EXHIBIT 20 

Case:17-03283-LTS Doc#:24535-20 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

Exhibit AHG Ex 20 2023-05-04 Excerpted Zarakas_FULL Page 1 of 15
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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Case:17-03283-LTS Doc#:24535-20 Filed:06/12/23 Entered:06/12/23 21:36:46 Desc:

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1 WILLIAM ZARAKAS

2 that could be charged, consistent with

3 the three goals listed in this paragraph?

4 A Yes.

5 Q And those are the maximum

6 rates on any given customer class PREPA

7 provides electricity to; correct?

8 A The affordability is

9 primarily at residential customers. But

1 0 the maximum is for all customers.

1 1 Q When you say the

1 2 affordability is primarily for

1 3 residential customers, what do you mean

1 4 by that?

1 5 A The affordability test, some

1 6 called it wallet, or it's a percentage of

1 7 spending on electricity. I should say

1 8 it's the amount spent on electricity as a

1 9 percentage of income -- in this case

2 0 median income -- was the test that we

2 1 applied for affordability.

2 2 Q And was there any

2 3 corresponding affordability test applied

2 4 to non-residential PREPA customers?

2 5 A No.

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1 WILLIAM ZARAKAS

2 A Yes.

3 Q And it should be a short

4 answer.

5 By whom were you instructed?

6 A In collaboration with the

7 board.

8 Q You were instructed by the

9 oversight board not to grow the median

1 0 income by inflation for purposes of

1 1 calculating residential affordability in

1 2 the revenue envelope model?

1 3 A Yes.

1 4 Q When did you receive that

1 5 instruction?

1 6 A In the development of the

1 7 model as we were quantifying the model.

1 8 Q When you received that

1 9 instruction, did a version of the model

2 0 already exist?

2 1 A It was in development.

2 2 Q Prior to receiving that

2 3 instruction, had you provided a version

2 4 of the in-development model to the

2 5 oversight board? That's a yes or no or I

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1 WILLIAM ZARAKAS

2 don't know.

3 A No.

4 Q Absent the instruction of

5 the board, could you have performed an

6 analysis of residential affordability in

7 which you did grow median income by the

8 rate of inflation?

9 A It's possible, yes.

1 0 Q And do you agree that if

1 1 median household income grows over time

1 2 by an assumed rate of inflation, then

1 3 amounts greater than $120 a month will be

1 4 less than 6 percent of that

1 5 household's -- that median income

1 6 household's monthly income?

1 7 A So arithmetically, I think,

1 8 yes.

1 9 Q You mentioned earlier that

2 0 the PREPA's fiscal plan forecast

2 1 projections are incorporated as an input

2 2 into the revenue envelope model; correct?

2 3 A Yes.

2 4 Q And that those inputs

2 5 include a rate of inflation; is that

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1 WILLIAM ZARAKAS

2 right?

3 A For costs, yes.

4 Q The forecast of PREPA's

5 costs that's incorporated into the

6 revenue envelope model, does that reflect

7 inflationary growth over time?

8 A Yes.

9 Q Do you know whether in the

1 0 context of the revenue model, capital

1 1 expenses reflect inflationary growth over

1 2 time?

1 3 A I don't know.

1 4 Q As you sit here today, are

1 5 you aware of -- strike that.

1 6 Do you know, as you sit here

1 7 today, how big PREPA's revenue envelope

1 8 would be, all other things being equal,

1 9 if you grew the median income

2 0 household -- the median household's

2 1 income -- try it a third time.

2 2 As you sit here today, do

2 3 you know how large PREPA's revenue

2 4 envelope would be if you were to keep the

2 5 rest of your analysis the same, but grow

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1 WILLIAM ZARAKAS

2 A Roughly half.

3 Q Is it the first half?

4 A So it's July through June.

5 So you're asking me when the 2021 fiscal

6 plan starts; correct?

7 Q Close.

8 What was the date on which

9 fiscal -- PREPA's Fiscal Year 2021

1 0 started?

1 1 A July 2021.

1 2 Q Not July 2020, but

1 3 July 2021? I want to make sure I have it

1 4 right.

1 5 A Me too. Yeah. I believe

1 6 it's July 2021.

1 7 Q The fiscal year, PREPA's

1 8 fiscal year doesn't match up with the

1 9 calendar year; correct?

2 0 A That's right.

2 1 Q Did you consider using an

2 2 average rate for -- try again.

2 3 In determining the average

2 4 2021 rate to use in Exhibit 42, did you

2 5 consider using an average of the two

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1 WILLIAM ZARAKAS

2 fiscal year rates that would apply to

3 Calendar Year 2021?

4 A At the time, no.

5 Q Have you considered doing an

6 analysis like that since?

7 A Yes.

8 Q Have you performed such

9 analysis?

1 0 A We are looking at the PRCS

1 1 data in much greater detail.

1 2 Q How so?

1 3 A Looking at the data, there's

1 4 some data that might need to be excluded

1 5 in coming up with the average

1 6 consumption.

1 7 Q What kinds of data might

1 8 need to be excluded in coming up with the

1 9 average consumption?

2 0 A I have a team of people

2 1 looking at it now. So I'm not completely

2 2 prepared. But, for example, on line 7,

2 3 that number that you pointed out is $48.

2 4 $48 happens to be $4 times 12. $4 is the

2 5 customer charge that is included in the

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1 WILLIAM ZARAKAS

2 provided for by PREPA's 2022 certified

3 fiscal plan?

4 A I believe so, yes.

5 Q And you adopted those

6 changed assumptions at the instruction of

7 EY?

8 A At the instruction of the

9 board.

1 0 Q And the next row down I want

1 1 to direct your attention to is labeled

1 2 total bill, and in parentheses, no debt

1 3 repayment. You see that?

1 4 A I do.

1 5 Q And there's a figure in the

1 6 first few columns of $96.81 in that row.

1 7 You see that as well?

1 8 A Yes.

1 9 Q And what does the $96.81

2 0 reflect?

2 1 A The difference between Row 4

2 2 and the -- I'm sorry. It's the

2 3 calculation of what the bill would be

2 4 based on the 425 kilowatt hours per

2 5 month.

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1 WILLIAM ZARAKAS

2 A As I recall, it has

3 different, what are called load modifiers

4 in it.

5 Q Do you recall what some of

6 those different load modifiers are?

7 A Yes.

8 Q What are they?

9 A Energy efficiency,

1 0 additional photovoltaic adoption,

1 1 electric vehicles. There might be more.

1 2 Q Were you involved in

1 3 preparing PREPA's alternative forecast of

1 4 net load?

1 5 A No.

1 6 Q Was Brattle involved in

1 7 preparing the alternative forecast?

1 8 A No..

1 9 Q Does the revenue envelope

2 0 model make use of PREPA's alternative

2 1 forecast of net load in any way?

2 2 A No.

2 3 Q Why not?

2 4 A We were instructed to use

2 5 the base case which is also the only case

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1 WILLIAM ZARAKAS

2 that has the cost and other aspects

3 included in the fiscal plan.

4 Q And who provided that

5 instruction?

6 A The board.

7 Q When you say the board

8 provided that instruction, did you

9 receive that instruction directly from a

1 0 board member or from advisors?

1 1 A Typically, through counsel.

1 2 Q And that's counsel at

1 3 Proskauer?

1 4 A Yes.

1 5 Q Are there any instructions

1 6 you received in connection with the

1 7 revenue envelope model that you got

1 8 directly from board members?

1 9 MS. DALE: You could answer

2 0 that yes or no.

2 1 A Yes.

2 2 Q Which instructions did you

2 3 receive directly from board members?

2 4 Sorry.

2 5 Which instruction or

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1 WILLIAM ZARAKAS

2 understand the question.

3 A Yes.

4 Q Did Brattle determine that

5 revenues in the -- let me try again.

6 Did Brattle determine that

7 revenue envelope revenues should be set

8 aside for those purposes?

9 A I'm sorry. Could you just

1 0 rephrase it for me?

1 1 Q Sure.

1 2 Did Brattle make the

1 3 determination that some revenue envelope

1 4 revenues should be set aside to cover

1 5 additional capital expenditures?

1 6 A No.

1 7 Q Who made that determination?

1 8 A The determination that it

1 9 should be deducted was the board.

2 0 Q And did Brattle make the

2 1 determination that some revenue envelope

2 2 revenues should be set aside to cover

2 3 fixed cost under recovery?

2 4 A No.

2 5 Q Who made that determination?

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1 WILLIAM ZARAKAS

2 A The same answer.

3 Q The oversight board?

4 A Yes.

5 Q Was Brattle instructed to

6 set aside a portion of the revenue

7 envelope revenues to cover both

8 additional capital expenses and fixed

9 cost under recovery?

1 0 A Yes.

1 1 MR. MADDEN: Tab 14.

1 2 Q And sorry, just to be clear,

1 3 those instructions came from the

1 4 oversight board or its advisors?

1 5 A Or counsel.

1 6 (The above-referred-to

1 7 document was marked as Exhibit 49 for

1 8 identification, as of this date.)

1 9 Q We've marked as Exhibit 49 a

2 0 spreadsheet that comes -- it's referred

2 1 to as additional capital expenditures in

2 2 the revenue envelope and legacy charge

2 3 model.

2 4 Do you recognize this

2 5 spreadsheet? And the exhibit version

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1 WILLIAM ZARAKAS

2 Q What was the increase in

3 volumetric charges to accommodate the

4 National deal?

5 A Each individual charge?

6 Q Did the volumetric charges

7 go up, down or stay the same?

8 A Up.

9 Q Was that across all rate

1 0 classes or only some?

1 1 A Only some.

1 2 Q And did you determine, you

1 3 meaning Brattle, determine the amount by

1 4 which volumetric charges would go up to

1 5 accommodate the National deal?

1 6 A At the direction

1 7 methodologically of the board.

1 8 Q And what was the

1 9 methodological direction provided to you

2 0 by the board?

2 1 A I believe it was to increase

2 2 non-residential volumetric charges. It

2 3 also might have excluded a small

2 4 commercial. I can't recall.

2 5 Q And did those changes made

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1 WILLIAM ZARAKAS

2 extent of the rate change to make to

3 accommodate the National settlement;

4 correct?

5 A Yes.

6 Q Were you given an amount by

7 which you needed to increase the amount

8 of revenues remaining?

9 A I believe so, yes.

1 0 Q And that amount was an

1 1 instruction from the board as well?

1 2 A The board, its advisors, our

1 3 counsel.

1 4 Q And so Brattle, consistent

1 5 with the direction about which rates to

1 6 change, worked backwards from the

1 7 additional revenues remaining it needed

1 8 to find to change volumetric rates;

1 9 correct?

2 0 A Yes.

2 1 Q Other than those changes,

2 2 can you think of any other changes made

2 3 to the revenue envelope and legacy charge

2 4 model since the version presented to the

2 5 board and its advisors in late 2022?

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