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

20091231-0037 FERC PDF (Unofficia1) 12/29/2009
Direct Testimony of Jimmy Addison
Docket ER \ 0- -000
Page 3 ofl9
Exhibit No. SCE-\
A. The purpose of my testimony is three-fold: (I) I support SCE&G's request in this
2 proceeding to institute a formulaic determination of the annual transmission revenue
3 requirement for transmission services provided under its Open Access Transmission
4 Tariff (nOA TTn) and to convert network transmission service charges from the load ratio
5 methodology to stated rates as determined annually by that formula; (2) I explain the
6 business and financial risks peculiar to SCE&G that bear upon its credit rating and its
7 cost of capital; and (3) I describe SCE&G's credit metrics, capital structure and support
8 the cost of capital to be used in SCE&G's filing.
9 Q. PLEASE SUMMARIZE YOUR TESTIMONY.
10 A. SCE&G's currently authorized annual transmission revenue requirement and point-to-
II point stated rates are based on the transmission investment and the costs it experienced 14
12 years ago. Since that time, SCE&G's net transmission plant investment has more than
13 doubled. In addition, SCE~G has begun a major transmission expansion program to
14 accommodate two proposed nuclear units recently approved by the SCPSc. SCE&G's
IS construction plan represents a significant increase in the Company's capital expenditures
16 for the next decade. This fact alone substantially increases the Company's business risk.
17 In order to meet its expected customer growth, SCE&G will almost double its investment
18 in electric plant over the next ten years; therefore, SCE&G must access the capital
19 markets at a time when those markets are particularly volatile. Its substantial building
20 plan was a key factor in SCE&G's credit ratings being downgraded by all three credit
21 rating agencies. The Company has concluded that it must institute a formula rate with
22 projected transmission plant additions because such a formulaic methodology will