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

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Response:
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 160
70.2 Please discuss any assumptions made and alternatives considered in
determining the debt return of approximately six percent. For each alternative
considered, please discuss the likelihood of each occurring.
Please refer to the response to BCUC IR1 Q70.1.
Response:
70.3 Please recalculate the NPV of the “Net AMI” project assuming the following
individual scenarios:
• Debt Return (Line 22) – 100 basis points increase per year commencing
in 2014, to a maximum Debt Return of eight percent.
• Debt Return (Line 22) – 100 basis points increase per year commencing
in 2014, to a maximum Debt Return of 10 percent.
For this question, please provide the analysis supporting the NPV estimation,
state all assumptions used, and comment on the likelihood of each event
occurring.
FortisBC provides the results of the requested scenario (holding all other assumptions constant)
below.
Scenario 1:
Debt Return (Line 22) – 100 basis points increase per year commencing in 2014, to a maximum
Debt Return of eight percent.
In this Scenario, the only change to the model was to change the rates in Line 22 as follows:
2012 2013 2014 2015 2016 +
Debt Return 5.92% 5.82% 6.98% 7.93% 8.00%
The NPV of the “Net AMI” project changed to the following:
Net Present Value of Revenue Requirements at 6.0 percent
($000s)
(21,861)