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

20091231-0037 FERC PDF (Unofficia1) 12/29/2009
Direct Testimony of Jimmy Addison
Docket ER 10- -000
Page 12 of 19
Exhibit No. SeE-1
The projected annual capital expenditure related to these projects will be more than
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double SCE&G's normal annual capital expenditure. According to S&P's April 2009
ratings report for SCANA, SCE&G's proposed construction project "introduces
significant construction and financing risk which places considerable pressure on the
consolidated credit profile of SCAN A and necessitates that all remaining aspects of the
business perform satisfactorily in order to provide support and preserve the current
ratings." See Exhibit SCE-5. Moody's July 14, 2009 downgrade also reflected the
concern that analysts have "with the material execution risks associated with a project of
this magnitude for a company of this size." See Exhibit SCE-3.
10 Q.
ARE THERE ANY OTHER BUSINESS RISKS?
II A.
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Yes, those business risks involve the Commission's new transmission grid reliability
rules.
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Q. HOW DO THE NEW RELIABILITY RULES IMPACT SCE&G'S BUSINESS
RISK?
IS
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A. Pursuant to the Energy Policy Act of 2005, the Commission has adopted transmission
grid maintenance and operation reliability standards, which are enforced, under the
Commission's auspices, by NERC. These reliability standards increase SCE&G's
business risk in several ways. First, the new reliability regime requires performance of
transmission operation and maintenance in accordance with a mandated set of standards
and subject to penalties. This reliability regime is relatively new and untested; therefore,
there is a measure of uncertainty as to both the requisites for meeting the standards and