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 228
• Project and sustaining capital costs were included in the year in which
they are expected to be incurred.
• No financing or depreciation expense was included.
• The analysis did not include sunk costs.
• All figures are presented in nominal dollars.
96.2 For the economic analysis prepared above, please recalculate the NPV of the
“Net AMI” project assuming the New Operating Costs (Line 46) increase by three
percent per year, commencing in 2016. For this question, and the following subquestions,
provide the analysis supporting the NPV estimation, state all
assumptions used, and comment on the likelihood of each event occurring.
In this analysis the only change was that it was assumed that New Operating Costs (Line 46)
were escalated by 3 percent per year commencing in 2016 instead of 1.8 percent. Please see
the results below.
New Operating Costs escalated at 3% starting in 2016
($000s)
Net Present Value of Revenue Requirements at 6.0 percent (22,087)
Net Present Value of Revenue Requirements at 8.0 percent (16,468)
Net Present Value of Revenue Requirements at 10.0 percent (12,224)
FortisBC believes it is highly unlikely that only New Operating Costs would increase by three
percent per year. A more likely scenario is that all costs (in both the Status Quo and AMI) would
rise at three percent starting in 2016. If that were the case, the following table would result: