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

20091231-0037 FERC PDF (Unofficia1) 12/29/2009
Direct Testimony of Michael J. Vilbert
Docket ER 10-_-000
Page 30 of35
EXHIBIT
NO. SCE-13
A47. No. Consistent with the Commission's practice, I also provides estimates based upon a
2 version of the model where g is set equal to the long-term earnings growth rates from
3 IIBIE/S provided by security analysts using the same procedure to adjust the dividend
4 yield. Iuse the BEst earnings growth rate forecasts provided by Bloomberg?9
5 Q48. How is the dividend yield determined?
6 A48. The high and low dividend yield is calculated as the 6-month average of the highest
7
8
9
10
I I
monthly closing prices or lowest monthly closing prices divided into the annualized
current quarterly dividend, i.e., the current dividend times 4. The result of combining the
high and low dividend yields with the two estimates of the dividend growth rate is four
estimates of the cost of equity for each sample company. The highest (lowest) of the four
estimates is reported as the high (low) estimate for the company which in turn are used to
12 establish the range of reasonableness for the sample. Details on the calculation of each
13 parameter in Equations (3) and (4) above are provided in Appendix B.
14 c. PROXY GROUP ESTIMATES AND THE RANGE OF REASONABLENESS
15 Q49. What are the results of the application of the Commission's DCF methodology to
16 the sample of transmission-owning companies determined to be comparable to
17 SCE&G?
18 A49. Table 5 below summarizes the results of the Commission's DCF methodology using data
19
20
through September 2009. The table presents the high and low estimate for each company
in the sample as well as summary statistics for both the Full and Restricted Samples.
21 Q50. What are the results?
22 A50. For the Full Sample, the estimates range from a low of 7.72 to a high of 16.16; with a
23 midpoint of 11.94 percent, a median of 11.04 percent, and a mean of 11.28 percent. For
24 the Restricted Sample (i.e., restricted by bond rating), the range tightens a little with the
29 BEst is Bloomberg's version of analyst forecasts comparable to I/B/E/S. Neither BEst nor I1BIE/S estimate
growth rates. Both simply provide a summary offorecasts prepared by security analysts.