London Property Management Association (LPMA) INTERROGATORY #26 List 1

Transcription

1 Filed: September 0, 0 Tab Schedule.0 LPMA Page of London Property Management Association (LPMA) INTERROGATORY # List Issue Are the inputs used to determine the working capital component of the rate base and the methodology used appropriate? Interrogatory Ref: Exhibit D, Tab, Schedule, Attachment a) Table 9 indicates that approximately one-half of the utilities shown do not include interest expense in the calculation of the working capital allowance. Please explain why Navigant believes that the long-term interest cost should be included in the analysis when other utilities, including Union Gas and Enbridge, do not include this cost. b) When asked if there was any impact on the lead/lag study associated with payment of long-term debt or short-term debt, Union Gas responded (EB-0-00, Exhibit J.B- --) that no, there is no impact. The explanation provided by Union indicated that debt was not a component of rate base but rather it was a method of funding rate base similar to equity. Interest payments are paid from the operations of the business and are not a required component of cash working capital. Please comment on the Union response and indicate why Hydro One believes that it should include the cost of long-term debt in the cash working capital calculation. c) Please explain why there is no component of cash working capital associated with the payment of dividends on equity. Please calculate the expense lead time associated with the payment of dividends for the 00 year. Response a) Navigant cannot comment on studies which it did not prepare and does not have an opinion regarding if those studies should or should not have included long-term interest expense. We cannot comment on the filings of Union Gas, Enbridge or other utilities which did not include a long-term interest expense component to the working capital calculation. Given the specific circumstances of Hydro One, Navigant believes that the practice of including long-term interest expense in the estimation of working capital is appropriate and properly reflects the cash flow needs of the company. Long-term interest expense is a legal obligation with a specific payment date like all other expenses of the utility.

2 Filed: September 0, 0 Tab Schedule.0 LPMA Page of b) Navigant cannot comment on the accuracy of a study they did not prepare or the testimony in a proceeding in which we were not an active participant. c) Cash Working Capital calculations are limited to expense accounts for the utility. Dividends are not an expense account.

3 Filed: September 0, 0 Tab Schedule.0 LPMA 7 Page of London Property Management Association (LPMA) INTERROGATORY #7 List Issue Are the inputs used to determine the working capital component of the rate base and the methodology used appropriate? Interrogatory Ref: Exhibit D, Tab, Schedule, Attachment & Exhibit B, Tab, Schedule a) Please provide all the data, such as when the coupon payments for each bond occur and the associated amount that was used to calculate the expense lead time of. days for interest on long-term debt. b) A number of debt issuances have or will mature between 00 and the test years of 0 and 0. Please provide the calculation of the expense lead time for each of 0 and 0 based on the debt instruments shown in Interrogatory #8-LPMA- that requested an update to the 0 and 0 schedules shown in Exhibit B, Tab, Schedule. Response a) Please see the table below:

4 Filed: September 0, 0 Tab Schedule.0 LPMA 7 Page of INTEREST EXPENSE - TX TX Portion Interest Rate Amt Beginning Ending Service Lead Lead Total Lead Weighted Lead % $ 9.0 //00 //00 // (9.00) (.0).87% (.) % $ 7. //00 //00 // (.00) (.0).% (.87) % $. //00 //00 // (0.00) (0.0) 0.8% (0.8) % $. //00 //00 // (0.00) (0.0).8% (.) % $.88 //00 //00 // (0.00) (0.0).% (.0) % $. //00 //00 // (9.00) (.0) 0.9% (.0) % $.87 //00 //00 // (9.00) (0.0).% (.77) % $ 0.9 //00 //00 /8/ (7.00) (7.0).9% (.) % $.0 //00 //00 /9/ (.00) (7.0).9% (.) % $.0 //00 //00 // (.00) (70.0).9% (.8) % $ 9. //00 //00 // (.00) (0.0).9% (.00) % $ 7.9 //00 //00 // (0.00) (7.0).0% (.) % $.7 //00 //00 /9/ (.00) (.0).7% (0.) % $.9 //00 //00 /9/ (.00) (.0) 0.% (0.).0.0% $. //00 //00 /0/ (.00) (.0).77% (.0) % $.7 //00 //00 // (.00) (0.0).8% (0.7) % $.9 //00 //00 // (.00) (0.0).9% (0.) % $.80 //00 //00 // (.00) (0.0).8% (0.7) % $ 0. //00 //00 // (.00) (8.0).7% (.) % $ 9.0 //00 //00 7// (8.00).0.87% % $ 7. //00 //00 7// (.00) 9.0.% % $. //00 //00 9// (9.00).0 0.8% % $. //00 //00 9// (9.00).0.8% % $.88 //00 //00 9// (9.00).0.% % $. //00 //00 9// (.00) % % $.87 //00 //00 9// (09.00) 7.0.% % $ 0.9 //00 //00 0/8/ (7.00) % % $.0 //00 //00 0/9/ (7.00) % % $.0 //00 //00 0// (70.00).0.9% % $ 9. //00 //00 // (9.00).0.9% % $ 7.9 //00 //00 // (.00).0.0% % $.7 //00 //00 /9/ (.00) 0.0.7% % $.9 //00 //00 /9/ (.00) % % $. //00 //00 /0/ (.00).0.77% % $.7 //00 //00 // (0.00).0.8% % $.9 //00 //00 // (0.00).0.9% % $.80 //00 //00 // (0.00).0.8% % $ 0. //00 //00 // (8.00).0.7%.7 $,8.07 $.8.

5 Filed: September 0, 0 Tab Schedule.0 LPMA 7 Page of b) Based on the debt instruments shown in, Tab 8, Schedule.0 LPMA, the interest expense lead days are. for 0 and.98 for INTEREST EXPENSE - TX TX Portion Interest Rate Beginning Ending $M $M Weighted Lead Service Total Lead Service Lead Total Lead Lead Lead Lead (B) (C) (D) (E) (F) (G) (H) (I) (J) (K) (L) (M) (N) (O) (P) (Q) (R) % //0 //0 //0 // (.00) (0.0) 8.0 (9.00).0.%.% % //0 //0 /9/0 /9/ (.00) (.0) 8.0 (.00) 0.0.0%.0% % //0 //0 //0 9// (9.00) (.0) 8.0 (.00) % 0.8% (0.) % //0 //0 //0 9// (0.00) (0.0) 8.0 (9.00).0.%.% (.) % //0 //0 /7/0 0/7/ (8.00) (7.0) 8.0 (7.00) %.8% % //0 //0 //0 9// (90.00) (07.0) 8.0 (0.00) 7.0.0%.0% (0.) 0.00.% //0 //0 //0 9// (9.00) (08.0) 8.0 (07.00) % 0.7% (0.) % //0 //0 //0 // (0.00) (7.0) 8.0 (7.00).0.%.% % //0 //0 //0 7// (.00) (9.0) 8.0 (7.00).0.88%.88% (.97) 88.8.% //0 //0 //0 // (99.00) (.0) 8.0 (.00).0.%.% % //0 //0 //0 // (.00) (8.0) 8.0 (8.00).0.77%.77% % //0 //0 //0 // (.00) (0.0) 8.0 (0.00).0.%.% % //0 //0 //0 7// (.00) (.0) 8.0 (.00) %.77% (.8).0.0% //0 //0 /0/0 /0/ (.00) (.0) 8.0 (.00).0.%.% % //0 //0 //0 9// (9.00) (0.0) 8.0 (09.00) 7.0.%.% (0.80) % //0 //0 //0 9// (0.00) (0.0) 8.0 (9.00).0.7%.7% (.) % //0 //0 //0 7// (.00) (9.0) 8.0 (7.00).0.%.% (.) % //0 //0 //0 7// (.00) (.0) 8.0 (.00) 9.0.%.% (.7) % //0 //0 //0 9// (80.00) (97.0) 8.0 (9.00) 8.0.%.% (0.8) % //0 //0 //0 9// (9.00) (08.0) 8.0 (07.00) 7.0.9%.9% (0.9) % //0 //0 //0 0// (.00) (70.0) 8.0 (70.00).0.%.% % //0 //0 /8/0 0/8/ (7.00) (7.0) 8.0 (7.00) 08.0.%.% % //0 //0 //0 // (9.00) (0.0) 8.0 (0.00) 7.0.0%.0% % //0 //0 /8/0 7/8/ (7.00) (.0) 8.0 (.00).0.%.% (.7)

6 Filed: September 0, 0 Tab Schedule.0 LPMA 7 Page of 0 - INTEREST EXPENSE - TX TX Portion Interest Rate Beginning Ending $M $M Weighted Lead Service Total Lead Service Lead Total Lead Lead Lead Lead (B) (C) (D) (E) (F) (G) (H) (I) (J) (K) (L) (M) (N) (O) (P) (Q) (R) % //0 //0 /9/0 /9/ (.00) (.0) 8.0 (.00) % 0.9% % //0 //0 //0 9// (9.00) (.0) 8.0 (.00) % 0.7% (0.) % //0 //0 //0 9// (0.00) (0.0) 8.0 (9.00).0.%.% (.) % //0 //0 /7/0 0/7/ (8.00) (7.0) 8.0 (7.00) 07.0.%.% % //0 //0 //0 9// (90.00) (07.0) 8.0 (0.00) % 0.9% (0.0) 0.00.% //0 //0 //0 9// (9.00) (08.0) 8.0 (07.00) % 0.% (0.0) % //0 //0 //0 9// (9.00) (08.0) 8.0 (07.00) 7.0.9%.9% (0.) % //0 //0 //0 // (0.00) (7.0) 8.0 (7.00).0.%.% % //0 //0 //0 7// (.00) (9.0) 8.0 (7.00).0.7%.7% (.7) 88.8.% //0 //0 //0 // (99.00) (.0) 8.0 (.00).0.08%.08% % //0 //0 //0 // (99.00) (.0) 8.0 (.00).0.%.% % //0 //0 //0 // (.00) (8.0) 8.0 (8.00).0.8%.8% % //0 //0 //0 // (.00) (0.0) 8.0 (0.00).0.97%.97% % //0 //0 //0 7// (.00) (.0) 8.0 (.00) 9.0.%.% (.).0.0% //0 //0 /0/0 /0/ (.00) (.0) 8.0 (.00).0.79%.79% % //0 //0 //0 9// (9.00) (0.0) 8.0 (09.00) %.99% (0.7) % //0 //0 //0 9// (0.00) (0.0) 8.0 (9.00).0.00%.00% (.) % //0 //0 //0 7// (.00) (9.0) 8.0 (7.00).0.08%.08% (.8) % //0 //0 //0 9// (80.00) (97.0) 8.0 (9.00) 8.0.%.% (0.7) % //0 //0 //0 9// (9.00) (08.0) 8.0 (07.00) 7.0.8%.8% (0.89) % //0 //0 //0 0// (.00) (70.0) 8.0 (70.00).0.0%.0% % //0 //0 //0 9// (9.00) (08.0) 8.0 (07.00) %.77% (0.9) % //0 //0 /8/0 0/8/ (7.00) (7.0) 8.0 (7.00) 08.0.%.% % //0 //0 //0 // (9.00) (0.0) 8.0 (0.00) % 0.9% % //0 //0 /8/0 7/8/ (7.00) (.0) 8.0 (.00).0.%.% (.9)

7 Filed: September 0, 0 Tab Schedule.0 EP Page of Energy Probe (EP) INTERROGATORY # List Issue Are the inputs used to determine the working capital component of the rate base and the methodology used appropriate? Interrogatory Ref: Exhibit D, Tab, Schedule, Table and Attachment (Navigant) a) Please provide the equivalent version of Table with 0 and 0 WCA amounts and rates as approved by the Board. b) Identify and discuss the drivers of the changes for 0/0 (Table 7 Navigant) and indicate if these changes are expected to continue into the future. c) Estimate the impact these would have made to 0 and 0 WCA and net cash requirement.

8 Filed: September 0, 0 Tab Schedule.0 EP Page of Response a) Revenue Lag () Expense Lag () Net Lag (Lead) () 0 OEB Approved 0 OEB Approved (A) (B) (C) (D) (E) Expenses OM&A Expenses Removal costs Environmental Remediation Interest on Long term debt.0.87 (.7) Income tax Total GST (see Table ). 7.9 TOTAL AMOUNTS PAID/ACCRUED Working Capital Required (Calculations based on above values, for each expense category, calculated using the following formula: For 0 Col (D)*Col (C)/) For 0 Col (E)*Col (C)/) OM&A Expenses Removal costs Environmental Remediation Interest on Long term debt (.8) (.) Income tax..8 Total GST (see Table ) (.) (.) NET WORKING CASH REQUIRED 7..0 b) The impacts affecting the 0/0 lead/lag days are discussed on page through as well as in the Conclusion of the Navigant report. c) If the previous study is restated using the lead / lag days in the current study, the estimated WCA percentages would be.% for 0 and.9% for 0.