SCEG OATT Formula Transmission Rate Filing.pdf - SCANA ...

20091231-0037 FERC PDF (Unofficia1) 12/29/2009
Direct Testimony of Alan C. Heintz
Docket ERIO- -000
Page 20 of28
Exhibit No. SCE-8
Q.
HOW ARE ATTACHMENTS
4 AND 7 RELATED?
2 A.
3
4
Attachment 7 applies a Fixed Charge Rate ("FCR") calculated on Appendix A to each
project. Appendix A calculates a net plant FCR at line 158 (reflecting the "normal" ROE
at line 121) by dividing the annual transmission revenue requirement (excluding
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transmission depreciation) by net transmission plant.
This FCR is then carried over to
6
7
Attachment 7 as "Net Plant Carrying Charge without New Investment Incentive without
Depreciation."
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9
10
II
Attachment 4 replicates the "Return/Capitalization Calculations" and "Income Taxes"
sections of lines 99 through 137 of the main body of the formula. Attachment 4 uses the
rate base calculated by the formula to calculate a new level of investment return and
associated income taxes by changing only one variable, the base ROE, which is
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incremented by 100 basis points.
It is important to note that Attachment 4 is, in effect, a
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"workpaper". Its only purpose is to calculate the "baseline" or "standard" FCR per 100
basis points increment in ROE. This baseline is then used at Attachment 7 as a means of
calculating the incremental return and taxes associated with any authorized increment in
ROE (which may differ among projects). To sum up, Attachment 4 is not used to
calculate the revenue requirement and it does not specii)' the level of incentive ROE
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adder that applies to any Commission-authorized
7.
incentive project shown on Attachment
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On Appendix A, line 161 is calculated by subtracting the investment return (line 149) and
income taxes (line 150) from the net revenue requirement (line 155). Line 163 is the sum
ofline 161 and the incentive return and income taxes calculated on Attachment 4. At line