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

More documents

Recommendations

Info

20091231-0037 FERC PDF (Unofficia1) 12/29/2009 Exhibit No. seE-2 How Returns On Equity Factor Into U.S. Utilities' Creditworthiness Primary Credit Analyst: Gerrit Jepsen, CFA. New yo~ 111212-438-2529; gerrit,jepsen@Standardandpoors.com Table Of Contents <strong>Rate</strong>-Case Issues Regulatory Mechanisms www.sta.dardandpoors.com/ralingsd;recl 1 Standartl & Poor's. All fights reserved. No reprint Of dinemifNIlion without 5&1"$ permission. See Terms of Use,IOisclaimer 00 U'If: lasl page.
20091231-0037 FERC PDF (Unofficia1) 12/29/2009 Exhibit No. SCE-2 How Returns On Equity Factor Into U.S. Utilities' Creditworthiness Although a higher authorized return on equity (ROE) may theoretically improve a utility'S cash flow, a company's ability to actually earn the authorized ROE is more important for overall creditworthiness. The ability to earn an authorized ROE depends on adjustments included in rate·case decisions, and Other regulatory mechanisms such as fuel-adjustment Furthermore, clauses. Standard & Poor's Ratings Services distinguishes between the effect of regulatory decisions on earnings and cash flow, which may differ. In a rate case, decisions beyond setting the ROE can p:tovide an opportunity for a utility to earn the authorized ROE or result in earnings erosion. In some cases, the inability to earn the authorized ROE could occur immediately after a rate case decision. Regardless of the authorized ROE, a utility'S cash flow could be compromised and its financial profile could decline from escalating costs such as pension and health care expenses, and much higher than historical levels of capital spending. Between rate cases, regulatory mechanisms that provide recovery of costs can support a utility's ability to earn its authorized ROE. As utilities seek recovery of these increasing costs in rates and higher capital spending levels, lower ROEs may be acceptable if other costs are recoverable and the authorized ROE can actually be earned. This article, which is Part I of two articles, analyzes ratemaking factors that weigh upon a utility's creditworthiness. Part II, to be published within the next several weeks, will illustrate the points made in Part I through an analysis of eight utilities--four that appear to have earned at least their authorized ROEs and four utilities that have not earned their authorized equity returns. <strong>Rate</strong>-Case Issues When commissions set a utility's rates in a rate case, many items may be considered that can strengthen or weaken the utility'S ability to at least earn its authorized return. The ROE authorization is only one component. Other regulatory decisions in rate cases that can result in a utility earning or not earning its authorized ROE include: • The revenue sources and the revenue levels used for setting rates. Commissions that exclude various revenue sources or assume lower customer growth when setting rates may provide a better opportunity for a utility to earn its authorized ROE. Wholesale sales to municipalities, cooperatives, and other investor-owned utilities may be excluded from the calculation of retail rates and therefore are not included in the regulated ROE calculation. Although a utility may not earn its authorized retail ROE, the total utility ROE could be higher because of the inclusion of cash flow from nonretail sales. Alternatively, a commission may include sales to non retail customers when setting rates, making it likelier that the earned retail ROE and total utility ROE will be similar. Also, because a utility may be able to' sell incremental power at prices above the base-rate levels, its overall ROE could be higher than the retail-only ROE. • Operation and maintenance expenses. Expenses such as wages, pensions, insurance, rents, and health care can affect a utility'S opportunity to earn the authorized ROE. If rate recovery of these expenses is lower than actual levels, rates may not provide a utility the ability to earn the authorized ROE and if expenses increase faster than forecast, earnings could also erode, resulting in lower ROEs. • Fuel and purchas!!d-power expenses included in base rates. The exclusion of higher fuel and purchased-power Standard & Poor's RatingsDirect I June 14. 2005 Standard & PooI's. All riQhts reserved. No Nl/:Nirllor dis~titlnwithout S&P's permission. See Tetms oj UseJOisclaimer Ofl the last page. 2
Page 1 and 2:
20091231-0037 FERC PDF (Unofficia1)
Page 3 and 4:
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44: 20091231-0037 FERC PDF (Unofficia1)
Page 93: 20091231-0037 FERC PDF (Unofficia1)
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
......... " ..... r ...............
Page 151 and 152:
"0 0 '" .... Exhibit No. seE· 7 ..
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
Page 171 and 172:
Page 173 and 174:
Page 175 and 176:
Page 177 and 178:
Page 179 and 180:
Page 181 and 182:
Page 183 and 184:
Page 185 and 186:
Exhibit No. SCE-9 Page 2 of 10 8 FE
Page 187 and 188:
"0 0 '" .... .... I 0 0 Exhibit No.
Page 189 and 190:
Exhibit No. SCE-9 Page 6 of 10 ~. 4
Page 191 and 192:
64 FERC ER07-169 Ameren Energy Mark
Page 193 and 194:
88 Illinois Commerce Commission ER0
Page 195 and 196:
Page 197 and 198:
Page 199 and 200:
Page 201 and 202:
Page 203 and 204:
Page 205 and 206:
Page 207 and 208:
Page 209 and 210:
Page 211 and 212:
Page 213 and 214:
Page 215 and 216:
Page 217 and 218:
Page 219 and 220:
Page 221 and 222:
Page 223 and 224:
Page 225 and 226:
Page 227 and 228:
Page 229 and 230:
Page 231 and 232:
Page 233 and 234:
Page 235 and 236:
Page 237 and 238:
Stat.",ent BG Propwed Retes South C
Page 239 and 240:
Page 241 and 242:
Page 243 and 244:
Page 245 and 246:
Page 247 and 248:
Page 249 and 250:
Page 251 and 252:
Page 253 and 254:
Page 255 and 256:
Page 257 and 258:
Page 259 and 260:
Page 261 and 262:
Page 263 and 264:
Page 265 and 266:
Page 267 and 268:
Page 269 and 270:
Page 271 and 272:
Page 273 and 274:
Page 275 and 276:
Page 277 and 278:
Page 279 and 280:
Page 281 and 282:
Page 283 and 284:
Page 285 and 286:
Page 287 and 288:
Page 289 and 290:
Page 291 and 292:
Page 293 and 294:
Page 295 and 296:
Page 297 and 298:
Page 299 and 300:
Page 301 and 302:
Page 303 and 304:
Page 305 and 306:
Page 307 and 308:
EXHIBIT NO. SCE-16 "o o '" .... "w
Page 309 and 310:
Page 311 and 312:
Table No. MJV·4 Panel B Commission
Page 313 and 314:
Workpaper Commission #2 to Table No
Page 315 and 316:
Workpaper #4 to Table No. MJV-4 Com
Page 317 and 318:
Company American Electric Power Co
Page 319 and 320:
Page 321 and 322:
Page 323 and 324:
Company Workpaper #9 to Table No. M
Page 325:
Date Workpaper # 11 to Table No. MJ
show all

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

Create successful ePaper yourself

Delete template?

Save as template?