1

2 IN THE UNITED STATES DISTRICT COURT

 FOR THE DISTRICT OF PUERTO RICO

3 Case No. 17-BK-3283-LTS

 ----------------------------------------x

4 In re:

5 THE FINANCIAL OVERSIGHT AND MANAGEMENT

 BOARD FOR PUERTO RICO,

6

 as representative of

7

 THE COMMONWEALTH OF PUERTO RICO, et al.,

8

 Debtors.

9 -----------------------------------------x

 Case No. 17-BK-4780-LTS

1 0 -----------------------------------------x

 In re:

1 1

 THE FINANCIAL OVERSIGHT AND MANAGEMENT

1 2 BOARD FOR PUERTO RICO,

1 3 as representative of

1 4 THE PUERTO RICO ELECTRIC POWER AUTHORITY,

1 5 Debtor.

 ----------------------------------------x

1 6 May 4, 2023

 9:38 a.m.

1 7

1 8 VIDEOTAPED DEPOSITION of WILLIAM

1 9 ZARAKAS, held at the offices of Kramer

2 0 Levin Naftalis & Frankel LLP, located at

2 1 1177 Avenue of the Americas, New York, New

2 2 York 10036, before Anthony Giarro, a

2 3 Registered Professional Reporter, a

2 4 Certified Realtime Reporter and a Notary

2 5 Public of the State of New York.

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Exhibit 9 Page 1 of 28
1

2 A P P E A R A N C E S :

3

4 KRAMER LEVIN NAFTALIS & FRANKEL LLP

 Attorneys for the Ad Hoc Group of PREPA

5 Bondholders

 1177 Avenue of the Americas

6 New York, New York 10036

7 BY: NATAN HAMERMAN, ESQ.

 (via Zoom)

8 ALICE BYOWITZ, ESQ.

 (via Zoom)

9

 KRAMER LEVIN NAFTALIS & FRANKEL LLP

1 0 Attorneys for the Ad Hoc Group of PREPA

 Bondholders.

1 1 2000 K Street NW, 4th Floor

 Washington, D.C. 20006

1 2

 BY: MATTHEW M. MADDEN, ESQ.

1 3 mmadden@kramerlevin.com

 JANE TOMIC, ESQ.

1 4 jtomic@kramerlevin.com

 SHIHKA GARG, ESQ.

1 5 (via Zoom)

 MARK RUSSELL, ESQ.

1 6 (via Zoom)

1 7 CADWALADER, WICKERSHAM & TAFT LLP

 Attorneys for Assured Guaranty Corp. and

1 8 Assured Guaranty Municipal Corp

 200 Liberty Street

1 9 New York, New York 10281

2 0 BY: WILLIAM J. NATBONY, ESQ.

 bill.natbony@cwt.com

2 1 THOMAS J. CURTIN, ESQ.

 thomas.curtin@cwt.com

2 2 (via Zoom)

 ZACK SCHREIBER, ESQ.

2 3 zack.schreiber@cwt.com

2 4

2 5

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Exhibit 9 Page 2 of 28
1

2 A P P E A R A N C E S (Cont.)

3

4 QUINN EMANUEL URQUHART & SULLIVAN, LLP

 Attorneys for Syncora Guarantee, Inc.

5 51 Madison Avenue, 22nd Floor

 New York, New York 10010-1603

6

 BY: KATE SCHERLING, ESQ.

7 katescherling@quinnemanuel.com

8 WEIL, GOTSHAL & MANGES LLP

 Attorneys for National Public Finance

9 Guarantee Corporation

 1395 Brickell Avenue, Suite 1200

1 0 Miami, Florida 33131

1 1 BY: COREY BRADY, ESQ.

 corey.brady@weil.com

1 2 (via Zoom)

1 3 PAUL HASTINGS LLP

 Attorneys for Official Committee of

1 4 Unsecured Creditors

 200 Park Avenue

1 5 New York, New York 10166

1 6 BY: LUC A. DESPINS, ESQ.

 lucdespins@paulhastings.com

1 7 SHLOMO MAZA, ESQ.

 (via Zoom)

1 8 ALEXANDER BONGARTZ, ESQ.

 (via Zoom)

1 9

2 0

2 1

2 2

2 3

2 4

2 5

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Exhibit 9 Page 3 of 28
1

2 A P P E A R A N C E S (Cont.)

3

4 PAUL HASTINGS LLP

 Attorneys for Official Committee of

5 Unsecured Creditors

 N.E. 100, 1170 Peachtree Street NE

6 Atlanta, Georgia 30309

7 BY: WILLIAM WHITNER, ESQ.

 (via Zoom)

8 ERIC STOLZE, ESQ.

 (via Zoom)

9

1 0 PAUL HASTINGS LLP

 Attorneys for Official Committee of

1 1 Unsecured Creditors

 2050 M Street NW

1 2 Washington, D.C. 20036

1 3 BY: NICHOLAS A. BASSETT, ESQ.

 nicholasbassett@paulhastings.com

1 4

1 5

 SHEPPARD MULLIN RICHTER & HAMPTON LLP

1 6 Attorneys for the Ad Hoc Group of FGIC

 Noteholders

1 7 30 Rockefeller Plaza

 New York, New York 10112

1 8

 BY: LAWRENCE LAROSE, ESQ.

1 9 llarose@sheppardmullin.com

 BENJAMIN GILBERT, ESQ.

2 0 bogilbert@sheppardmullin.com

2 1

2 2

2 3

2 4

2 5

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Exhibit 9 Page 4 of 28
1

2 A P P E A R A N C E S (Cont.)

3

4

5 O'MELVENY & MYERS LLP

 Attorneys for AAFAF

6 7 Times Square

 New York, New York 10036

7

 BY: GABRIEL OLIVERA, ESQ.

8 golivera@omm.com

 MARIA BENITES, ESQ.

9 mbenitesgutierrez@omm.com

 ELIZABETH McKEEN, ESQ.

1 0 (via Zoom)

 MARIA DiCONZA, ESQ.

1 1 (via Zoom)

1 2

 O'MELVENY & MYERS LLP

1 3 Attorneys for AAFAF

 610 Newport Center Drive, 17th Floor

1 4 Newport Beach, California 92660

1 5 BY: ASHLEY PAVEL, ESQ.

 apavel@omm.com

1 6 (via Zoom)

1 7

 PROSKAUER ROSE LLP

1 8 Attorneys for the Financial Oversight and

 Management Board as Representative for

1 9 PREPA

 2029 Century Park E, Suite 2400

2 0 Los Angeles, California 90067

2 1 BY: MICHAEL FIRESTEIN, ESQ.

 mfirestein@proskauer.com

2 2 (via Zoom)

2 3

2 4

2 5

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Exhibit 9 Page 5 of 28
1

2 A P P E A R A N C E S (Cont.)

3

4

 PROSKAUER ROSE LLP

5 Attorneys for the Financial Oversight and

 Management Board as Representative for

6 PREPA

 Eleven Times Square

7 New York, New York 10036

8 BY: MARGARET A. DALE, ESQ.

 EHUD BARAK, ESQ.

9 NICOLE SWANSON, ESQ.

 (via Zoom)

1 0 MATTHEW SKRZYNSKI, ESQ.

 (via Zoom)

1 1 DANIEL DESATNIK, ESQ.

 (via Zoom)

1 2 JEFFREY LEVITAN, ESQ.

 (via Zoom)

1 3 JULIA ALONZO, ESQ.

 (via Zoom)

1 4 ELLIOT STEVENS, ESQ.

 (via Zoom)

1 5

1 6 PROSKAUER ROSE LLP

 Attorneys for Financial Oversight and

1 7 Management Board as Representative for

 PREPA

1 8 1001 Pennsylvania Avenue NW, Suite 600

 Washington, D.C. 20004

1 9

 BY: MEE RINA KIM, ESQ.

2 0 PAUL POSSINGER, ESQ.

 (via Zoom)

2 1

2 2

2 3

2 4

2 5

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Exhibit 9 Page 6 of 28
1

2 A P P E A R A N C E S (Cont.)

3

 MASLON LLP

4 Attorneys for U.S. Bank National

 Association, in its Capacity as Trustee

5 90 South Seventh Street, Suite 3300

 Minneapolis, Minnesota 55402

6

 BY: JOHN DUFFEY, ESQ.

7

8

 WACHTELL, LIPTON, ROSEN & KATZ

9 Attorneys for Fuel Line Lenders

 51 West 52nd Street

1 0 New York, New York 10019

1 1 BY: ANGELA HERRING, ESQ.

 (via Zoom)

1 2

1 3 ALSO PRESENT:

1 4 MARCELO RIVERA, Videographer

 BILL CRADDOCK, Concierge Tech

1 5 JAKE FRANKS, Concierge Tech

 CATHY KUNKEL (via Zoom)

1 6 ROCIO VALENTIN (via Zoom)

 ROLANDO EMMANUELLI-JIMENEZ (via Zoom)

1 7 ZOE NEGRON-COMAS, ESQ.(via Zoom)

 SCOTT MARTINEZ, AlixPartners

1 8 ERIC KAY (via Zoom)

 JULIA FRAYER (via Zoom)

1 9

2 0

2 1

2 2

2 3

2 4

2 5

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Exhibit 9 Page 7 of 28
1 WILLIAM ZARAKAS

2 participating or just observing. And

3 in that moment, we let the noticing

4 parties know that we would be

5 participating. We understood that

6 that would be communicated to the

7 board.

8 MS. DALE: It wasn't, but

9 thank you.

1 0 EXAMINATION BY

1 1 MS. COMAS:

1 2 Q Mr. Zarakas, I only have a

1 3 few questions for you. I know it's been

1 4 a very long day for you.

1 5 My first question, it's been

1 6 a long trajectory. Can we go back to the

1 7 beginning?

1 8 The purpose of the revenue

1 9 envelope calculation is to determine the

2 0 maximum amount of revenue that can be

2 1 generated over the time of the adjustment

2 2 period. Would that be a correct

2 3 statement?

2 4 A Yes.

2 5 Q And that is based on revenue

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Exhibit 9 Page 8 of 28
1 WILLIAM ZARAKAS

2 generated only if the median household

3 spent 6 percent of their income on

4 electricity?

5 MS. DALE: Objection to the

6 form of the question.

7 THE WITNESS: Answer?

8 MS. DALE: Yes, if you

9 understand.

1 0 A Affordability or electricity

1 1 spending by the median income household

1 2 was part of the development of the

1 3 revenue envelope.

1 4 Q Would that fact require that

1 5 this calculation be updated yearly based

1 6 on median income?

1 7 A No.

1 8 Q Why not?

1 9 A We set the rate in the first

2 0 year based on that and don't change

2 1 the -- either the revenue envelope or the

2 2 legacy charge rate for the entire term.

2 3 Q Is there a reason for that?

2 4 A Yes. The 6 percent is

2 5 considered -- is a policy measure. It's

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Exhibit 9 Page 9 of 28
1 WILLIAM ZARAKAS

2 a threshold for energy poverty. It's not

3 a long-term equilibrium that's sought.

4 Q Regarding the revenue, you

5 and your team were in the process of

6 calculating it.

7 Were you considering the

8 Commonwealth of Puerto Rico's fiscal plan

9 as well?

1 0 A As it was used as the

1 1 backdrop for the PREPA fiscal plan, yes.

1 2 Q Are you aware that the

1 3 Commonwealth's fiscal plan projects

1 4 decreasing real growth for the period of

1 5 the plan of adjustment for PREPA?

1 6 A I believe so, yes.

1 7 Q Would that increase -- do

1 8 you think it is likely for household

1 9 income to increase given that real growth

2 0 decline?

2 1 Let me reformulate that.

2 2 Given that there is a

2 3 projection of real growth decline

2 4 decrease, would it be likely for

2 5 household income to increase in the

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Exhibit 9 Page 10 of 28
1 WILLIAM ZARAKAS

2 period of the plan of adjustment?

3 A Both are compatible. They

4 both can work, yes.

5 Q How?

6 A Overall, economic activity

7 is projected to decline, as is population

8 and number of customers. But the

9 remaining population and customers,

1 0 despite the decline in overall

1 1 population, could continue to have modest

1 2 adjustments to their household income.

1 3 Q What would those modest

1 4 adjustments be based on?

1 5 A The escalation rates that

1 6 are used for overall cost and wages

1 7 included in PREPA's fiscal plan.

1 8 Q Moving to the PREPA 2022

1 9 fiscal plan, are you aware that the rates

2 0 projected are lowest in Fiscal Year 2024

2 1 versus the projections for Fiscal Year

2 2 2051?

2 3 A Yes.

2 4 Q Does that mean that as the

2 5 plan progresses, the share of wallet

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Exhibit 9 Page 11 of 28
1 WILLIAM ZARAKAS

2 might change based on the increasing

3 rate?

4 A It might.

5 MS. DALE: Objection. We're

6 talking now about the median income

7 residential household?

8 MS. COMAS: Yes. That is

9 correct.

1 0 MS. DALE: Thank you.

1 1 Q Was this considered in the

1 2 calculation for the revenue envelope?

1 3 MS. DALE: Objection to the

1 4 form of the question. Was what

1 5 considered?

1 6 MS. COMAS: The possibility

1 7 that the affordable amount of -- the

1 8 affordable percentage of electricity

1 9 payment for a household would

2 0 increase in that period because the

2 1 rates are increasing.

2 2 A Could you restate the second

2 3 part of your question there?

2 4 Q Yes.

2 5 Under the premise that the

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1 WILLIAM ZARAKAS

2 rate would increase in the period of the

3 plan, was it considered that that

4 increase would also increase the burden

5 on the rate payer, i.e., the shared

6 wallet that they would be paying?

7 A I think indirectly, but not

8 as part of the model.

9 Q How would you say it was

1 0 considered?

1 1 A Wages increasing, as well as

1 2 costs, might result in a higher or lower

1 3 affordability in the future or share of

1 4 wallet as you say.

1 5 Q Questions of counsel

1 6 previously in reference to Exhibit P of

1 7 the disclosure statement, which is marked

1 8 as Exhibit 37 of this deposition, you

1 9 stated that part of the --

2 0 MS. DALE: Hold on. Could

2 1 you just wait one second? He just

2 2 wants to get the actual exhibit in

2 3 his hand.

2 4 MS. COMAS: Sure.

2 5 MS. DALE: We have it.

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1 WILLIAM ZARAKAS

2 Thank you.

3 Q You stated in that moment

4 that part of this calculation of the

5 legacy charge was ensuring that PREPA

6 would be sustainable; is that correct?

7 A Yes.

8 Q Do you consider that the

9 plan of adjustment, as it is now, with

1 0 the legacy charge that we have now in the

1 1 plan, is sustainable for PREPA?

1 2 A Feasible and sustainable.

1 3 Q Do you base that conclusion

1 4 only on projections that are from PREPA's

1 5 fiscal plan?

1 6 A PREPA's fiscal plan was used

1 7 in developing the revenue envelope.

1 8 Q And the sustainability of

1 9 PREPA as you understand it is based on

2 0 the projections in the fiscal plan?

2 1 A Yes.

2 2 Q Was there any other data,

2 3 apart from the fiscal plan that you used?

2 4 A For purposes of the costs

2 5 that PREPA would incur?

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1 WILLIAM ZARAKAS

2 Q For purposes of determining

3 that this would be sustainable. So, yes,

4 it includes the costs that PREPA would

5 incur.

6 A Yes. We looked at fixed and

7 volumetric charges that are charged

8 throughout the United States that was not

9 included in the PREPA fiscal plan. And

1 0 we looked at both average bills

1 1 and percent increases around the United

1 2 States as well as for PREPA.

1 3 Q Did you consider for that

1 4 analysis also the declines in Puerto

1 5 Rican's GDP in the Commonwealth fiscal

1 6 plan?

1 7 A Only to the extent that it's

1 8 included in PREPA's fiscal plan.

1 9 Q Are you aware that LUMA has

2 0 publicly expressed that the budgets that

2 1 have been certified by the board for 2023

2 2 and 2024 are not adequate or do not

2 3 completely fund their operations?

2 4 A I'm aware that LUMA has

2 5 stated in a letter to the board that the

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1 WILLIAM ZARAKAS

2 capital and operating expenditures for

3 the next several years are -- very well

4 might be higher than what's in the fiscal

5 plan.

6 Q Based on those expressions,

7 is it possible that the system costs and

8 the revenue on the load model are

9 underestimated?

1 0 A It is possible.

1 1 Q What effect would that have

1 2 if they were underestimated?

1 3 A Because we included or -- we

1 4 developed our rates in the first year.

1 5 And we don't change the rates over the

1 6 course of the plan. The intention is

1 7 that there's some room for asymmetric

1 8 risk, the type of risk that you're

1 9 referring to.

2 0 Q So for my understanding,

2 1 that would mean that the remaining

2 2 revenue would not be impacted greatly by

2 3 such an underestimation because the risk

2 4 is compensated?

2 5 A It depends on the size of

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Exhibit 9 Page 16 of 28
1 WILLIAM ZARAKAS

2 the increases in costs. So if there's

3 modest increases in cost, it could be

4 accommodated. If there are major

5 increases in cost, it might not.

6 Q Do you have like a figure in

7 mind for what would be a major increase?

8 A We don't.

9 Q Regarding the legacy charge

1 0 on Puerto Rico's economy, was there an

1 1 analysis on that when you were developing

1 2 the legacy charge?

1 3 A Could you repeat that?

1 4 Q Was there an analysis on

1 5 your part or on your team's part about

1 6 the effect that the legacy charge would

1 7 have on Puerto Rico's economy?

1 8 A No.

1 9 Q Was there an analysis on

2 0 whether it would have an impact on

2 1 private sector employment?

2 2 A No.

2 3 Q Was there an analysis on

2 4 whether it would have an impact on

2 5 business closures?

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1 WILLIAM ZARAKAS

2 A No.

3 Q Is there a reason why these

4 were not considered?

5 A No particular reason; more

6 so just the amount of workflow and

7 ability to complete work.

8 Q To questions of counsel, you

9 were asked of the percentage of

1 0 population that is above the median

1 1 income. You recall that?

1 2 A Yes.

1 3 Q You recall it was around

1 4 45 percent of the population?

1 5 A Yes.

1 6 Q To my understanding, that

1 7 45 percent of the population under the

1 8 current legacy charge would have the same

1 9 rate as any other residential

2 0 non-subsidized or subsidy eligible

2 1 customer; is that correct?

2 2 A Yes.

2 3 Q And I recall -- you can

2 4 correct me if I'm wrong -- you mentioned

2 5 that there was not a consideration of

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1 WILLIAM ZARAKAS

2 having a different rate for a higher

3 income household. Does that sound

4 correct?

5 A Yes.

6 Q Is there a reason that was

7 not considered?

8 A Yes.

9 Q Could you tell me what that

1 0 reason was?

1 1 A Sure. I think it was a

1 2 matter of a -- a combination of board

1 3 policy. But also, it's a relatively

1 4 unused discriminatory rate setting method

1 5 that is really not used very much, if at

1 6 all, in the United States.

1 7 Q That was going to be my

1 8 follow-up question because you mentioned

1 9 you have experience in other rate making

2 0 processes.

2 1 So would having different

2 2 rates for higher income customers be

2 3 considered not standard?

2 4 MR. MADDEN: Objection to

2 5 form.

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1 WILLIAM ZARAKAS

2 MS. COMAS: I should

3 rephrase that.

4 Q Would it be considered

5 standard to have a different rate for

6 higher income customers?

7 MR. MADDEN: Same objection.

8 MS. COMAS: Can he answer?

9 MS. DALE: He can. He's

1 0 just thinking about it.

1 1 Q Do you need me to rephrase,

1 2 sir?

1 3 A No. I'm okay. I am aware

1 4 of only one place in the United States

1 5 where it is even being considered.

1 6 Q Thank you.

1 7 During your prior testimony,

1 8 you defined price elasticity -- and

1 9 you'll correct me if I get this wrong --

2 0 as the response of customers to increase

2 1 in price.

2 2 A I couldn't hear the end of

2 3 your question.

2 4 Q You defined price elasticity

2 5 as the response of customers to increases

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1 WILLIAM ZARAKAS

2 in price. Does that sound correct?

3 A Yes.

4 Q In general, what factors are

5 considered for that price elasticity

6 analysis?

7 MS. DALE: Objection to the

8 form.

9 A Could you be a little more

1 0 explicit in your question?

1 1 Q Would specific be like by

1 2 sector or is there a reference?

1 3 MS. DALE: I didn't hear

1 4 your question. I'm sorry, counsel.

1 5 MS. COMAS: The witness

1 6 asked me to be more specific. But

1 7 I'm wondering if what would be more

1 8 helpful is for me to be specific in

1 9 terms of sector or if the general

2 0 question that needs to be more

2 1 specific.

2 2 A When you said factors, I

2 3 wasn't sure what you meant by that.

2 4 Q What are some elements of

2 5 the analysis --

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1 WILLIAM ZARAKAS

2 MS. DALE: Objection.

3 Q -- for price elasticity?

4 MS. DALE: Sorry to speak

5 over you. Objection to form.

6 A In determining the price

7 elasticity of demands that we used, we

8 looked at studies that have been done,

9 both going back sometime, as well as

1 0 studies that have been a little more

1 1 current to help us understand recent

1 2 additions or incremental effects on price

1 3 elasticity.

1 4 Q To questions from counsel

1 5 regarding whether you did a separate

1 6 affordability analysis for the population

1 7 of residential customers that is above

1 8 the median income, if I recall, you

1 9 answered no; is that correct?

2 0 A That's correct.

2 1 Q Was there a separate

2 2 analysis of price elasticity for that

2 3 population?

2 4 A No.

2 5 Q Is it possible that there

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1 WILLIAM ZARAKAS

2 would be differences in the results of

3 that analysis?

4 A We didn't segment the price

5 elasticity of demand by segments within a

6 class. To your question, higher income,

7 higher usage customers very well might

8 have higher price elasticities of demand.

9 But we did not look at income levels in

1 0 determining price elasticities of demand.

1 1 Q But you've mentioned just

1 2 now that they might have higher

1 3 elasticity, the higher income population?

1 4 A Yes.

1 5 Q Would you be able to explain

1 6 why that is?

1 7 A Yes. Some of the -- price

1 8 elasticity of demand is driven by your

1 9 ability to access substitutes. And

2 0 higher income customers tend to be able

2 1 to access more substitutes; for example,

2 2 they would be able to put photovoltaics

2 3 on their roofs and put storage batteries

2 4 in their house as well.

2 5 Q Would it be an accurate

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1 WILLIAM ZARAKAS

2 inference that placing a higher rate on a

3 higher income household could lead to

4 higher elasticity?

5 MS. DALE: Objection to form

6 to the hypothetical. But if you can

7 answer it.

8 A I think the answer is that

9 higher prices on higher income customers

1 0 might lead to more defection from using

1 1 PREPA.

1 2 Q Thank you.

1 3 Are you aware of how long

1 4 PREPA has been operating under certified

1 5 fiscal plans for PROMESA?

1 6 A Could you say the last part

1 7 again? I'm sorry.

1 8 Q For PROMESA, are you aware

1 9 of how many years PREPA has been

2 0 operating under certified fiscal plans

2 1 for PROMESA, the law?

2 2 A I don't know if I know the

2 3 answer to that question.

2 4 Q As part of your analysis,

2 5 did you study any prior fiscal plans,

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1 WILLIAM ZARAKAS

2 other than the 2022 fiscal plan?

3 A We looked at several fiscal

4 plans, yes.

5 Q Can you remember which one?

6 A I believe we looked at 2020

7 and 2021 as well.

8 Q When you looked at those

9 fiscal plans, were you able to observe

1 0 the indices for reliability?

1 1 A We looked at reliability

1 2 through other data sources.

1 3 Q What data sources?

1 4 A ITripoli and EIA, I believe.

1 5 I'm sorry. It's not iTripoli. It's EEI,

1 6 Edison Institute.

1 7 Q Based on that review, would

1 8 you say it's accurate that PREPA has not

1 9 met projections for system reliability

2 0 improvements in the past few years?

2 1 Let me rephrase that

2 2 question.

2 3 Would you say that in those

2 4 time periods that you studied, PREPA has

2 5 met reliability improvement goals, to

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1 WILLIAM ZARAKAS

2 your knowledge?

3 A The data sources that I just

4 talked about don't talk about PREPA

5 goals. It talks about PREPA performance.

6 But you just prompted me to realize that

7 there were some targets in the LUMA

8 contract. And I believe those targets

9 have not been met, either by LUMA or

1 0 PREPA before LUMA.

1 1 Q You mentioned that the

1 2 sources that you did consult were

1 3 performance, not goals; is that correct?

1 4 A Correct.

1 5 Q Could you see any

1 6 improvement in performance in those

1 7 sources?

1 8 A No.

1 9 Q Could this lack of

2 0 improvement be due to operational

2 1 resources?

2 2 MS. DALE: Objection to the

2 3 form. You can answer.

2 4 A I'm not sure what you mean

2 5 by operational resources.

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1 WILLIAM ZARAKAS

2 Q I'll rephrase.

3 Is it possible that the lack

4 of improvement in reliability performance

5 is due to a lack of funding for

6 operational processes?

7 A There's a difference in

8 terminology. Operational improvements

9 are an expense item versus a capital

1 0 item. So I'm just not sure I understand

1 1 your question.

1 2 Q Let me clarify that.

1 3 The costs for improving

1 4 reliability, are those capital

1 5 expenditures?

1 6 A In part, yes.

1 7 Q They are not operational

1 8 expenses?

1 9 A Also some operational

2 0 expenditures.

2 1 Q So I will ask the question

2 2 for both things.

2 3 Could the lack of funding

2 4 for capital expenditures be causing this

2 5 lack of improvement in performance?

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1 WILLIAM ZARAKAS

2 A It could. We did not study

3 that. But it could.

4 Q And is the same true for

5 lack of funding for operational

6 expenditures?

7 A It could. Again, we did not

8 study that.

9 Q Since you did not study it,

1 0 I'm going to assume the answer to this is

1 1 the same.

1 2 Did the revenue envelope

1 3 consider the costs of meeting those

1 4 reliability improvements?

1 5 A Only to the extent that it's

1 6 included in the fiscal plan.

1 7 MS. COMAS: That is the

1 8 extent of my questions. Thank you

1 9 very much.

2 0 MS. DALE: Anybody else have

2 1 any other questions for the witness?

2 2 MR. MADDEN: I have brief

2 3 follow-up. But I'll let anyone else

2 4 go first. I'll be very brief.

2 5 FURTHER EXAMINATION BY

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