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

of removal exceed the salvage proceeds, a net negative salvage percentage results.
The estimation of the net salvage percentages developed using the traditional
approach, included the following steps:
1. The annual retirement, gross salvage and cost of removal transactions for
the period January 1, 1995 through December 31, 2009 were extracted from
the plant accounting systems.
2. A net salvage amount (gross salvage proceeds less cost of retirement) was
calculated for each historic year. Additionally, a net salvage amount was also
calculated for each historic 3-year rolling band.
3. The net salvage amount determined above was compared to the original
booked costs retired for each period in the manner described, which resulted
in a net salvage percentage of original costs retired for each year, in addition
to 3-year rolling bands.
4. The annual, and 3-year rolling average net salvage percentages were
analyzed to determine a reasonable estimated net salvage percentage. At
this point the net salvage percentage was based purely upon statistical
analysis.
5. Each account was then analyzed based on the statistical analyses, the
information provided by the operations groups regarding the current projects,
and with the professional judgment of Gannett Fleming. Based on this
analysis, a net salvage percentage for each account was determined.
6. The net salvage percentage was then used in the depreciation rate
calculations in the technical update.
The annual, five-year and three-year net salvage percentage calculations are
presented in account order in Part IV of this report.
CALCULATION OF ANNUAL AND ACCRUED DEPRECIATION
Appendix BCUC IR1 69.4
Group Depreciation Procedures. When more than a single item of property is under
consideration, a group procedure for depreciation is appropriate because normally all of the
items within a group do not have identical service lives, but have lives that are dispersed