~ E'Chibit No.: Issues: Dues & Donations, New Bill Format Costs, Advertising, Board of Directors Fees & £'Cpenses; True-Up Audit Jason Kunst MoPSCStaff Surrebuttal Testimony ER-201-1-0258 Febru01y6, 2015 Witness: Sponsoring Party: Type of EYhibit: Case No.: Date Testimony Prepared: MISSOURI PUBLIC SERVICE COMMISSION Filed March 23, 2015 Data Center Missouri Public Service Commission REGULATORY REVIEW DIVISION UTILITY SERVICES- AUDITING SURREBUTTAL TESTIMONY OF JASON KUNST UNION ELECTRIC COMPANY, d/b/a Ameren Missouri CASE NO. ER-2014-0258 ~ Exllibit No 'd-9-'\ Date ~~IS" Reporter ~ File No «;F.~- 00 \~ -~:58: Jefferson City, Missouri Februcuy 2015 ** Denotes Highly Confidential Information ** NP 1 I TABLE OF CONTENTS 2 I SURREBUTTAL TESTIMONY 3 I OF 4 ~ JASON KUNST 5 6 I II UNION ELECTRIC COMPANY, d/b/a Ameren Missouri 7 I CASE NO. ER-2014-0258 8 EDISON ELECTRIC INSTITUTE (EEl) DUES ........................................................................... 2 9 ENVIRONMENTAL GROUPS ..................................................................................................... 6 10 I MISCELLANEOUS EXPENSES AND DUES AND DONATIONS ........................................... 8 11 INEWB1LLFORMATTINGCOSTS ........................................................................................... 10 12 I PROPERTY TAX EXPENSE ...................................................................................................... 11 13 I ADVERTISING ............................................................................................................................ 11 14 I Specific Advertising Campaigns ................................................................................................... 24 15 16 17 18 19 20 21 Community Lights ................................................................................................................ 24 Social Media Campaign ........................................................................................................ 25 Storm Response Ads ............................................................................................................. 29 Cardinals Digital Outdoor Signs ........................................................................................... 30 Reliability Fair Invite ............................................................................................................ 31 Louie the Lightning Bug Parade Balloon ............................................................................. 32 Downtown Pole Banners ....................................................................................................... 32 22 I BOARD OF DIRECTORS FEES & EXPENSES ........................................................................ 33 23 PROJECT FIRST (ENTERPRISE SYSTEM) .............................................................................. 36 24 PLANT IN SERVICE AND DEPRECIATION RESERVE ........................................................ 36 25 i CUSTOMER DEPOSITS AND INTEREST ............................................................................... 37 26 ~CUSTOMER 27 I PREPAYMENTS AND MATERIALS AND SUPPLIES ........................................................... 37 ADVANCES .......................................................................................................... 37 28 1 1 SURREBUTTAL TESTIMONY 2 OF 3 JASON KUNST 4 5 UNION ELECTRIC COMPANY, d/b/a Ameren Missouri 6 CASE NO. ER-2014-0258 7 Q. Please state your name and business address. 8 A. Jason Kunst, 111 N. 9 Q. By whom are you employed and in what capacity? 10 A. I am employed by the Missouri Public Service Commission (Commission) as a 11 12 7'h Street, Suite 105, St. Louis, MO 63103. I Utility Regulatory Auditor I. Q. Are you the same Jason Kunst who sponsored direct testimony as part of Staffs 13 I Revenue Requirement Cost of Service Report that was filed in this case on December 5, 2014 14 I and also filed rebuttal testimony on January 16, 2015? 15 A. Yes. 16 Q. Please give a brief summary of your surrebuttal testimony. 17 A. My surrebuttal testimony will respond to the rebuttal testimony of Union Electric 18 ~ Company, d/b/a Ameren Missouri ("Company" or "Ameren Missouri") witness Laura M. Moore 19 I regarding various dues and donations, as well as property tax expense, new bill formatting costs; 20 I Ameren Missouri witness Trina J. Muniz regarding advettising expenditures; and Ameren 21 I Missouri witness Lynn M. Barnes with respect to Board of Director fees and related expenses. 22 I Additionally, I will address Staffs true-up adjustments to plant-in-service, depreciation reserve, 23 I customer deposits, interest on customer deposits, customer advances, prepayments, project first 24 I costs, and materials and supplies. Page 1 Surrebuttal Testimony of Jason Kunst l ~ EDISON ELECTRIC INSTITUTE (EED DUES Q. 2 3 ~ Does Staff believe that ratepayers may receive some benefit in association with Ameren Missouri's membership in EEl? 4 A. Yes. Staff reviewed the EEl website, as well as the inf01mation provided by the 5 i Company in Staff Data Request Nos. 0149, 0150, and 0413. Staff believes that while there may 6 I be some benefit to ratepayers, the membership appears to primarily benefit the Company and its 7 I shareholders. Staff's recommendation to disallow the entire amount of EEl dues stems from the 8 I Company's failure to quantify these benefits between the shareholders and the ratepayers as 9 i ordered in Kansas City Power and Light ("KCPL '), Case No. ER-82-66. The Report and 10 I Order issued in Case No. ER-82-66 states: KCPL included $105,000 of its EEl dues in Missouri jurisdictional cost of service ... The Staff and Office of Public Counsel oppose recovery of this expense from the ratepayers on two levels. First, both contend that EEl is a lobbying organization whose primary objective is to promote shareholder interests, and therefore the expense should be disallowed. Second, both question the existence of benefits accming to the ratepayers from EEl activates ... The Commission still believes the question is one of benefit to the ratepayer. In the instant case there appears to be some possible benefit, but until the Company can better quantify the benefit and activities that were the casual factor of the benefit, the Commission must disallow EEl dues as an expense. The Commission also points out that the Company needs to develop some method of allocating expenses between its shareholders and the ratepayers once the benefits and activities leading thereto have been adequately quantified. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I Staff's position was upheld in subsequent KCPL Case Nos. ER-83-49 and E0-85-185. 26 Q. Are there any other cases that the Commission has mled on that address the issue 27 I of EEl dues? 28 A. Yes. In Arkansas Power and Light, Case No. ER-85-265 the Report and Order 29 I states: Page 2 Sun·ebuttal Testimony of Jason Kunst 1 2 3 4 5 6 7 8 9 10 11 The Commission has reviewed the evidence in this case and reaffirms its previously stated position that a utility company must properly assign EEl dues based upon the respective benefit to the ratepayers and the shareholders. Re: Kansas City Power and Light Company, 26 Mo. P.S.C. (N.S.) 104, 114 (1983). Company has failed to properly assign costs in this case as required. The Commission finds further that the evidence indicates that NARUC has not adopted the twothirds standard as suggested by the Company. The Commission would also suggest to the Company that this issue would not be relitigated if Company would refrain from seeking recovery of EEl dues until it can properly assign the benefits as required by the Commission. 12 I Similarly in Union Electric Company, Case No. EC-87-114, the Commission's Report and 13 ! Order Stated: 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 The Commission has consistently excluded EEl dues from cost of service for the last several years on the ground that these payments have not been shown to produce any direct benefit to the ratepayers. Recently the Commission has stated that not only must a direct benefit be shown but the benefits must be quantified and allocated between shareholders and rat<;fayers. See Re: Kansas City Power and Light Company, 75 P.U.R.4 1, 31,28 Mo. P.S.C (N.S.) 228,259 (1986). The Commission continues to adopt this standard as reasonable for the inclusion of EEl dues in cost of service. The Company's testimony includes a list of benefits which it alleges have resulted from EEl membership. No quantification or allocation of EEl benefits appear in the Company's testimony other than the hearsay statement that 20 percent of EEl activities are devoted to lobbying. Since the Commission's standard has not been met for the inclusion of EEl dues in the Company's cost of service, the Commission concludes that EEl dues should be excluded from the cost of service ... 32 33 34 Q. ~ Does Staff believe any portion of the EEl dues should be included in the cost-of-service calculation? A. No. In her rebuttal testimony, Company witness Moore listed several projects and 35 I activities that EEl is involved with; however, she provided no information to support how much 36 i of their membership dues are allocated to each activity. Additionally, Company witness Moore 37 I failed to provide quantification of the benefits between shareholders and ratepayers as ordered in Page 3 Surrebuttal Testimony of Jason Kunst 1 ~ 2 I possible benefits to the ratepayers, and thus far has failed to do so in this case. 3 4 Q. ~ ~ Did Staff request that the Company provide an allocation of the EEl dues based upon the benefits received by shareholders and ratepayers? A. 5 6 the aforementioned KCPL cases. The Company bears the burden of proof in quantifYing any Yes. Staff Data Request No. 0149 in the current case requested the following information from the Company: 7 8 9 10 11 With regard to the twelve months ending March 31,2014, please provide a detailed description of the services that are provided by Edison Electric Institute. Please include a percentage of billings for each service or benefit from EEL Of these services or benefits, please provide what is received by Ameren Missouri and what is received for the benefit of the ratepayer. 12 I The Company's response was a narrative of the benefits of being a member of EEI, 13 i primarily taken from the EEl website. The information can also be found in the rebuttal 14 II 15 I cost-allocation of the dues between shareholders and ratepayers in either its response to Staff 16 I Data Request No. 0149 or in Company witness Moore's rebuttal testimony. 17 testimony of Company witness Moore on pages 4 through 10. The Company did not provide any Q. Did Company witness Moore admit that she has not provided the necessary 18 ! quantification of benefits as required by the Commission's previous orders to facilitate inclusion 19 ! of EEI dues in rates? 20 21 22 23 24 25 26 A. Yes. On page 10, lines 6-10 of her rebuttal testimony, Ms. Moore stated: The Commission should allow the recovery of the non-lobbying portion of the Company's EEI dues because, while it is not possible to quantity a dollar benefit of any one of the above items, it is clear that EEI membership provides very substantial benefits to Ameren Missouri's customers. These benefits greatly exceed the EEI membership fees requested in this case. Page 4 Surrebuttal Testimony of Jason Kunst Q. 1 Has Staff requested that the Company provide an adequate quantification of the 2 I benefits received between ratepayers and shareholders prior to Staff Data Request No. 0149 in 3 I this case? A. 4 Yes. This is certainly not a new issue to the Company. Staff has submitted 5 I similar data requests in at least Ameren Missouri Rate Case Nos. ER-2010-0036 (Staff Data 6 I Request No. 0219), ER-2011-0028 (Staff Data Request No. 0202), and ER-2012-0166 (Staff 7 I Data Request No. 0171). The Company failed to provide an adequate quantification of the 8 I benefits or a percentage breakdown between ratepayers and shareholders in each of the 9 ! aforementioned rate cases. 10 11 Q. ~ 12 13 seminars and materials under EEI sponsorship? A. II Has Staff included the costs associated with employees attending training Yes. Staff has included the costs in its case for employees to attend training seminars or for the Company to purchase training materials. These fees are charged separately to 14 I member companies and not included in the membership fee paid to EEL 15 Q. Please summarize Staffs position with regard to EEI membership dues. 16 A. Staff believes the ratepayer may receive some benefits from the various activities 17 I and programs listed in Company witness Moore's rebuttal testimony and the response to Staff 18 I Data Request No. 0149. Staff contends that the Company has not provided a quantification of 19 I the benefits between the ratepayers and shareholders, and thus failed to comply with prior 20 I Commission precedent requiring the Company to allocate the benefits received between 21 I ratepayers and shareholders. Therefore, Staff recommends that the Commission disallow the 22 I $483,000 ofEEI dues incurred by the Company in the test year. Page 5 Surrebuttal Testimony of Jason Kunst l ! ENVIRONMENTAL GROUPS 2 3 Q. ~her Does Staff agree with Company witness Moore statements found on page 11 of rebuttal testimony, on lines 15 through 22, that the $500,000 paid to various environmental 4 ! groups should be included in costs for ratemaking purposes? 5 A. No. Staff has concerns with the amount of lobbying that is performed by the 6 i Utility Water Act Group ("UWAG"), Utility Air Regulatory Group ("UARG"), the Utility Solid 7 i Waste Activities Group ("USWAG"), and the Midwest Ozone Group ("MOG"). It is Staffs 8 i position that the primary purpose of these groups is to address environmental regulation on 9 I behalf of the utility industry, whose interests do not necessary align with those of ratepayers. 10 Q. What lobbying activities are the groups above engaged in? ll A. The MOO's website (www.midwestozonegroup.com) states its primary goal is to 12 i "work with policy makers in evaluating air quality standards". The 2014 dues for the MOG were 13 I paid directly to Steptoe 14 ! activities. The USWAG's website (www.uswag.org) states the following: 15 16 17 18 19 20 & Johnson LLP, an international law firm that engages in lobbying USWAG is responsible for addressing solid and hazardous waste issues on behalf of the utility industry ... USWAG engages in regulatory advocacy pertaining to RCRA, TSCA, HMTA. USWAG's mission is to address the regulation of utility wastes, byproducts and materials in a manner that protects human health and the enviromnent and is consistent with the business needs of its members ... 21 I The UWAG dues are paid directly to Hunton 22 ! seven registered lobbyists who actively engage in lobbying on enviromnental issues. 23 I Hunton & Williams LLP is also the firm that represents the UARG. 24 I or UWAG maintain websites. Internet searches only return contact information for Hunton & 25 I Williams LLP. & Williams LLP, another law firm that has Page 6 Neither the UARG Surrebuttal Testimony of Jason Kunst 1 2 Q. II 3 Did the Company allocate any portion of these dues below the line as lobbying costs? A. No. In response to Staff Data Request No. 0561 in ER-2014-0258 which stated 4 II "did the company make an adjustment to remove any lobbying pmtion of the dues for 5 II these groups," the Company indicated it did not remove a pmtion of these dues for 6 I lobbying expenditures. 7 Q. Company witness Moore listed various benefits that the Company receives from 8 I its membership in these groups on pages 12 through 16 of her rebuttal testimony. Was Staff able 9 I to review any of the issue tracking or advice they received from the above groups? 10 A. 11 12 13 14 15 16 17 18 19 20 No. Staff submitted Data Request No. 0413 which stated the following: For the following groups please provide the "yearbook" and all similar documentation summarizing the group's activities, projects, and accomplishments that occurred during period covering April 1, 2013 tlu·ough January 1, 2015 (updating when available): a) Edison Electric Institute, b) Utility Water Act Group (UWAG), c) Utility Solid Waste Activities Group (USWAG), d) Utility Air Regulatory Group (URAG), and e) Midwest Ozone Group. This documentation should include descriptions of the activities in both the governmental relations/lobbying and non-lobbying areas. Provide all documentation that address the referenced time period above. 21 I The Company's response to b) through e) of the above data request was that the 22 I "information was confidential and privileged pursuant to the attorney-client privilege and 23 i work-product doctrine," 24 Q. Did Ameren Missouri provide a benefit allocation between the ratepayers and the 25 i shareholders for the benefits listed in the rebuttal testimony of Company witness Moore and 26 I Staff Data Request No. 0219 in ER-2014-0258. 27 28 A. No. Similar to the EEl dues above, the Company responded it would be i impossible to quantify the benefits of membership between the ratepayers and the shareholders. Page 7 Surrebuttal Testimony of Jason Kunst 1 2 3 Q. Please summarize Staffs position with regards to the dues paid to the I envirorunental groups? A. Staff believes these groups primary purpose is to represent the utility industry in 4 I the regulatory and legislative arenas. Without being able to view any of the work performed by 5 I these groups in the test year, Staff is unable to evaluate if there were any benefits to the 6 I ratepayers. In general, Staffs position is that costs associated with lobbying and political 7 I advocacy activities should not be recovered from customers in rates. 8 I MISCELLANEOUS EXPENSES AND DUES AND DONATIONS 9 10 11 Q. Is the Company seeking recovery of any additional dues and donation amounts I not included in Staffs case? A. Yes. Beginning on page 17 of her rebuttal testimony, Company witness 12 I Moore discusses multiple items that she believes should have been included in the Staff's 13 ~ cost-of-service calculation. 14 I Company, Staff has reconsidered some of the adjustments that were made in the direct filing. 15 I Staff believes that $144,992 of the previously recommended disallowance should be included in 16 I its cost-of-service calculation. Included in this amount is $127,454 for the adjustment to remove 17 I what were previously identified as gas operations expenditures, $3,036 for the membership 18 I annualization adjustments, $5,200 for the corporate membership to the American Nuclear 19 I Society, and $1,809 for out of state memberships and licenses that benefit Ameren Missouri 20 I ratepayers. 21 22 Q. Based on additional information and clarification provided by the Does Staff disagree with any of proposed adjustments by Company witness I Moore described on pages 17 tlu·ough 19 of her rebuttal testimony? Page 8 Surrebuttal Testimony of Jason Kunst I A. Yes. Staff does not agree with the adjustments to include $59,052 for the 2 ~ 3 ! ("NEETRAC"), $7,347 for the Electrical Board of Missouri and Illinois, $5,239 of the out of 4 ~state corporate membership to the National Electric Energy Testing Research & Application Center 5 6 7 memberships, and the $56,421 for the office space leased in Washington, DC. Q. ~to Why does Staff disagree with the Company witness Moore's proposed adjustment correct the annualization of the NEETRAC dues? A. During the test year ending March 31, 2014, the Company paid NEETRAC 8 I $59,052 of dues for calendar years 2013-2014 and $59,452 of dues for 2014-2015. Staff emd in 9 I calling the adjustment an annualization in direct testimony, as it really represents a normalization 10 i adjustment. Staff did include the test year level of 2014-2015 NEETRAC dues in it's of service 11 I calculation. 12 I recommends that the Commission disallow these costs. Allowing the Company to recover the 13 12013-2014 NEETRAC fees that were paid during the test year, in addition to the 2014-2015 fees 14 I that were also paid during the test year would constitute a double recovery for these dues. 15 16 17 Q. Staff believes the $59,052 of 2013-2014 dues was correctly removed and Why does Staff disagree with Company witness Moore's explanation regarding I Staffs treatment of the costs associated with the Electrical Board of Missouri and Illinois? A. Staff reviewed its direct work papers again after the reading the rebuttal testimony 18 i of Company witness Moore. Upon fmther review Staff made no adjustment to remove the 19 i dues paid to the Electrical Board of Missouri and Illinois. Company witness Moore is mistaken 20 I in this regard. 21 22 Q. For what out of state licenses and membership dues does Staff recommend I exclusion from the cost-of-service calculation? Page 9 Surrebuttal Testimony of Jason Kunst I A. The Staff recommends that the Commission disallow $5,093 for the out-of-state 2 II memberships to the Illinois Environmental Regulatory Group ("IERG") and the Iowa Taxpayers 3 I Association. Staff believes the IERG falls into a similar category as the environmental groups 4 I previously mentioned in this testimony. According to the Iowa Taxpayers Association website 5 II (www.iowataxpayers.org): 6 7 8 Since its formation in 1935, the Iowa Taxpayers Association mission has been to educate and inform Iowans about sound fiscal policy; provide state policymakers with objective, nonpartisan research about the impact of specific tax and spending policies; and advocate for the adoption of rational public fiscal policy as it relates to business and corporate taxes. 9 I0 II I Staff believes these are out-of-state lobbying groups that promote the interests of their members 12 I and not necessarily the interest of Ameren Missouri's ratepayers. 13 Q. Has Staff changed its adjustment to remove the cost of the leased office space in 14 I Washington DC? 15 A. No. Staff has received additional information in response to Staff Data Request 16 I Nos. 0535 and 0567. The information provided in response to those requests did not persuade 17 I Staff to change its adjustment with regard to this issue. The Staff believes these lobbying related 18 I costs are of no benefit to Missouri electric ratepayers. 19 I NEW BILL FORMATTING COSTS 20 Q. Based on Company witness Moore's rebuttal testimony regarding new bill format 21 I costs, found on page 38, lines 4 through 20, has Staff made corrections to its direct testimony 22 I adjustments related to this issue? 23 A. After reviewing additional information provided by the Company, Staff 24 I has reconsidered some of its adjustments for these expenditures. 25 I $27,304 that had previously been recommended for disallowance should be included in the Page 10 Staff now believes that Surrebuttal Testimony of Jason Kunst 1 I cost-of-service calculation. 2 The Staff believes that with this correction that this issue is I now resolved. 3 I PROPERTY TAX EXPENSE Q. 4 Has the Staff received the amount of property tax expense paid by Ameren 5 I Missouri through the true-up period cutoff of December 31, 2014? A. 6 Yes. The Staff has received and reviewed the 2014 property tax expenses. 7 I The Company paid $141,618,366 and Staff has reflected this amount as part of its true-up 8 I cost-of-service calculation. The Staff and Company now agree on the proper amount of property 9 i tax expense to be included in rates in this rate case. 10 I ADVERTISING 11 Q. Has the Staffs reconsidered its recommendation of any adve1tisement costs since 12 I the time of its direct testimony filing? A. 13 Yes. Since the time of Staffs direct testimony filing, the Company has supplied 14 I information with regard to two adve1tisements that were not made available to Staff to review at 15 I the time of the direct filing in this case. After reviewing the information provided by the 16 I Company, Staff has modified its direct testimony position to include $197 of costs for the solar 17 I farm mtwork and $16,644 for the energy efficiency advertisements, and is now recommending 18 i that $16,841 be added back into its cost-of-service calculation for the combined cost of those 19 I two advertisements. Staff would note that Company witness Muniz incorrectly listed the cost of 20 ~the 21 i was $197. 22 Q. solar farm artwork as $197,000 in her rebuttal testimony on page 17, line 7. The con·ect cost Are there any other adjustments that Staff would like to make? Page 11 Surrebuttal Testimony of Jason Kunst I A, Yes. Staff made an error in its direct filing and did not remove the $1,621 for the 2 I downtown pole banners in question. 3 ~ Staff has made the correction and recommends disallowance of those costs. 4 Q. Did the Company spend any money during test year for promotional advertising? 5 A. No it did not. The Staff points out that the Company has not expended funds 6 I during the test year to promote the use of electricity most likely because this would conflict with 7 I advertising designed to encourage customers to be energy efficient. 8 I Missouri customers have no option to choose another electricity provider in that they are captive 9 I customers of a regulated monopoly. Furthermore, Ameren 10 Q. Did Staff remove any costs for political advertising in its direct filing? 11 A. No. The Company did not incur any costs during the test year for any political 12 13 14 i advertisements. Q. Has the Staff allowed all advertising costs incurred during the test year that were I deemed to be general and safety? 15 A. Yes. 16 Q. Are the advertising costs that the Staff is proposing for disallowance in this case 17 18 19 20 I limited to just institutional advertising? A. Yes. The only advertising costs incurred during the test year that Staff I recommends that the Commission disallow are institutional advettisements. Q. Company witness Muniz states in her rebuttal testimony on page 18, lines 8-9, 21 I that "In total, the difference between what the Staff is proposing and what should be allowed is 22 I $698,734." Does Staff have any clarification as to the quantification of the overall differences 23 ! that exist between the Staff and the Company with regard to advertising expense in this case? Page 12 Surrebuttal Testimony of Jason Kunst 1 2 A. ~ Yes. During the test year the Company spent a total of $4,396,357 on advertising; that total does not include energy efficiency related advertising costs that were passed through 3 I Arneren Missouri's MEEIA rider. Of this approximate $4.4 million test year amount, $443,750 4 I was recorded below-the-line. Therefore, Company's direct case reflected an inclusion 5 I of $3,952,607 of advertising costs for recovery in rates. No Company witness sponsored any 6 I direct testimony in this case or any adjustment to remove any of this $3,952,607 test year 7 I above-the-line level of advertising cost from their $264 million rate increase request in this rate 8 ! case. The Staff has proposed an adjustment to exclude $1,449,972 of test year advertising 9 I expense, all of which represents institutional adve1tising. As part of her rebuttal testimony, 10 I Ms. Muniz agrees that $801,834 of Staffs approximate $1.5 million recommended disallowance 11 I adjustment is institutional and should be removed from the cost-of-service calculation in this 12 I case. However, Ms. Muniz seeks to recover approximately $648,588 1 of Staffs $1.5 million 13 I recommended adjustment based on differing categorizations that she has sponsored in 14 I her rebuttal testimony. The following chart sums up the Staff and Company difference as of 15 I this filing. 16 Test Year Advertisement Costs Community Lights Campaig $ 283,485 §tcn·111 Response Acts .......... $_ . 49,901 Cardinals Digital Signs $ 44,222 l{~jjabiJity_FairJf1»ite $ . 6_6,610 Louiethe Lightning Bug $ 52,664 I)owntown Pole Banners $ ],621 Social Media Campaign $ 366,780 $ 8§5,283 17 1 Staff Amount $ $ $ - Company Company/Staf Amount '[Difference $ 283,485 • $ (283,485) $ ......... 49,901 $ . (49,9_01) ·$ 44,222 • $ (44,222) ~ 1~,305 L 66,§]() $ (3~}05) $ $ 52,664$ (52,664) $ - _$ J,§~l $ __(1,621} $183,390 $ 366,780 • $ (183,390) $216,6951 865,:283 $ (64.8,588) 1 The $698,734 number cited by Company witness Muniz on page 18, lines 8-9 includes the full amount of the reliability fair invite, Staff only removed half of $66,610 cost. It also does not include recent changes by Staff as of this filing. Page 13 Surrebuttal Testimony of Jason Kunst Q. I On page 2, lines 15-18, of her rebuttal testimony Company witness Trina J. Muniz 2 i states "The Commission Staff puts all of these expenditures into a grouping they call 3 I "advertising," which is also the language historically used at the Commission for these costs. 4 I I believe this term to be incorrect when applied to many of the costs identified by Mr. Kuntz 5 I [sic]." Does Staff believe advertising is the con·ect term to use for these expenditures? 6 A. Yes. Staff believes the term advertising is correctly applied when addressing this 7 I issue. On page 2, line 20-21, Ms. Muniz wrote "The traditional definition of"advertising" is the 8 I activity or profession of producing information for promoting the sale of commercial products or 9 ! services." Staff disagrees with that definition and believes that the definition of advertising is I 0 i more pervasive in that it means "the action of calling something to the attention of the public II I especially by paid announcements. " 2 When Ameren Missouri or Ameren Corporation advertises 12 ~ 13 I ratepayers to an issue or to associate the Ameren Missouri name with a popular local sports team to Ameren Missouri electric ratepayers, they are attempting to draw the attention of the 14 ! such as the St. Louis Cardinals, and are not necessarily promoting the sale of electricity. 15 i Ms. Muniz is unfairly restricting the scope and the definition of advertising and in the process is 16 i attempting to limit the application of the long-standing KCPL advertising standard to just 17 I promotional advertising, which is clearly not appropriate. 18 Q. Company witness Muniz uses the terms "educating customers" and 19 i "communications expenses" throughout her rebuttal testimony. If Staff were to replace the word 20 I "advertising" with the term "communication" or "education," would the advertising standard as 21 I set forth in the Kansas City Power and Light Company, Case No. E0-85-185 still apply and 22 I should the same method be used to categorize the ads? 2 Advertising. 11 .i\1erriam-TVebster.com. Merriam-\Vebster, n.d. \Veb. 22 Jan. 2015. . 11 Page 14 Surrebuttal Testimony of Jason Kunst 1 A. Yes. Staff believes tlwt Ms. Muniz is merely attempting to sidestep the KCPL 2 ~ standard by referring to advertising through terminology that on the surface appears to be more 3 I suitable. No matter what term Ms. Muniz chooses to use, it does not change the fact that the 4 I KCPL standard is still applicable. Ms. Muniz' proposed change in terminology does not change 5 ! the Staffs long-standing, consistent application and determination of the primary message on an 6 ~ ad-by-ad basis to each advertisement. The Commission could replace the term adve1tising with 7 I either of the terms used by Ms. Muniz and it should not affect how the standard is applied. The 8 I following excerpt from the Commission's Report and Order in KCPL Case No. E0-85-185 9 I illustrates this point: 10 I Excerpt from Report and Order in Case E0-85-185: 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 In addition, the Commission determines on this record that the ratepayers should not bear the costs of institutional or goodwill "communication". The Commission cannot conclude herein that institutional "communication" is beneficial to ratepayers. If the Company desires to improve its public image, that is management's business, but the costs will not be borne by the ratepayers under the rates established in this case. The Commission does believe that promotional "communication" can be beneficial to the ratepayers and should not be arbitrarily disallowed, but any benefit must be cost-justified. The benefits from those expenditures must be demonstrated to exceed the costs of the promotional "communication" itself. The Commission determines a fifth category should be added to Staffs list of recommended categories. The fifth categ01y would be that of political "communication". Political "communication" does not benefit the ratepayers and is not properly charged to them. There is no argument as to the disallowance of this type of "communication" in the instant case. Thus, the Commission is discontinuing its application of the New York Rule and is adopting Staffs recommended categories of "communication" expense, as well as adding a fifth category for political "communication". Q. Does Staff believe that Ms. Muniz uses the terminology "communication" and I "education" in an attempt to make the expended advertising costs appear necessary and of 32 I benefit to ratepayers rather than institutional in nature and of no benefit to ratepayers? Page 15 Surrebuttal Testimony of Jason Kunst A. 1 Yes. Staff believes that the Company's use of these terms is to pmtray to the 2 l Commission that Ameren Missouri is merely seeking recovery of advettising costs in rates for 3 II necessary "communication" that the customer "needs to know about." Staff believes that these 4 l terms are being used to distract from the fact that Ameren Missouri is actively engaged in 5 l preparing, producing and paying for institutional advertising targeted at its customers in an 6 I attempt to build a more favorable image of the Company in customer's minds or to portray the 7 l Company as a good corporate citizen. A prime example of this is demonstrated by the 8 l advertisements that associate Ameren Missouri with local sports teams such as the Cardinals, the 9 I Rams and the Blues. 10 Q. On page 3, lines 9-13, Company witness Muniz states, regarding the Ameren sign 11 (located on the outfield wall at Busch Stadium, "Ameren Missouri does have expenditures which 12 l are goodwill expenditures because it is a pa1t of the corporate community of St. Louis. The cost 13 I of the Ameren sign and other goodwill expenditures are not, however, included in Ameren 14 I Missouri's revenue requirement in this case. I am addressing a different set of communications 15 I costs." Did Ameren Missouri include other goodwill advertising expenditures in its approximate 16 I $264 million rate increase request as part of its direct testimony filing? 17 A. Yes, Ameren Missouri did include other goodwill advertisement costs in their rate 18 I increase request in this case. Ms. Muniz is correct in that Ameren Missouri did record the cost of 19 l the prominent sign located on the outfield at Busch Stadium in a below-the-line account, but she 20 I neglects to mention that similar signage at other sports venues in St. Louis and the surrounding 21 I area were not removed from Ameren Missouri's proposed cost-of-service calculation. Ameren 22 i Missouri failed to record the cost of similar advettising, such as sponsoring the "Ameren Power 23 i Play" at St. Louis Blues games, in below-the-line accounts. Please see Schedule JK-2, page 1 for Page 16 SmTebuttal Testimony of Jason Kunst 1 I a picture of the "Ameren Power Play" displayed on the Jumbotron at Blue's home games. Staff 2 ~ 3 ~remove 4 ~ Scottrade Center. Similarly, Staff proposes to disallow $150,000 for amounts paid by Ameren 5 ~ Missouri to the St. Louis Rams at the Edward Jones Dome, as well as various other similar 6 ~ goodwill advertising expenditures from the cost-of-service calculation that the Company 7 i included in its direct filing in this case. These goodwill expenditures are a perfect example of 8 I institutional advertising. These examples do not provide any information to the public helpful 9 I for the provision of safe and adequate electric service. Instead, Ameren Missouri is associating discovered that these costs were recorded in above-the-line accounts and made an adjustment to approximately $160,000 for similar expenditures with the St. Louis Blues at the 10 I its name with the St. Louis Cardinals and the St. Louis Blues and attempting to appropriate a part 11 I of the highly favorable image that likely exists in the minds of the fans of the St. Louis Cardinals 12 I and St. Louis Blues to Ameren Missouri. In addition, Ameren Missouri is strategically placing 13 I their name in highly visible places in an attempt to also be seen as a good corporate citizen 14 I supporting the City of St. Louis, the St. Louis Cardinals baseball organization, the St. Louis 15 I Blues hockey club and the St. Louis Rams football team. Q. 16 On page 3, lines 14-22, and continuing on page 4, lines 1-21, Company witness 17 I Muniz describes the KCPL standard and how it is inadequate in today' s modern age. Does Staff 18 I agree with this determination? A. 19 No. In her rebuttal testimony Ameren Missouri witness Muniz on page 3, 20 I lines 16-20 states, as support for their case, that the KCPL standard stems from a case that was 21 I decided approximately 30 years ago and that "Mark Zuckerberg3 22 ~ was five years old." The Company also goes on to explain that over the last 30 years much has changed in terms of 3 The founder ofFacebook. Page 17 Surrebuttal Testimony of Jason Kunst 1 ~ the media outlets from which customers receive information. Staff agrees that technologies have 2 I improved and additional means of communication have come into existence since the time that 3 I the KCPL order was established, but the main thrust of the KCPL standard remains completely 4 ~ intact. It is still essential today for Staff to determine the "primary message" of each 5 I advertisement. Furthermore, there is no reference in the KCPL standard that addresses a 6 ~ differing categorization of advettising based upon the differing types of media that are used. In 7 ~ fact, Staff has never disallowed any one type or form of advertising. Staff has always based its 8 i disallowance on the primary message being conveyed; no matter what form or media outlet that 9 I is selected by the Company or its advertising agency. The Staff believes the Commission 10 I established this standard as an objective way to categorize advertising and that this standard is 11 I still relevant and applicable today despite any advancement in technologies that are now used to 12 I disseminate advertising messages. 13 Q. Company witness Muniz, on page 4, lines 24-25, and page 5, lines 1-5, states 14 I "Staff, however, ignores the Commission's decision (in case ER-2008-0318) in that case and has 15 I reviewed the ads on an ad-by-ad basis." Did the Staff ignore the order established by the 16 I Commission inAmerenMissouri Case No. ER-2008-0318? 17 A. No. Staff followed the KCPL precedent established by this Commission as pa1t 18 I of Case No. E0-85-185 and classified each ad into five categories: 19 I Promotional, Institutional and Political, based on its primary message. Once the Staff had 20 I classified each ad, the Staff reviewed the ads grouped by ad campaign and assessed those costs 21 I on a campaign basis as suggested by the Commission's Report and Order from Case No 22 I ER-2008-0318. Staff consistently has taken the step to review ads on a campaign basis since the 23 I time of the issuance of the order from case No. ER-2008-0318. Page 18 General, Safety, Staff is confused by Surrebuttal Testimony of Jason Kunst l I Ms. Muniz's claim because the ad campaign is merely the sum of its parts. One cannot evaluate 2 I an ad campaign without evaluating each ad on an ad-by-ad basis. Finally, Staff believes that an 3 I ad-by-ad review is the most accurate method to address advertising costs but has consistently 4 I categorized Ameren Missouri's advertising on both the ad-by-ad and on the campaign basis in 5 I this case and in prior rate cases. 6 7 Q. How did Staffs analysis using the ad-by-ad classification compare with the I Staffs analysis on a campaign basis? A. 8 Staff provided detailed work papers to the Company clearly demonstrating the 9 I results of both methods. Staff believes that an ad-by-ad review is much more accurate and 10 I prevents the situation the campaign basis can create where ratepayers would be forced to pay for 11 I substantial amounts of institution advertising. Furthermore, many ads are run on a stand-alone 12 I basis and are not part of any particular ad campaign. In addition, an ad-by-ad review is still 13 I necessary to determine if the campaign on the whole is acceptable, under the campaign basis, 14 I because each of the ads within the campaign must first be evaluated individually. In order to 15 I determine if a campaign was acceptable, Staff divided the total costs of the allowable general and 16 I safety advertisements for the campaign by the ad campaign's total cost. If the percentage was 17 I greater than 50%, the campaign was allowed on the campaign basis. Staffs analysis showed a 18 I recommended disallowance of approximately $1.5 million if the ad-by-ad method was used and 19 I a recommended disallowance of approximately $1.7 million if the campaign basis was applied. 20 I Staff supports the use of the ad-by-ad analysis in this case as it resulted in a more conservative 21 I adjustment to remove approximately $200,000 less of advertising costs from the test year. 22 ~ 23 I campaign basis, then Staff would recommend a $1.7 million adjustment to remove advertising Although the Staff does not recommend this treatment, if the Commission wishes to apply the Page 19 Surrebuttal Testimony of Jason Kunst I I costs based upon its categorization of advertising on a campaign basis. At the conclusion of this 2 I surrebuttal testimony, Staff will provide two detailed charts summarizing the advertising costs on 3 ! an individual ad-by-ad basis but also on a campaign basis for the Commission to reference. 4 5 Q. I Cost of Service Report? 6 7 Why did Staff recommend using the ad-by-ad basis over the campaign basis in its A. Staff believes an ad-by-ad approach is the more appropriate, conservative, and ! accurate method of evaluating advertising expenses. The advertising costs in this case are 8 I somewhat lower in comparison to the level of advertising costs addressed in prior Ameren 9 ! Missouri rate cases. This is partly due to the fact that advertising expenditures were increased I0 II due to a decision reached by Company management to engage in significant advertising eff01ts 11 ! in an attempt to restore Ameren Missouri's image after the Taum Sauk disaster and crippling 12 I storm outages that occurred in 2006 and 2007. Please refer to the following chart which shows 13 ! the level of advertising costs incurred by the Company in the past 8 calendar years: 14 I ** 15 16 17 18 19 20 21 ** 22 Page 20 NP Surrebuttal Testimony of Jason Kunst 1 I The following example illustrates why the Staff has concerns about applying the campaign basis 2 ~ 3 I advertising is general or safety in nature, but the remaining 49% of the campaign consists 4 I of institutional advertising. Under the campaign basis discussed in the order from Case No. when evaluating advertising. The Company could have a campaign where 51% of the 5 I ER-2008-0318, the Company would be allowed to collect 100% of these costs in rates. In this 6 I example, if the total campaign cost was $5 million, the customers would be saddled with paying 7 I for approximately $2.5 million dollars of institutional advertising in rates if the campaign 8 I standard were applied. However, if an ad-by-ad review was applied, customers would avoid 9 i paying in rates for the $2.5 million level in institutional advertising since it can be appropriately 10 I removed from the overall campaign. Staff has concerns that the Company could manipulate the 11 ~ campaign basis in future cases in order to recover in rates desired levels institutional advertising 12 I merely by pairing it with otherwise acceptable general and safety advertising in a single 13 i campaign. This would obviously be an undesirable ratemaking outcome. Finally, Staff believes 14 I that, based on the testimony of customers at the twelve local public hearings that were held in 15 I this case, many customers have made clear that they have concerns about Ameren Missouri 16 I seeking recovery for advertising costs in rates. Certainly, customers would not find it acceptable 17 I to be required to pay for any amount or portion of institutional advertising that could result based 18 I upon the broad approach that exists with examining advertising solely on a campaign basis. 19 Q. On page 5, lines 7-17, of Company witness Muniz' rebuttal testimony, she 20 I describes concerns regarding how the KCPL standard is applied by Staff. She also states that 21 I there is no opportunity for Ameren Missouri to respond because there is no description in Staffs 22 ! direct testimony stating how the KCPL categories are applied. 23 I Company's concern is valid? Page 21 Does Staff believe the Surrebuttal Testimony of Jason Kunst 1 A. No. Staff has consistently applied the same method for categorizing advertising 2 I since the KCPL standard was established by the Commission in KCPL cases, Nos. E0-85-185 3 ! and E0-85-224. Staff reviews each ad separately to determine the primary message of the ad 4 ! based upon the five categories established in the KCPL case. Ads whose primary message is 5 ! determined to be institutional or political in nature are proposed for 6 ! found to be general or safety-related are deemed acceptable for recovery in rates by the 7 I Company. Staff allows promotional advertising if there is cost justification provided by the disallowan~e, while ads 8 I Company for the advertisement. Staff has used the same practice in every one of the Company's 9 I past eight rate and complaint cases that date back to Case No. EC-87 -114. In addition, Staff has 10 ! also applied the campaign basis established in Case No. ER-2008-0318 to Ameren Missouri's 11 I advertising in the four rate cases that have occurred since the time that the Commission issued an 12 I order on advertising in that case. The Company has reviewed a great deal of Staff testimony and 13 ~ 14 ! performed in an advertising review. Finally, in this case, a second auditor, Staff witness Lisa M. 15 I Ferguson, conducted an independent and objective review of each separate ad under the KCPL 16 I standard and each ad campaign under the order issued in Case No. ER-2008-0318. Ms. Ferguson 17 I is an experienced auditor and has previously been responsible for the advettising issue in 18 I Company rate cases. Both auditors in this case formed the same conclusion with regard to the 19 ! categorization of each advertisement and the assessment of each advertising campaign. 20 conducted lengthy depositions of previous Staff witnesses in order to assess what exactly is Q. On page 5, lines 19-23 and page 6, lines 1-7, Company witness Muniz expresses 21 I concern that the Company has only been provided with an explanation of Staffs reasoning on 22 I categorization in surrebuttal testimony or during deposition. Also, Ms. Muniz believes that Staff 23 I auditors are not qualified to review advertising expenses. Does Staff agree with these concerns? Page 22 Sun·ebuttal Testimony of Jason Kunst 1 A. No. By following the Commission-established precedent established in the KCPL 2 ~ 3 I No. ER-2008-0318, I have followed the same approach that has been taken in every Ameren 4 I Missouri case during the past 25 plus years. 5 ~reasonable 6 standard as part of Case No. E0-85-185 and the campaign basis set out in Ameren Missouri Case Q. The KCPL standard provides Staff with a and objective standard with which to categorize the Company's advertising expenses. Ms. Muniz explains that Ameren Missouri must use a mix of paid, earned and 7 I owned media in order to effectively reach their customers and that the customers are exposed to 8 I over 20,000 messages a day. Ms. Muniz believes this is why the Company must communicate 9 10 11 I more often than in the past to get their message to customers. Does Staff agree this is necessary? A. Ms. Muniz appears to be saying that a regulated company needs to advertise more i than in the past simply because other non-regulated companies are advertising more than they 12 i did in the past. The number of other messages that Ms. Muniz believes that Ameren Missouri 13 I customers are exposed to each day is irrelevant with regard to the proper application of the 14 I KCPL standard to a regulated utility. The fact remains that an objective ad-by-ad review is still 15 I required as well as an assessment of each overall campaign to determine an appropriate 16 I advertising allowance to include in customer rates. A reasonable level of general and safety ads 17 I should be included in rates. Under appropriate circumstances, where promotional advertisements 18 19 I are placed and can be cost justified by the Company, then those ads should be included as well. Q. Throughout her rebuttal testimony, Company witness Muniz references changing 20 I technology that has impacted Ameren Missouri's ability to reach its ratepayers. 21 I change in technology and how it has impacted the Company's ability to reach its ratepayers 22 I change Staff's application of the KCPL standard? Page 23 Should the Surrebuttal Testimony of Jason Kunst A. 1 No. The medium used to reach customers through advertising should not affect 2 II the standard used when Staff performs its ad-by-ad review. Staff evaluates each advertisement 3 II regardless of how it was transmitted to the ratepayers for its primmy message. In this case alone, 4 ~Staff has 5 ~ allowed or disallowed only a single type of advertising media. The KCPL standard used by Staff 6 II to evaluate advertising can be applied to any form of media, as changing the form will not 7 I change the primmy message. 8 I Staff continues to believe the prim my message of the other advertising items included in 9 II Ms. Muniz's rebuttal testimony are of an institutional nature and reconunends that they should allowed costs for television, print, radio, social media, billboards, et al. Staff has never 10 i be disallowed from the cost-of-service calculation. 11 Staff addresses each of these specific i advettising campaigns separately below. 12 ~ Specific Advertising Campaigns 13 I 14 Community Lights Q. Do you agree with Company witness Muniz that the Community Lights campaign 15 I costs should be allowed in the cost of service? 16 17 A. II No. Company witness Muniz states the following on page 11, lines 7-8, of her rebuttal testimony, "This campaign was used to recognize customers in .our service territory that 18 I give back to their conununities through volunteerism." Staff found the primary message of the 19 I Community Lights campaign to be the Company trying to improve its public image by 20 ~ associating itself with volunteerism, and accordingly classified it as institutional. While it is 21 II endearing to recognize customers in their conununity, the primary message of the ad campaign 22 I in question is showing the conununity that Ameren Missouri is a good corporate citizen. 23 I The message does not provide information concerning the provision of safe and reliable service. Page 24 Surrebuttal Testimony of Jason Kunst 1 ~ In short the customers are paying to recognize others in their community while Ameren Missouri 2 I takes the credit of pointing them out. Q. 3 Ms. Muniz states that the purpose of the cap1paign was to drive traffic to 4 I the Ameren Missouri Face book page and that, given that purpose; the costs should be classified 5 I under the general category established in the KCPL cases, Nos. ER-85-185 and 6 I E0-85-224. Does Staff agree with this assessment? 7 A. No. The Staff disagrees and believes the primmy message of the advertisements 8 i in this campaign is institutional in nature. 9 I Social Media Campaign 10 Q. How did Staff evaluate the Social Media Campaign? 11 A. Staff reviewed the planned monthly Facebook content calendars provided to 12 ! Ameren Missouri by its then advertising agency, Weber Shandwick. Staff categorized 50% of 13 I the suggested posts by Weber Shandwick to be institutional in nature and recommends that the 14 i Commission disallow that pmtion of the costs associated with these postings. Additionally, Staff 15 I categorized 40% of the posts as general and the remaining 10% as safety-related, and Staff 16 ! recommends that these portions be allowed for recovery in the cost-of-service calculation. 17 Q. What are examples ofFacebook posts that Staff found institutional in nature? 18 A. Examples of institutional posts to Facebook that Staff recommends for 19 I disallowance include: 20 I 21 Example #1: "Where's Louie? Find out where @Louie- St. Louis Blues Mascot is to get i free tickets to the next St. Louis Blues game! Look for clues to find Louie here:" Page 25 Surrebuttal Testimony of Jason Kunst 1 I Example #2: "Want to win one year of free electricity? Send Fresh 102.5 a photo of your ' 2 I home's holiday lights for a chance to win up to $1,500 toward your Ameren Missouri electric 3 ~ bill! Enter here:" 4 I Example #3: "There are only a few days left to enter your nominations for our Ameren ~ Missouri Community Lights contest! Tell us who the shining lights are in your community and 5 6 I they could win $5,000." 7 I Example #4: "Check out some photos from last week, where youth from area Boys' & 8 I Girls' Clubs got to bat at a clinic with former St. Louis Cardinals pitcher Rick Horton in Ballpark 9 I Village:" Q. 10 11 I and safety-related messages. A. 12 13 Please provide examples of Facebook postings that Staff categorized as general The following are examples of general and safety posts to Facebook that Staff I recommends that the Commission allow the Company to recover in the rates to be established in 14 I this case: 15 I Example #1: "Want to see how the Maryland Heights Renewable Energy Center turns 16 I trash into treasure? Learn how we transform decomposing trash into environmentally-responsible 17 I electricity in this video:" 18 i Example #2: "Want to be energy efficient on a budget? With our LightSavers program, 19 I you can get discounts on compact fluorescent light bulbs (CFLs) and Light-Emitting Diode light 20 I bulbs (LEDs). Find out more here:" 21 I 22 I against a flat wall allows light to reflect from two wall surfaces instead of one? Try this at home 23 I to save energy and create more usable light." Example #3: "Did you know that placing lamps in the comer of a room rather than Page 26 Surrebuttal Testimony of Jason Kunst 1 ~ Example #4: "It's Child Safety and Protection Month, and keeping you and your family 2 i safe is an important part of Ameren Missouri's every day conunitment to providing reliable 3 I service. Use these tips to help keep your family safe:" 4 ~ Staff has again used the primary message of each post to determine the amount of 5 I the social media advertising that should be included in the cost of service. If the social media 6 I was examined on a campaign basis as the Company and the Report and Order in Case No. 7 II ER-2008-0318 suggests it should, and then the cost of every post was be included in the 8 I cost-of-service calculation then all customers would be required to pay for giveaways of tickets, 9 I0 I kitchen makeovers, and electricity gift cards addition to costs that are actually general and I safety-related. 11 12 Q. What additional costs were included in Staffs reconunendation to disallow I $183,390 for the Social Media Campaign? 13 A. The expenses Staff removed from its cost-of-service calculation included the 14 I Weber Shandwick payment invoices that Ameren Missouri had grouped into the Social Media 15 II 16 I believes allowing the costs for the Weber Shandwick planned social media would be duplicative 17 i in nature because the costs for responding to posts, monitoring posts, and reviewing private 18 i messages are now handled by supervisors in the Ameren Missouri call center and the Ameren 19 I Missouri conununications team. 20 I annualization that has been included in the Staffs cost-of-service calculation in this case. In 21 i addition, from the examples above, Staff did not completely disallow all social media costs as 22 I the Company suggests. Staff is not disallowing the social media ads because of the type of Campaign. Weber Shandwick provided planned social media content to the Company. Staff These costs have already been included in the payroll Page 27 Surrebuttal Testimony of Jason Kunst I ~ media involved, but rather due to the primary message of the posts per the guidelines of the 2 ~ KCPL standard. 3 Q. On page 12, lines 22-23, and page 13, lines 1-4, Company witness Muniz states 4 i "A single Facebook post may not appear to be educational when viewed on its own, but the 5 II stream of Facebook posts-which should be considered one campaign-is educational because the 6 I constant stream of posts keeps the followers interested so that they receive the particular posts 7 II that are designed to be educational or informational." Is Staff suggesting that the Company 8 I should not make a steady stream of posts for its Face book advertising? A. 9 No. Staff is merely stating that not all Facebook posts fall into the general and I 0 I safety categories so as to benefit the customer in the provision of safe and adequate electric II ! service. Staff believes that customers should only pay for posts that fall within these categories. 12 I If the Company wishes to draw customers to their Facebook page, the Company and its 13 I shareholders should be required to bear the costs of those giveaway items designed to attract 14 II customer to Ameren Missouri's Facebook page. 15 II through 5 to this surrebuttal testimony it provides the planned postings to Facebook for 16 I November 2013, which provides a fair representation of a typical month of Ameren Missouri 17 I Facebook postings. 18 ! 19 ~many Please refer to Schedule JK-2, pages 2 The planned Facebook posts found in Schedule JK-2, pages 2 through 5 demonstrate that posts have a primary message of general and safety, while other posts are institutional in 20 I nature. The rest of the planned Face book posts were submitted in Appendix 4 of the Staffs 21 i Cost of Service Report. This demonstrates the problems that occur with examining advertising 22 I solely on a campaign basis. If this entire set of costs for the Facebook advertising are allowed 23 I into rates, not only is the customer paying for general and safety advertising, but also Page 28 Surrebuttal Testimony of Jason Kunst I I institutional advertising. Staff believes, in general, that Ameren Missouri customers would not 2 II be receptive to paying for any amount or portion of institutional advertising in rates. 3 I Storm Response Ads 4 Q. Do you agree with Company witness Muniz that the stmm response ads should be 5 I classified as general advertising and included in the cost of service? 6 A. No. Please refer to Schedule JK-2, pages 6 and 7 to view these particular 7 I advetiisements. The primmy message of each of these ads was to draw attention to Ameren 8 I Missouri and how hard they worked to restore power. Ameren Missouri is showing what amount 9 i of resources is required to perform the job that they are required to perform in the first place. 10 I Customers expect the Company to restore power after a storm as part of the customer service of 11 I Ameren Missouri. Staff contends that these ads are designed to pat Ameren Missouri on the 12 i back for restoring service. In addition, as Staff witness, Lisa M. Ferguson has pointed out in her 13 I surrebuttal testimony on page 2, lines 15-19, in Ameren Missouri Rate Case No. ER-202-0166, 14 I these ads are part of an overall strategy that Ameren Missouri has employed in recent year to 15 I restore their image after the negative publicity that resulted in the aftetmath of the 2006 and 2007 16 I storm outages. As a customer at the Florissant local public hearing on January 5, 2015, testified 17 i "The public does not want to know what you do to provide power. The public just wants the 18 I electricity to work. 4 " Additionally in the Company response to Staff Data Request No. 0034 in 19 I ER-2014-0258, the Company internally classified the storm response ad as institutional when it 20 I was ran in the Labor Tribune. The cost for that advertisement is included in the $49,901 the 21 i Company is seeking to recover. 4 Quote from Charles Meador, Florissant !ph. Page 29 Surrebuttal Testimony of Jason Kunst 1 2 Cardinals Digital Outdoor Signs Q. On page 15, lines 5-l 0, Ms. Muniz states "These costs are prudent. In order to 3 ~ raise awareness for our energy effective rebates and to provide tips on how to lower energy 4 I usage, we partnered with the St. Louis Cardinals. The agreement put the Cardinals' live game 5 I scores on digital outdoor boards on highways throughout St. Louis with ActOnEnergy .com 6 ~prominently displayed on the signs, drawing attention to our website." Does Staff agree with 7 I this characterization of this advertising? 8 A. No. Please refer to Schedule JK-2, page 8 to see a copy of this ad provided to 9 I Staff. Once again, Staff determined the primary message of the billboard advertisement to be 10 I institutional. Company witness Muniz states that the purpose of this ad is to raise awareness for 11 I energy effective rebates. The Staff again disagrees with this characterization. When a customer 12 i looks at this billboard, the primary message is the Cardinals score sponsored by Arneren 13 I Missouri. There is absolutely no website for ActOnEnergy.com anywhere on this billboard. The 14 i only item refeJTing to Arneren Missouri is the logo. ·Even if the website were prominently 15 I displayed on the billboard, the primary message is still institutional in that this is merely another 16 ! attempt to associate Arneren Missouri with the St. Louis Cardinals. Just because a website is 17 I displayed on any piece of advertising is not a blank check for the Company to consider it general 18 I advertising, especially when the website costs are already included in customers rates. If that 19 I were the case, then any piece of advertising would be general just because the website is on it. 20 Q. On page 15, lines 15-17, Ms. Muniz states "However, these costs enabled us to 21 I provide information about our service - energy efficiency, and therefore should be classified as 22 I General." Does Staff agree with this argument? Page 30 Sunebutta1 Testimony of Jason Kunst 1 A. No. For the reasons enumerated above these advertising costs are institutional 2 I in nature. 3 I 4 Reliability Fair Invite Q. Does Staff have a similar stance on the use of the St. Louis Rams association with 5 I Ameren Missouri to draw crowds to the reliability fair? 6 A. Yes. Staff allowed 50% of this advertising because the main thrust of patt of the 7 I advertising is Ameren Missouri's effort to improve system reliability and its effect on customer's 8 ! provision of safe and reliable service. However, as Ms. Muniz states on page 16, lines 1-6: 9 10 11 12 13 14 15 One could speculate that the reason for the proposed disallowance was that the Company hired a popular professional football player to appear at the fair. The purpose of having the football player at the fair was to attract attention and bring more people to the fair, which was open to the public and held in Florissant. Without his presence, the fair would have been far less well attended and thus less effective. 16 ! This is a prime example where, if the Company wishes to improve its image by partnering with 17 I another organization, the Company can shoulder the costs of the institutional advertising which 18 19 20 21 i is the primary message of the professional football player. Q. Do you agree with Company witness Muniz that the full cost of the reliability fair I invite should be included in the cost of service? A. No. Staff contends that the primwy message of the invitation was to meet a 22 i professional football player, based on the wording "Ameren Missouri invites you to meet Chris 23 I Givens" (with a photo of Chris Givens dominating the front of the invitation). A different 24 I primary message may have been relayed if the invitation stated "Ameren Missouri invites you to 25 Illearn more about improvements in reliability." That was not the case, so Staff allowed half of Page 31 Surrebuttal Testimony of Jason Kunst 1 ~ 2 I the reliability fair itself was general in nature. 3 I the cost of the invitation as the reliability fair itself was allowed because the primary message of Louie the Lightning Bug Parade Balloon Q. 4 On page 16, lines 14-15, Ms. Muniz states "Without explanation, I do not 5 ! know why the recommendation to disallow these costs was made." Does Staff agree that this 6 I is possible? A. 7 No. Ms. Muniz states in her rebuttal testimony that "The balloon is used in large, 8 I sometimes televised, parades and is held by Ameren Missouri employees and volunteers." It is 9 I clear that the primary message of the balloon itself is institutional. This has been the same 10 I position that Staff has maintained for the last four rate cases. The intent is clear that Ameren 11 I Missouri actively seeks to have its balloon seen and recognized by customers during happy 12 I events like the annual Thanksgiving Day parade in downtown St. Louis. 13 I attempt to recover these costs in rates under the guise of safety is not reasonable. However, Staff 14 I would point out that it has allowed costs for costumes, actors, etc., to be worn to schools for the 15 I safety education of children as well as the bus that displays a safety message. 16 I 18 Downtown Pole Banners Q. 17 The Company's Do you agree with Company witness Muniz that the pole banners should be I classified as general and included in rates? 19 A. No. The primmy message of the banners is of the Company attempting to raise its 20 I public image by displaying these banners around its headquarters for the outside public to see. 21 I Staff has also disallowed these banners in the past four rate cases. 22 I 23 I atrium, the hallways and in the conference rooms throughout its headquarters that are sufficient The ·Company has numerous employee motivation posters and signs located in the Page 32 Surrebuttal Testimony of Jason Kunst 1 I to provide motivational messages its employees. The Staff has not proposed disallowance of any 2 I of the numerous motivational signs located inside Ameren's corporate headquarters. Company 3 I witness Muniz states that "The banners help raise the awareness of the service we provide our 4 i customers .... .it is important for us to keep our employees engaged and aware of information used 5 Jto serve our customers." These costs are unnecessary and if it is employee engagement the 6 ~ 7 !located throughout the building. 8 9 10 Company seeks, that has already been accomplished through the countless motivational posters Q. Please summarize Staffs position with regard to advertising costs still at issue in I this case. A. Staff believes that the Company's position that the KCPL standard is antiquated 11 I and improper is completely unfounded. The Staff maintains that the KCPL standard is still 12 I applicable despite the fact that additional media outlets now exist. It represents an objective 13 I attempt to evaluate advertising in all the various forms that exist, even today. Furthermore, the 14 i Staff as part of each rate case has two auditors perform a completely independent assessment of 15 i the advertisements on an-by-ad basis as well as on a campaign basis. In this case, both auditors 16 ! have agreed on the proper categorization of the advertisements. I have attached two charts 17 I Schedule JK-2, pages 9 through 11 showing Staffs recommendation on the ad-by-ad basis as 18 I well as the campaign basis vs the campaign basis for the ads detailed above. 19 ! BOARD OF DIRECTORS FEES & EXPENSES 20 Q. On page 69, lines 16-17 of her rebuttal testimony, Company witness Barnes wrote 21 ! "We are, and should be, allocated an appropriate share of these expenses." Do you agree with 22 I that statement? Page 33 Surrebuttal Testimony of Jason Kunst A. 1 No. In addition to the points addressed in my rebuttal testimony that was filed on 2 I January 16, 2015, Staff has concerns with the amount of time the board of directors may have 3 ! spent on the divestiture of its merchant generation business, AER, during the test year. Staff 4 ! submitted Staff Data Request No. 0542 seeking more information that would provide the total 5 I Ameren Corporate board costs and how those cost were allocated to each business unit under 6 ~ Ameren Corporation and is still awaiting a response to this request. Furthermore the Ameren 7 I Corporate board has subsidiaries that have conflicting goals and objectives. The Staff is not 8 I allowed to review the entire set of Ameren Corporate board documents. Instead, the Staff is 9 I provided only those board documents that Ameren deems applicable to Ameren Missouri. 10 ~ 11 i time that Ameren Corporation board members devoted to Ameren Missouri matters, as well as 12 I the cost that were assigned to Ameren Missouri, are reasonable in relation to the time and costs 13 ~ that were devoted to the AER divestiture during the test year by the Ameren Corporation board. 14 I Furthermore, Staff is prevented from determining the amount of time that the Ameren Corporate 15 I board spent on other entities such Ameren Transmission Company ("ATX"), or Ameren Illinois. 16 I For an example of this please refer to Schedule JK-2, page 12 to this surrebuttal. 17 I attachment is a copy of page 6 of a presentation that Ameren Corporation made on December 16, 18 112014, as part of an investor meeting. This page illustrates that Ameren Cm]Joration can be 19 I conflicted with regard to making a determination of where to invest capital. Absent the complete set of board documentation Staff is unable to assess whether the amount of This 20 Q. Are any of the costs incurred by the board of directors duplicative? 21 A. Yes. The costs to host the board of director meetings offsite are duplicative, 22 I unnecessary, and umeasonable. Ameren Corporation has a board room at its headquarters where 23 I the board has met at many times. Hosting the meetings offsite at the Ritz Carlton Hotel or at Page 34 Surrebuttal Testimony of Jason Kunst 1 I the Four Seasons hotel is excessive and unreasonable. The costs of the meeting rooms, phone 2 I and internet service, audio/video setup, printing, computer usage, parking, et al. that were 3 I allocated down to Arneren Missouri would have otherwise been avoided. All of those costs 4 i could have been eliminated by hosting the board meeting at the existing boardroom located at 5 II Arneren headquarters. The costs for all of those services that are available at Arneren's corporate 6 I headquarters are already being paid for by Missouri electric rate-payers. Q. 7 On page 72, lines 1-13, Company witness Barnes disagreed with your statement 8 I regarding excessive costs relating to the board of directors expenses. How do you respond? 9 A. Staff believes the costs for hotel and airfare are excessive and, if Arneren 10 I Corporation wishes to treat the board of directors to stays at luxury hotels and use of private 11 I aircraft, then the shareholders should bear the burden of the costs. Arneren Missouri electric 12 I ratepayers were attempted to be charged $192,000 for** _ **flights in the test year, whereas 13 I first-class, round-trip airfare would have been approximately $6,000 for the same number of 14 I flights after allocation. 15 I** Invoices from the Ritz Carlton show food and beverage costs of ** before allocation to Arneren Missouri. Staff believes these are unnecessary and • 16 I exorbitant costs. 17 18 19 Q. During the test year in this case ending March 31, 2014, did any members of the i board of directors choose to fly on commercial flights? A. ** 20 ** 21 22 23 Q. Are there any additional costs that Staff recommends disallowing in regards to I board of directors fees and expenses? Page 35 NP Surrebuttal Testimony of Jason Kunst A. 1 2 i the costs of limousine services to transport the board of directors to and from the hotel. Q. 3 4 Yes. Upon further review, Staff recommends a disallowance of $3,176 to remove ~ aforementioned costs in the cost-of-service? A. 5 Has the Company indicated that is no longer seeking to include any of the Yes. The Company has indicated to Staff that it is no longer seeking to recover 6 I the costs associated with board meetings and hotel stays at the Ritz Carlton and the Four 7 I Seasons. In addition the Company also does not seek to recover the costs associated with the use 8 I of the private chartered jet. 9 I PROJECT FIRST (ENTERPRISE SYSTEM) 10 Q. What is "Project First?" 11 A. Ameren initiated Project First to replace its unsupported and high-risk fmancial 12 I systems. Subsequent to the test year in this case, Ameren Missouri completed the installation of 13 I a new general ledger and an internal management repotting system. 14 Q. Does Staff propose any adjustment to the costs associated with these systems? 15 A. Yes. Staff recommends the disallowance of $240,641 of one-time non-recun-ing 16 I software set up costs that occun-ed in the test year ending March 31, 2014. 17 I PLANT IN SERVICE AND DEPRECIATION RESERVE 18 19 Q. Has Staff made any adjustment to the level of plant in service and depreciation I reserve? A. 20 Yes. Staff has updated it's adjustments to reflect the actual rate base value of 21 ~ 22 I true-up date. Staff, however, has not included the Callaway life extension in its plant-in-service Ameren Missouri's plant in service and depreciation reserve through the December 31, 2014, Page 36 Surrebuttal Testimony of Jason Kunst 1 ~balances; please refer to the surrebuttal testimony of Staff witness Johu P. Cassidy for a complete 2 I discussion of this issue. 3 I CUSTOMER DEPOSITS AND INTEREST 4 Q. Has Staff reviewed the level of customer deposits to include in rate base? 5 A. Yes. Staff has adjusted the amount to reflect the 13-month average ending 6 II December 31, 2014. 7 I expense adjustment to reflect the change above. Additionally Staff has recalculated the interest on customer deposits 8 I CUSTOMER ADVANCES Has Staff made any adjustment to the level of customer advances to include as an 9 Q. 10 I offset to rate base? 11 A. Yes. Staff has adjusted the amount to reflect the 13-month average ending 12 I December 31, 2014. 13 I PREPAYMENTS AND MATERIALS AND SUPPLIES 14 Q. Has Staff reexamined the level of prepayments to include in rate base? 15 A. Yes. Staff has adjusted the levels to reflect the 13-month average ending 16 !December 31,2014. ** - - - - - - - - - - - - - - - - - - - - - - 17 ** 18 19 Q. Has Staff reexamined the level of materials and supplies to include in rate base? 20 A. Yes. Staff has adjusted the level to reflect the 13-month average ending 21 I December 31, 2014. Additionally, Staff recommends removing $451,680 for obsolete, Page 37 NP Surrebuttal Testimony of Jason Kunst 1 II incompatible, and/or unusable inventmy due to the installation of the new reactor head at the 2 I Callaway nuclear power plant. 3 Q. Does this conclude your surrebuttal testimony? 4 A. Yes. Page 38 BEFORE THE PUBLIC SERVICE COMMISSION OF THE STATE OF MISSOURI In the Matter of Union Electric Company d/b/a ) Ameren Missouri's Tariff to Increase Its ) ) Revenues for Electric Service Case No. ER-2014-0258 AFFIDAVIT OF JASON KUNST STATE OF MISSOURI COUNTY OF COLE ) ) ) ss. Jason Kunst, of lawful age, on his oath states: that he has participated in the preparation of the foregoing Sunebuttal Testimony in question and answer fmm, consisting of 3S pages to be presented in the above case; that the answers in the foregoing Surrebuttal Testimony were given by him; that he has knowledge of the matters set forth in such answers; and that such matters are ttue and conect to the best of his knowledge and belief. Subscribed and sworn to before me this 0. SUZIE MANKIN Notal}' Public - Notal}' Seal State of Missoun Commissioned lor Cole County My Commlssloo Exp