SMITH MOORE 434 Fayetteville Street

LEATHERWOODATTORNEYS AT LAW
Suite 2800
Raleigh, NC 27601

October 20, 2017

Ms. M. Lynn Jarvis

Chief Clerk
North Carolina Utilities Commission
430 N. Salisbury Street
Raleigh, NC 27603

Re: In the Matter of: Application of Duke Energy Progress, LLC

For Adjustment of Rates and Charges
Applicable to Electric Service in North Carolina
NCUC DOCKET NO. E-2, SUB 1142

Dear Ms. Jarvis:

Attached please find the Direct Testimony of Bill Saffo on behalf of North Carolina
League of Municipalities for filing with North Carolina Utilities Commission in the above-
referenced docket.

If you have any questions or comments regarding this filing, please do not hesitate to contact me.

Sincerely,

Smith Moore Leatherwood LLP

Isl Karen M. Kemerait

CC: All Parties of Record

Enclosure

Karen M. Kemeralt I Direct: 919.755.8764 ka ren. ke merait@s m Ith moo rel aw. com www.smithmoorelaw.com

ATLANTA I CHARLESTON I CHARLOTTE GREENSBORO I GREENVILLE RALEIGH I WILMINGTON

RALEIGH 522595.1
 STATE OF NORTH CAROLINA
UTILITIES COMMISSION
RALEIGH

DOCKET NO. E-2, SUB 1142

BEFORE THE NORTH CAROLINA UTILITIES COMMISSION

In the Matter of:

Application of Duke Energy Progress, LLC
For Adjustment of Rates and Charges
Applicable to Electric Service in North Carolina

DIRECT TESTIMONY

OF

BILL SAFFO

ON BEHALF OF NORTH CAROLINA LEAGUE OF MUNICIPALITIES

October 18, 2017

RALEIGH 522574.1
 Direct Testimony of Bill Saffo
Docket No. E-2, Sub 1142
Page 1 of 18

Q. PLEASE STATE YOUR NAME AND ANY ELECTED POSITION

2 THAT YOU CURRENTLY HOLD?

3 A. My name is Bill Saffo. I am the Mayor of the City of Wilmington, North

4 Carolina.

6 Q. WHAT IS YOUR ADDRESS AT THE WILMINGTON CITY HALL?

7 A. 102 North 3rd Street, Wilmington, North Carolina 28401

9 Q. PLEASE BRIEFLY LIST THE ELECTED POSITIONS YOU HAVE

10 HELD WITH THE CITY OF WILMINGTON?

11 A. I served on the Wilmington City Council for one term from 2003 to 2007,

12 and have been elected to serve as Mayor for four two-year terms, in 2007,

13 2009, 2011, 2013, and most recently in 2015.

14

15 Q. HA VE YOU LIVED IN WILMINGTON YOUR ENTIRE LIFE?

16 A. Yes. My parents were first generation Greek immigrants; but I am a native

17 of Wilmington. I attended and graduated from J.T. Hoggard High School in

18 Wilmington, and went on to receive my Bachelor of Arts degree from UNC-

19 Wilmington.

20

21 Q. DO YOU SERVE ON ANY OTHER BOARDS OR COMMISSIONS?

22 A. Yes, I serve on the Board of Directors for the Lower Cape Fear Water and

23 Sewer Authority, the New Hanover County Tourism Development Authority

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 2of18

Board, and the UNC-Wilmington Advisory Board. As Mayor, I have served

2 on the Wilmington Regional Film Commission, the Transportation Advisory

3 Commission, and the Wilmington Industry Development Commission.

5 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?

6 A. Serving as an elected public official in the City of Wilmington for now over

7 fourteen years, I have learned a great deal about municipal services, budgets

8 and the budgeting process, and the challenges not only to Wilmington but to

9 all North Carolina municipalities to use finite taxpayer resources as wisely

10 as possible to meet the demand and expectations of our citizenry. One of the

11 expenses that comprise a significant portion of our budget is the cost of

12 electricity. As Mayor of the eighth largest city in North Carolina, I will

13 discuss the pressures on - some would say pending crisis of - municipal

14 budget, how our municipal operations use electricity, our efforts to conserve

15 electricity usage, and the challenges created by the proposed significant

16 increase in electric rates by Duke Energy Progress, LLC ("DE Progress") on

17 city budgets.

18

19 It is my opinion that cities and the investor-owned utilities that serve them

20 should work cooperatively together to find mutually beneficial solutions to

21 the challenges that we both face. We have been appreciative of effmis that

22 DE Progress has made since the last rate case. Representatives of DE

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 3 ofl8

Progress have met with the municipalities to find mutually advantageous

2 solutions for modernization of outdoor street lighting.

4 I believe that DE Progress' currently proposed levels of increases in electric

5 rates under which the municipalities are charged for electric service must be

6 carefully and collaboratively considered, especially in light of the substantial

7 proposed increase for "grid modernization" and the closure of coal ash

8 basins. The rate increase requested by DE Progress has the potential for

9 "rate shock" among all customers. Therefore, we request that the

10 Commission carefully analyze the expenses that DE Progress seeks to pass

11 on to customers, especially the expenses related to the closure of coal ash

12 basins, to determine whether ratepayers should be responsible for those

13 expenses.

14

15 Q. WHAT PRESSURES DO NORTH CAROLINA MUNICIPALITIES

16 FACE REGARDING THEIR BUDGETS AND FINANCES OVER

17 THE COMING YEARS?

18 A. I am concerned that we might be facing a convergence of factors that will

19 create a "perfect storm" gathering on the horizon that will dramatically and

20 adversely affect municipal budgets in the near future. These factors include:

21 (1) continued rapid growth of our cities as more people seeking jobs move to

22 them from rural areas and from other parts of the country; (2) increased

23 demands for infrastructure and municipal services for this growing

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 4of18

population; and (3) the substantial increase in rates for electricity that DE

2 Progress is requesting.

4 Q. PLEASE PROVIDE INFORMATION ABOUT EACH OF THE

5 FACTORS THAT YOU MENTIONED. FIRST, WHAT HAS BEEN

6 THE EXPERIENCE OF NORTH CAROLINA MUNICIPALITIES IN

7 TERMS OF GROWTH?

8 A. I have lived in Wilmington for my entire life, and therefore, the growth of

9 Wilmington is what I am most familiar with. In 1980, when I was a student

10 at UNCW, the population of Wilmington was about 44,000. Over the next

11 decade, it grew 26.2%, to 55,530. From 1990 to 2000, Wilmington's

12 growth accelerated to 36.6%, as the population increased by over 20,000, to

13 75,838. From 2000 to 2010, our population grew by 40.4%, to 106,476. I

14 have seen nothing that would indicate that growth will slow in this decade.

15 In fact, whether in absolute numbers or in terms of percentages, since 1980,

16 Wilmington has grown faster each decade than in the decade before.

17

18 As further indication of the expected growth in Wilmington, I have paid

19 attention to information from the NC Office of State Budget and

20 Management for growth in New Hanover County, where the City of

21 Wilmington is located. The NC Office of State Budget and Management

22 has projected a 17.5% increase in population for New Hanover County for

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 5of18

the period from 2010 until 2020, and a 15.3% increase in population for

2 New Hanover County from 2020 until 2030.

4 While the City of Wilmington has experienced significant growth, other

5 Nmih Carolina cities along the I-40/I-85 crescent have grown even faster.

6 According to the 2017 report from the UNC Demography Center On North

7 Carolina Population Growth Since 2010, North Carolina's population grew

8 by 112,000 between 2015 and 2016, which is the largest single increase

9 since 2010 according to new data from the U.S. Census Bureau. Overall,

10 North Carolina's population has grown by 611,000 since 2010, an increase

11 of 6.4%. As indicated by the NC Office of State Budget and Management,

12 the greatest percentage increase in growth is occurring in the large

13 metropolitan areas of North Carolina. For example, the Town of Cary has

14 been one of the fastest growing municipalities in North Carolina. In fact, the

15 Town of Cary experienced the fastest growth from 2010 until 2011 (3.24%

16 in that single year according to the Triangle Business Journal). Regardless

17 of which ranking one references or which benchmark one uses, it is

18 indisputable that most North Carolina's cities have been rapidly growing.

19

20 Q. DOES THIS GROWTH PLACE PRESSURE ON MUNICIPAL

21 BUDGETS? ISN'T GROWTH CONSIDERED TO BE A POSITIVE

22 DEVELOPMENT FOR CITIES?

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 6of18

A. Yes, growth is considered to be a positive development. Growth creates

2 jobs, fuels retail sales, and is an indication of economic vitality. While

3 growth in the long term is absolutely positive, in the short run, growth can

4 place tremendous pressure on municipal budgets. Municipalities plan for

5 growth; but there is inevitably a lag time from the time that new residents

6 move into a city to when the city can plan, construct, and have infrastructure

7 in place to accommodate that growth. Evidence of this difficulty can be seen

8 when counties struggle to build schools quickly enough to accommodate

9 growth from new residents, and cities struggle to alleviate traffic congestion

10 and expand their water and sewer services.

II

12 Unfortunately, some of North Carolina's municipalities are expenencmg

13 declining populations, and their budget pressures are different, and much

14 greater, than ours. The reason for the "out-migration" is often loss of jobs

15 due to factory closings. The effects on these municipalities' resources are

16 two-fold: the closing of businesses diminishes the commercial tax base, and

17 the reduced demand on housing stock lowers residential property values.

18 Both effects result in less revenue for cities to fund essential services, to

19 maintain infrastructure that was constructed when their populations were

20 larger, and to pay fixed, non-discretionary expenses, such as electricity

21 charges.

22

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 7of18

Finally, it should be noted that as new residents move to North Carolina's

2 growing cities from larger and older urban areas in the Northeast and the

3 Midwest, those new residents often expect infrastructure and urban services

4 that North Carolina municipalities are working to install in the communities.

6 Q. IS THIS WHAT YOU MEAN BY YOUR SECOND FACTOR

7 CREATING BUDGETARY PRESSURES - THE INCREASING

8 DEMAND FOR MUNICIPAL SERVICES?

9 A. Yes. A good example of this, in the context of electricity usage, is the extent

10 of street lighting. As of the date of our last Progress Report approximately a

11 year ago, Wilmington maintains 9,118 street lights, plus an additional 330

12 street lights that are leased in approved developments in the City. Despite

13 the great number of street lights, we frequently receive citizen requests for

14 additional street lighting. Wilmington is extremely proud of the walkability

15 of our downtown that is located in the waterfront area. Visitors staying at

16 our hotels along the Cape Fear River waterfront or living in some of our

17 historic neighborhoods can walk to many of our award-winning restaurants,

18 walk to a play, conce1i, or movie at Thalian Hall, and then walk afterwards

19 for a late-night drink or dessert before returning to their home or hotel.

20 Street lighting to ensure that pedestrians and bicyclists can be seen by

21 drivers, as well as for public safety and crime deterrence, is an essential

22 element of a vibrant downtown economy. I have observed similar

23 revitalizations of other downtown areas in Raleigh, Winston-Salem,

RALEIGH 522574. I
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 8of18

Durham, Asheville, and Charlotte. Additional street lights - and the cost of

2 electricity for their illumination - are an example of the types of expanded

3 municipal infrastructure and services that our citizens expect and deserve.

5 Q. WHAT ARE OTHER EXPANDED INFRASTRUCTURE NEEDS OR

6 DEMANDS FOR SERVICES THAT GROWTH CREATES?

7 A. For cities in general, new and expanded water and sewer infrastructure -

8 both in terms of pipes and treatment facilities -- sufficient to serve their

9 residents is a huge challenge. In Wilmington, we have tried to address these

10 needs by consolidating our system and the county's system to form a

11 regional water and sewer authority. This expanded facility is an essential

12 service and a large energy user.

13

14 More and wider streets to handle more vehicular traffic, and coordinated

15 traffic signalization, are also necessary to accommodate 21st century

16 transportation demands on a street grid that was laid out, in places, in the

17 19th century. As of last year, Wilmington maintains 217 traffic signals.

18 Over the last fifteen years, municipal responsibility for the cost of local

19 roads has grown significantly. Over the last twenty years, municipal

20 responsibility for the cost of local roads has grown significantly. Between

21 2006 and 2016, the number of road miles under municipal control grew by

22 11 percent, compared to only 2.9 percent growth in the number of State-

23 controlled miles. During this time, the assistance funding that the State

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 9of18

provides municipalities per mile of local road declined by 10 .6 percent,

2 adjusting for inflation.

4 Q. WHAT IS THE PRIMARY SOURCE, IN GENERAL, OF REVENUES

5 TO MUNICIPALITIES IN ORDER FOR THEM TO PROVIDE THIS

6 INFRASTRUTURE AND THESE SERVICES?

7 A. Although some municipalities may receive some funding from a variety of

8 other sources (such as local-option sales taxes, prepared-food and/or hotel

9 taxes, and state and federal appropriations and block grants), the bulk of

10 revenues for almost all North Carolina cities, including Wilmington, comes

11 from property taxes. In fact, for Wilmington, sixty percent of our revenue

12 comes from prope1iy taxes.

13

14 Q. TURNING NOW TO ELECTRICITY USAGE, WHAT ARE THE

15 PRIMARY USES OF ELECTRICITY BY THE CITY OF

16 WILMINGTON?

17 A. A significant use of electricity is street lighting. Wilmington maintains

18 9, 118 street lights, plus an additional 330 leased street lights in approved

19 developments in the City. Another major use of electricity is for our stop

20 lights and crosswalk signals at our intersections. An example of this major

21 usage is the 217 traffic signals that we maintain.

22

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 10of18

Prior to 2008 when the City of Wilmington transferred its water and

2 wastewater facilities to the Cape Fear Public Utility Authority, our largest

3 single category of electricity use was for water and wastewater treatment and

4 pumping. This is likely true for most North Carolina cities. The Cape Fear

5 Public Utility Authority is budgeting $2,737,205 million to pay for

6 electricity it uses this year, under the current rates.

8 Cities that have either professional sports venues or lit athletic fields as part

9 of their parks and recreation facilities also use considerable electricity for

10 that lighting of those facilities. Wilmington currently maintains 326 acres of

11 athletic and recreational facilities. However, that number will increase in the

12 next two years, as the City approved a Parks Bond in 2016. With revenue

13 from the Parks Bond, in the next two years, the City will construct a 65-acre

14 soccer complex, a 7-acre downtown urban park with a concert venue, and

15 two new gymnasiums.

16

17 Also, of course, municipal buildings, the City Hall, community centers, law

18 enforcement buildings, fire stations, and jails use a significant amount of

19 electricity for lighting, air conditioning, and heating (unless they have

20 natural gas furnaces).

21

22 Q. HOW MUCH HAS THE CITY OF WILMINGTON BUDGETED FOR

23 ELECTRICITY USAGE FOR THE NEXT FISCAL YEAR?

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 11 of 18

A. For fiscal year 2018, the City of Wilmington has budgeted the amount of

2 $2,423,959 for electricity service for DE Progress' anticipated charges. It is

3 important to note that the budgeted costs do not include the amount of any

4 rate increase, and thus, the actual amounts will be higher than shown in the

5 chart below.

Fiscal Year 2018

Streetlights Electricity 1,249,966
Street Signals Electricity 21 ,000
Public Buildings Electricity 1 ,065,473

Golf Facilities Electricity 29,500

Parking Facilities Electricity 58,020

Total($) 2,423,959
6

7 Also, please be aware that this budgeted amount for fiscal year 2018 does

8 not include the cost for electricity for water and wastewater facilities, which

9 is typically also borne by most North Carolina municipalities, but which is

10 paid by the Cape Fear Public Utility Authority in our region. The water and

11 sewer authority is currently budgeting $2,737,205 per year for electric

12 service for water treatment and transmission and wastewater collection and

13 treatment. If these amounts are added together, they total about $5.2 million

14 dollars per year. DE Progress' requested rate increase would increase the

15 expenses of the City of Wilmington by almost $200,000 and the expenses of

16 the water and sewer authority by about $465,000, for a total increase in cost

17 of about $665,000 that must be borne by City residents. Therefore, with

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 12of18

Duke's proposed rate increase, the total cost that would have to be borne by

2 City residents in fiscal year 2018 is about $5,865,000.

4 Q. WHAT WOULD BE THE PRACTICAL EFFECT OF THE

5 ELECTRIC SERVICE RA TE INCREASE, IF APPROVED, ON

6 MUNICIPALITIES AND THEIR RESIDENTS?

7 A. Electric charges are of course non-discretionary costs. When non-

8 discretionary costs - like electricity bills - increase, cities have no choice but

9 to either (1) pass these costs on to its residents in the form of higher taxes, or

10 (2) cut other municipal services in order to pay these electricity costs. The

11 practical effect is as simple as that. If the increased costs are passed along to

12 taxpayers, the same people have to pay for the increased rates not once -- but

13 twice - through the higher bills for their own electricity usage billed directly

14 to them, and also for the increased costs of the municipality usage, passed on

15 indirectly through taxes.

16

17 Q. ARE THERE OTHER ISSUES OR DEVELOPMENTS THAT ARE

18 PLACING FINANCIAL PRESSURES ON THE CITY OF

19 WILMINGTON AND ITS CITIZENS?

20 A. Cities and North Carolina resident are all facing financial pressures. A

21 pressure that is of particular concern to coastal residents is the rapid increase

22 in homeowners' insurance premiums and flood insurance premiums. Long-

23 time residents have budgeted their personal finances carefully based upon

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 13of18

the expectations that their expenses -- for food, shelter, health care, utilities,

2 insurance, etc. -- will remain relatively stable or gradually increase with the

3 rate of inflation. A dramatic increase in insurance premiums, coupled with

4 increases in electric bills, will definitely hurt their finances, just as it will be

5 a significant financial burden for the City of Wilmington, which likewise

6 must pay for insurance for its properties. Moreover, retirees on fixed

7 incomes, or who rely in part on interest from their savings accounts, will be

8 adversely affected by these insurance and utility rate increases.

10 Q. HAS THE CITY OF WILMINGTON IMPLEMENTED

11 CONSERVATION EFFORTS TO REDUCE ITS ENERGY USAGE?

12 A. Yes. The City has implemented a Sustainability Program to efficiently

13 manage energy, water, and waste while cultivating a culture of

14 environmental stewardship throughout City operations to reduce our

15 environmental footprint. In order to conserve resources, the City is

16 committed to implementing fiscally and environmentally sound projects to

17 reduce energy consumption and save tax dollars throughout City facilities

18 and properties.

19

20 In 2011, Wilmington was one of two North Carolina cities to receive the

21 Susan M. Burgess Sustainability Award from the League of Municipalities

22 to honor cities that have undertaken initiatives to conserve energy. In 2013,

23 we added a dedicated staff person to oversee our sustainability efforts. Our

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 14of18

convention center has received LEED Silver Certification from the US

2 Green Building Council, and we have retrofitted our City facilities to

3 improve energy efficiency and water efficiency. For example, all of our city

4 facilities now have Light Emitting Diode (LED) lighting. We have installed

5 solar panels and a solar water heating unit on our old streetsweeper facility

6 on 1J111 Street, which resulted in reduced electricity bills for this 6, 100-

7 square-foot building. We also installed energy efficient street lights as part

8 of our North 3rd Street Improvement project.

10 The City's Traffic Engineering division converted traffic signals to LED

11 lighting in the late nineties, and completed the conversion of all traffic

12 signals to energy efficient LED technology in 2005. In addition, the City's

13 Traffic Engineering division is in the process of converting approximately

14 8,000 leased streetlights and area lights to LED technology through DE

15 Progress' leasing program. The conversion will provide savings to the City

16 in leasing cost and over 870,000 kWh of energy consumption. The project

17 started in the fall of 2014, and is expected to last four years. The energy

18 savings is equivalent to C02 emissions from the electricity use of 84.6

19 homes in one year or the carbon sequestered annually by 504 acres of US

20 forests.

21

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 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 15of18

Q. ARE THERE INCENTIVES FOR NC MUNICIPALITIES THAT

2 SHOULD BE IN PLACE TO ENCOURAGE CONSERVATION AND

3 LOWER THE COST OF ELECTRICITY?

4 A. Other NC municipalities would have better ability to conserve resources and

5 reduce energy consumption if DE Progress provided additional incentives

6 for use of LED for outdoor lighting. Even though LED street lighting

7 systems are becoming more economically feasible, many municipalities are

8 still not able to take advantage of the benefits of LED lighting due to the cost

9 of converting their own lighting to LED fixtures. As NC municipalities

10 could achieve large cost savings through LED lighting, DE Progress should

11 provide financial incentives to municipalities to utilize LED lighting. Such a

12 solution would benefit the municipalities, the municipalities' residents, DE

13 Progress, and the entire state due to the environmental benefits.

14

15 Q. ARE THESE CONSERVATION EFFORTS CONSISTENT WITH

16 STATE POLICY AND THE POLICIES OF MANY

17 MUNICIPALITIES?

18 A. Absolutely. The State's policy supporting energy efficiency is articulated

19 and codified in Article 3B of Chapter 143 of the NC General Statutes

20 (N.C.G.S. 143-64.10 et seq.). In addition, for cities, the NC General

21 Assembly has allowed us to lower permit fees for buildings that meet energy

22 efficiency certification guidelines (N.C.G.S. 160A-381) and offer other

23 land-use development incentives for projects that contribute to the reduction

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 16of18

of energy consumption (N.C.G.S. 160A-383.4). Many municipalities have

2 utilized these statutes to implement energy conservation policies through

3 local ordinances, as well as implementing energy efficiency measures in

4 their own buildings as previously discussed.

6 Q. IN THIS RA TE CASE, DE PROGRESS JUSTIFIES ITS PROPOSED

7 RATE INCREASES TO RECOVER COSTS FOR A NUMBER OF

8 EXPENSES. HOW DO YOU RESPOND TO THIS REASON FOR

9 THE PROPOSED RATE INCREASES?

10 A. It is my understanding that DE Progress has stated that its significant rate

11 increase is driven by: a) capital investments made by DE Progress since its

12 last rate case, including the further implementation of DE Progress'

13 modernization program that consists of retiring, replacing, and upgrading

14 generation plants and transmission and distribution systems; b) costs related

15 to storm recovery; c) investments in customer service technologies; d)

16 recovery of costs associated with purchased renewable purchased power;

17 and e) costs associated with the coal ash cleanup. It is also my

18 understanding that the vast majority of the rate increase is DE Progress'

19 attempt to recover costs for its grid modernization and closure of coal ash

20 basins. While we understand that DE Progress must earn sufficient revenues

21 to allow it to operate, provide good service, and earn a reasonable rate of

22 return, the requested rate increases are extremely high and will result in

23 significant rate shock to all customers. For example, DE Progress' requested

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 17of18

rate increase would result in a 17% increase for residential customers, which

2 would be a tremendous financial burden. Likewise, the proposed increase

3 for the Traffic Signal Service would be high (a 16.4% increase). As

4 mentioned above, these requested increases would be a burden on all

5 customers in DE Progress' territory, including the City of Wilmington's

6 taxpayers.

8 We also have serious concerns about the ratepayers and taxpayers being

9 responsible for the cost of DE Progress' coal ash cleanup efforts. We

10 request that the Commission carefully scrutinize DE Progress' cost recovery

11 request for closure of the coal ash basins, and disallow any such expenses

12 that should not be borne by the ratepayers.

13

14 As I mentioned previously, we also strongly believe that energy

15 conservation is and should continue to be an important policy goal in

16 general. Municipalities that are committed to conservation efforts should be

17 rewarded and should be provided mechanisms to manage their expenditures

18 aggressively for all the reasons previously discussed in my testimony. I

19 previously highlighted an appropriate method to encourage conservation and

20 decrease the cost of energy: provide financial incentives for municipalities

21 to convert to LED lighting.

22

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 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 18of18

Q. HOW DO YOU BELIEVE THE MUNICIPALITIES'

2 CONSERVATION EFFORTS SHOULD BE CONSIDERED IN THE

3 CONTEXT OF EVALUATING DE PROGRESS' REVENUE

4 REQUIREMENTS?

5 A. Conservation efforts should continue to be encouraged and facilitated by DE

6 Progress' rate structure. Cities, such as the City of Wilmington, have made

7 investments in conservation measures in order to lower their utility costs and

8 have incorporated the projected savings from these measures in their

9 projections of municipal financial needs. For example, a city might be

10 willing to incur the capital cost of an energy efficiency project -- to lower its

11 energy usage by, for example, 5% -- based on its ability to use the savings to

12 pay the debt service for the financing of the project. Alternatively, a city

13 might decide to take the amount of the projected savings to finance the debt

14 service on an investment in additional poles and fixtures to improve street

15 lighting in previously unlit areas (e.g., in response to resident demands as

16 described earlier in my testimony) or to improve traffic signal

17 synchronization (e.g., to ease traffic congestion). However, incentives must

18 be provided to enable conservation and cost savings to be possible.

19

20 Q. HOW WOULD YOU SUMMARIZE YOUR POSITION ON THE

21 RATE INCREASES PROPOSED BY DE PROGRESS?

22 A. Elected leaders take their responsibilities to be good stewards of taxpayer

23 monies very seriously -- to use them wisely, to conserve our resources, to

RALEIGH 522574.1
 Direct Testimony of Mayor Bill Saffo
Docket No. E-2, Sub 1023
Page 19of18

keep municipal expenditures as low as practicable, and to ensure that

2 citizens are getting the very best value for their hard-earned money paid to

3 their local government. We agree that DE Progress needs sufficient revenue

4 to operate, and we recognize that we must work cooperatively with our

5 investor-owned utilities to try to meet all of these needs. However, we

6 believe that the requested rates are far too high, and we believe that the

7 proposed increases in rates for services to municipalities should be carefully

8 reviewed to assure all steps have been taken to minimize any rate increases

9 and to advance the policy goals discussed in my testimony.

10

11 We welcome continued discussions with DE Progress in order to continue to

12 address concerns and find mutually acceptable and workable solutions for

13 both the cities and DE Progress.

14

15 Q. DOES THIS CONCLUDE YOUR TESTIMONY?

16 A. Yes, at this time.

17

RALEIGH 522574.1