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

20091231-0037 FERC PDF (Unofficia1) 12/29/2009
Direct Testimony of Jimmy Addison
Docket ERIO·_·OOO
Page 180fl9
Exhibit No. SeE-I
A.
Investor interest in SCE&G greatly depends on our credit and that, of course, is affected
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by the perception of the support of regulators for our company and industry, as well as
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the returns granted the Company in rate proceedings.
This link is true in normal
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economic environments, but is especially true during these uncertain economic times
where investors will most certainly invest in a particular corporation such as ours, only
when the risks are known, measurable and low (relative to the markets) and the rewards
(returns) support the heightened risks of the current market environment.
8 Q.
WHAT CAPITAL STRUCTURE DO YOU PROPOSE BE USED IN THE
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FORMULA
RATE IN THIS FILING?
10 A.
The proposed formula relies on SCE&G's actual capitalization calculated from financial
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data reported annually in the Company's FERC Form No.1.
The current capital structure
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is 49.75% oflong-term
debt; 48.22% of common equity; and 2.03% of preferred stock.
13 Q.
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WHAT ARE THE COST RATES TO BE APPLIED
STRUCTURE?
TO THIS CAPITAL
15 A.
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The cost rate for long term debt currently is 5.01%. The cost rate for the preferred stock
is currently 6.36%. These cost rates will be recalculated each Rate Year by the formula.
While SCE&G's Witness Vilbert's testimony supports an ROE of 11.5%, the Company is
willing to accept an ROE of only 11.3% in order to avoid suspension and a hearing. The
ROE component of the formula is a fixed cost rate that, upon approval by the FERC, can
only change in the future as a result of a Section 205 or 206 filing. The proposed formula