly basis, the Manager of General Accounting reviews the components that make up
the Reserve for Injuries and Damages for any large claims that are pending. Generally, any
adjustments that need to be made based on this review are made on a quarterly basis with the
approval of the Controller.
The change in the reserve account is split between capital projects and expense. As the actual
charges are incurred and recorded, the reserve is continually adjusted for any expected
expenditures. The charges are tracked to make sure that we do not expense more than the
insurance deductible, and when we reach the deductible amount, we transfer the additional
charges to a receivable account to await insurance recovery.
When a change in the reserve account is needed, an entry is made directly to the 228 account so
that it can go through the normal allocation process. A deferred account is used for the other line
of the journal entry prior to the allocation process. The account used is 186210, deferred A/P
charges unclassified.
The components that make up this reserve include pending litigation, the self-insurance reserve
for Workers’ Compensation for the electric segment (details provided by HR) and Total &
Permanent Disability reserve (details provided by Payroll).
New litigation is added following occurrences in the field or receipt of notice that a lawsuit has
been filed. The Director of Legal Services is one of the initial contacts when any accidents occur
within our service territory. Quarterly, a list of all pending litigation is submitted to the CEO,
CFO, Controller, Secretary and Treasurer, as well as others. In addition, the Secretary is the
contact person for any litigation filed against the company. If litigation is filed, he/she notifies the
appropriate management, as well as the Controller. The Director of Legal Services also prepares
a quarterly schedule of material litigation items. This schedule represents litigation known to the
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Missouri Cities
TFR Questions Concerning 2015 Update
3nd Set of Questions - (August 21, 2015)
six officer group and should include the amounts for legal counsel with material items. This
information, along with the litigation listing, is added to the spreadsheet. Discussions are held
with attorneys and senior management to arrive at an estimated exposure amount. The total is
compared to the current reserve, and an adjustment is calculated.
To assess the Workers’ Compensation accrual, the Manager of General Accounting analyzes the
claims incurred vs. claims paid by year and calculates the reserve needed to pay future benefits.
The required reserve is then compared to the current reserve and an adjustment is calculated. To
assess the Total & Permanent Disability accrual, the Manager of General Accounting calculates
the present value of the total annual payments required per employee. This total is compared to
the current reserve and an adjustment is calculated and approved by the Controller.
44. With respect to Empire’s response to Question 31, please provide the following:
a. The attachment provided under the tab entitled “Pensions and Benefits Data” includes
amounts designated as “GLGAS”. Please explain what this designation denotes and
whether the amounts are included under the tab “Sheet5”.
b. If amounts for GLGAS are included, please identify the amounts and provide an
explanation why these amounts are included.
Response: GLGAS refers to Empire’s gas business unit (Empire District Gas), while GL001 refers
to the electric business unit. GLGAS data is not included in the amounts shown on Sheet 5.
Using’s Excel’s pivot table functionality, the data was filtered to exclude anything not related to
GL001. The filter on Sheet 5 can be seen in row 1.
45. With respect to Page 1 of the Input sheet, line 52, please confirm that NERC penalties have not
been included and provide supporting documentation. If they have been included, please
explain and provide the amount.
Response: There were no NERC Penalties paid in 2014. NERC penalties, if any, will be coded to
426300 in the future.
46. With respect to Empire’s response to Question 4, please provide a list of the 2014 General Plant
additions and retirements that includes the amount and description for each addition and
retirement.
Response: Duplicate of No. 36 above.
47. With respect to Empire’s response to Question 16, it appears that Worksheet A provides the details
associated with deferred taxes and does not address prepayments. Please provide a detailed listing
and explanation of the components of prepayments addressed in Worksheet E.
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Missouri Cities
TFR Questions Concerning 2015 Update
3nd Set of Questions - (August 21, 2015)
Response:
7