FortisBC Inc. (FortisBC) Application for a Certificate of Public ...

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
FortisBC Inc. (FortisBC or the Company)
Application for a Certificate of Public Convenience and Necessity
for the Advanced Metering Infrastructure Project
Response to British Columbia Utilities Commission (BCUC or the Commission)
Information Request (IR) No. 1
Submission Date:
October 5, 2012
Page 159
The Company has no current plan to complete a new depreciation study. Please also refer to
the response to BCUC IR1 Q1.1.
70.0 Reference: Project Costs and Benefits
Response:
Exhibit B-1, Tab 5.0, Section 5.2.6, p. 76
Carrying Costs, Debt Return
According to Exhibit B-1, “Interest expense was calculated assuming a weighted
average cost of approximately 6 percent” over the life of the project between 2012 and
2032.
70.1 Please discuss the current and forecast market conditions or other factors
considered in determining that the weighted average debt return will remain at
approximately six percent over the life of the project.
At the time of preparing the AMI application, reference was made to the Company’s 2012-2013
RRA Evidentiary Update which had forecast weighted average cost of debt (WACD) of
approximately 6.0 percent for 2012 and approximately 5.9 percent for 2013. While the
Company is still in the process of updating its financial schedules based on FortisBC Inc. 2012-
2013 Revenue Requirements and 2012 Integrated System Plan Order G-110-12 and Decision,
the Company has forecast the same WACD for 2012 and a rate of 5.8 percent for 2013. The
Company believes this is appropriate for the Project as this is the period in which the project
would be financed. Once the debt associated with the project is issued, and the project is
funded, future debt rates do not impact the economics of the project.
Response:
70.1.1 Specifically, please discuss if consideration was given to the possibility of
future interest rate increases and why no future interest rate increases
are expected between 2013 and 2032.
Please refer to the response to BCUC IR1 Q70.1.