PENNSYLVANIA PUBLIC UTILITY COMMISSION
Public Meeting held October 23, 2014
Docket Number: M-2014-2446721
BUREAU OF TECHNICAL UTILITY SERVICES
REPORT ON THE QUARTERLY EARNINGS
OF JURISDICTIONAL UTILITIES
FOR THE PERIOD ENDED
June 30, 2014
Robert F. Powelson, Chairman
John F. Coleman, Jr., Vice Chairman
James H. Cawley
Pamela A. Witmer
Gladys M. Brown
TABLE OF CONTENTS
Page No.
Introduction .....................................................................................................
5
Columbia Gas of Pennsylvania, Inc., West Penn Power Company, Pennsylvania Power Company,
Pennsylvania Electric Company, and Metropolitan Edison Company had a pending rate filing at Docket
Nos. R-2014-2406274, R-2014-2428742, R-2014-2428744, R-2014-2428743, and R-2014-2428745
respectively, and filed a letter with the Secretary in place of a report in accordance with
52 Pa. Code § 71.4.
Attachment A – Summary of Equity Returns………………………………
6
Attachment B – Summary of Returns ............................................................
10
This chart depicts the overall and equity returns (actual and adjusted) for the filing utilities for the
current quarter. The last authorized equity return and the year authorized is also shown.
Attachment C – Allowed Rates of Return on Common Equity ...................
13
This is a historical chart that shows the most recent fully litigated rate cases for select companies in
electric, gas, and water. A docket number followed by their final return on equity and year is also
given.
Attachment D – Market Based Returns on Equity – Electric .....................
14
The market indicated common equity cost rate range consists of data used from the electric barometer
groups and is based on a series of calculations to average the DCF methods. Also indicates Distribution
System Improvement Charge Return.
Attachment D – Electric Barometer Group Calculation of a Current and
52 Week Average Dividend Yield .....................................
15
Electric barometer companies are used to calculate a current DCF in the first chart. The second chart
demonstrates the companies 52 week average DCF. A final average of the two calculations is also
shown at the bottom.
Attachment D – Development of a Representative Dividend Growth
Rate…………………………………………………..........
16
Multiple sources of the electric barometer companies projected 5 year Earnings Per Share are used to
calculate the Group Average Dividend Growth Estimate.
Attachment D – Common Equity Ratios of Electric Barometer Companies
17
The Common Equity Ratios of Electric Utility Barometer Companies table depicts each company’s
common equity ratio. The range of reasonable equity ratios consists of the lowest and highest common
equity ratio in the quarter for the barometer group companies.
Attachment D – Capital Structure and Cost of Debt and Preferred Stock
18
The Capital Structure and Cost of Debt and Preferred Stock table is taken from the Schedule E and
Schedule F of each Pennsylvania electric company’s quarterly earnings report.
Attachment E – Market Based Returns on Equity – Gas ............................
19
The market indicated common equity cost rate range consists of data used from the gas barometer
groups and is based on a series of calculations to average the DCF methods. Also indicates Distribution
System Improvement Charge Return.
Attachment E – Gas Barometer Group Calculation of a Current and 52
Week Average Dividend Yield ..........................................
Gas barometer companies are used to calculate a current DCF in the first chart. The second chart
demonstrates the companies 52 week average DCF. A final average of the two calculations is also
shown at the bottom.
3
20
Attachment E – Development of a Representative Dividend Growth
Rate…………………………………………………..........
21
Multiple sources of the gas barometer companies projected 5 year Earnings Per Share are used to
calculate the Group Average Dividend Growth Estimate.
Attachment F – Market Based Returns on Equity – Water ........................
22
The market indicated common equity cost rate range consists of data used from the water barometer
groups and is based on a series of calculations to average the DCF methods. Also indicates Distribution
System Improvement Charge Return.
Attachment F – Water Barometer Group Calculation of a Current and
52 Week Average Dividend Yield .....................................
23
Barometer water companies are used to calculate a current DCF in the first chart. The second chart
demonstrates the companies 52 week average DCF. A final average of the two calculations is also
shown at the bottom.
Attachment F – Development of a Representative Dividend Growth
Rate…………………………………………………..........
Multiple sources of the Barometer water companies projected 5 year Earnings Per Share are used to
calculate the Group Average Dividend Growth Estimate.
4
24
Introduction:
On September 20, 1991, the Commission initiated a rulemaking at L-00910061
pertaining to earnings disclosures by the public utilities subject to its jurisdiction. At that docket, the
Commission stated that the submission of accurate, reliable and complete earnings disclosure reports,
at regular intervals, is essential to the fulfillment of the broad regulatory oversight responsibilities
entrusted to the Commission by the Legislature in the Public Utility Code. The earnings disclosure
regulations promulgated by the Commission were adopted October 1, 1992, and published
January 23, 1993, at 23 Pa.B. 463. Based upon those regulations, codified at 52 Pa. Code, Chapter 71,
a reporting format was developed and distributed to the jurisdictional fixed utilities of Pennsylvania.
All fixed utilities having jurisdictional revenues of $1,000,000 or more, for a calendar
year, are required to file the report by March 31 of each year. Such reports are to be based upon the
results of operations for the 12-month period ending December 31 of the prior year. Utilities having
more than $10,000,000 in jurisdictional revenues are also required to file reports for the 12 months
ending on March 31, June 30, and September 30 of each year. On November 30, 2004, however, the
Pennsylvania General Assembly signed into law Act 183 concerning alternative telecommunications
regulation and broadband deployment. As a result of Act 183, the reporting requirements for the PUC
jurisdictional telecommunications companies of Pennsylvania have been streamlined at Sections
3015(e) of the Public Utility Code. A quarterly earnings report is not listed among those reports now
required of PUC jurisdictional telecommunications utilities in Pennsylvania and, therefore, this report
does not address telephone company earnings.
The reports have been filed for the period ended June 30, 2014.1 The Finance Staff of the
Bureau of Technical Utility Services has reviewed the reports and has prepared this summary report for
public release. This Report sets forth the achieved return on equity for each company, the last allowed
return for that utility, a market return as determined through the analysis of the barometer group data
and the most recent returns allowed, per industry, by the Pennsylvania Public Utility Commission and
by other regulatory bodies. Where a utility has not filed a report, the reasons for not filing are
indicated.
Questions pertaining to the preparation and contents of this Report should be directed to
Ms. Erin Laudenslager, Manager - Finance, Bureau of Technical Utility Services, at (717) 705-4364.
1
Columbia Gas of Pennsylvania, Inc., West Penn Power Company, Pennsylvania Power Company, Pennsylvania Electric
Company, and Metropolitan Edison Company had a pending rate filing at Docket Nos. R-2014-2406274,
R-2014-2428742, R-2014-2428744, R-2014-2428743, and R-2014-2428745 respectively, and filed a letter with the
Secretary in place of a report in accordance with 52 Pa. Code § 71.4.
5
Attachment A
The equity return summaries that follow in Attachment A are, for each quarter:
ACTUAL
1. Based on actual results of operations
and
ADJUSTED
2. Based on company proposed pro forma and ratemaking adjustments
6
Attachment A
ELECTRIC UTILITIES
EQUITY RETURNS BY QUARTER
QTR
END
2009
2010
2011
2012
2013
2014
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
PECO
ACT ADJ
PPL
ACT ADJ
Duq
ACT ADJ
10.84
11.44
11.27
11.58
8.84
9.82
10.36
7.70
10.00
11.04
10.47
10.00
11.04
10.47
10.90
9.67
9.05
9.20
7.48
10.90
9.67
9.05
9.20
7.48
14.35
11.74
12.25
10.35
13.41
12.89
12.63
13.14
11.55
11.92
11.40
11.09
11.97
9.97
10.05
9.61
11.34
11.03
11.07
11.38
11.26
12.01
12.66
11.56
11.27
10.74
10.96
10.52
10.34
10.08
7.91
8.31
9.41
8.89
6.98
8.31
9.41
8.89
6.02
7.56
7.80
8.67
10.01
10.02
9.50
4.88
6.24
7.37
8.38
9.79
10.04
10.09
10.86
10.05
10.21
10.95
10.81
10.33
10.27
10.12
10.39
9.58
9.97
10.71
10.42
9.92
9.24
9.74
9.77
9.29
W Penn
ACT
ADJ
5.20
7.04
8.26
8.58
6.69
6.41
6.63
4.78
8.43
10.05
12.95
13.33
11.66
10.61
10.63
9.54
9.23
12.34
9.13
13.73
11.58
5.20
7.04
8.26
8.40
6.69
6.41
6.63
4.80
6.80
8.40
11.21
11.58
13.16
9.15
10.45
9.54
9.23
12.34
9.13
13.73
9.45
7
PaPwr
ACT
ADJ
UGI
ACT ADJ
10.02
11.84
10.17
10.24
12.66
12.28
12.19
6.88
10.90
7.41
11.67
5.91
5.78
8.95
9.69
8.41
8.89
8.85
8.49
14.49
15.28
7.55
3.42
6.96
8.03
10.17
13.41
12.46
12.95
13.46
14.11
14.84
14.60
15.04
14.61
15.85
14.60
12.77
11.53
10.74
14.25
13.36
12.64
8.76
10.64
8.49
8.93
11.19
10.19
10.23
4.69
8.55
5.81
10.05
7.60
7.02
8.95
9.54
8.27
8.74
8.70
8.34
14.30
15.04
7.55
8.30
9.05
11.15
11.70
11.89
11.97
11.55
13.47
12.94
12.93
9.79
8.42
8.53
9.48
8.98
9.84
10.49
10.65
11.99
10.25
9.21
Penelec
ACT
ADJ
6.39
8.01
10.34
9.71
10.43
8.04
8.37
9.11
9.57
6.51
8.73
6.45
5.76
6.48
7.34
5.41
5.30
5.86
-0.77
4.85
5.17
MetEd
ACT ADJ
5.83
5.22
4.69
7.67
7.20
6.93
9.51
9.74
8.63
9.21
4.23
3.36
9.96
4.71
3.77
6.97
5.89
4.47
7.32
8.24
6.83
8.10
6.12
4.86
8.62 10.56
9.21
6.38
7.68
6.43
8.18
9.90
7.50
8.43
4.24
5.23
7.54
3.90
4.64
8.08
3.44
4.01
8.58
5.72
6.28
7.74
5.39
6.81
7.67
5.01
6.47
8.21
5.36
6.79
2.07 -12.43 -10.43
2.99 -6.06 -7.87
3.34 -6.40 -8.13
Attachment A
GAS UTILITIES
EQUITY RETURNS BY QUARTER
QTR
END
Columbia
ACT ADJ
Peoples
ACT ADJ
2009 1 9.85 11.05 16.74
2 11.45 10.61 16.51
3 10.97 9.17 20.06
4
14.80
2010 1
2
9.65
3
4 12.50 7.67
2011 1
2
3
5.67
PECO
ACT ADJ
UGI
ACT ADJ
8.14 5.82 9.06 13.92
9.72 7.62 9.64 13.26
7.84 8.95 10.59 6.96
6.47 10.66 9.28 14.58
15.91
5.25
15.97
14.84
10.21 9.94 16.52
11.74 11.34 19.61
11.97 10.79 19.67
8.47 12.56 11.15 18.24
4
11.69 12.06
2012 1 8.65 11.24
8.98 12.09
2 9.00 10.17
8.72 12.03
3 9.27 8.88 6.21 9.35 9.98 13.48
4
11.24 9.57 12.42 15.10
2013 1
12.49 9.89 14.63 15.13
2 10.85 7.15 16.59 8.35 14.43 14.40
3 9.36 9.86 17.39 8.72 14.14 14.01
4 10.60 10.78 16.33 10.02 14.35 13.97
2014 1
14.68 9.94 15.23 13.52
2
13.05 9.78 15.32 13.24
Equitable
ACT ADJ
NFG
ACT ADJ
9.88 5.89 9.51 15.64
10.50 7.21 9.73 14.35
9.05 8.40 10.13 14.74
11.41 9.84 9.86 14.74
11.69 10.31 9.18 18.80
11.48 9.47 8.99 19.13
11.79 8.87 8.56 18.19
11.88 8.78 8.67 18.97
13.11 9.48 9.78 19.87
13.92 10.81 10.71 20.83
11.98 10.40 9.93 21.16
16.55 9.18 7.99
15.71 8.95 2.29
13.60 9.90 5.51
13.79 10.05 5.84
13.68 9.44 7.27
14.65 10.27 12.42
13.02 10.21 10.40
12.60 9.38 9.84
16.08 9.20 10.52
16.81 8.35 12.00
16.71 8.39 13.54
8
8.89
8.05
7.51
7.79
8.05
8.40
8.92
9.48
9.76
8.73
8.49
19.62
15.76
14.10
13.88
15.11
19.33
20.18
19.61
20.51
23.11
22.97
UGI Penn
ACT ADJ
9.79
8.79
12.48 2.21 8.31
12.48 4.11 8.58
10.46 7.84 8.77
10.33 8.86 7.95
10.99 8.62 9.03
11.29 9.57 10.12
12.11 13.08 12.17
12.97 14.08 12.65
13.05 14.32 11.48
12.34
10.51
10.06
10.39
10.17
10.25
10.25
10.72
10.07
9.78
12.00
14.01
13.22
13.63
13.16
13.31
13.28
10.98
10.59
13.41
16.67
15.30
Peoples TWP
ACT ADJ
4.98
4.30
4.97
3.75
3.27
2.96
3.15
3.65
3.27
6.52
6.10
5.78
9.57
9.06
6.94
6.67
9.35 6.75 5.56
9.63 5.24 3.39
10.40 4.57 6.43
10.66 7.02 7.41
10.63 5.05 6.94
10.58
10.27
10.76
10.49 7.21 12.23
10.06 12.19 11.87
10.90 14.06 12.32
Attachment A
WATER UTILITIES
EQUITY RETURNS BY QUARTER
QTR
END
2009
2010
2011
2012
2013
2014
PAWC
ACT
ADJ
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
8.72
9.30
9.58
9.18
8.98
9.06
9.17
9.54
10.52
10.51
8.10
9.30
9.58
8.52
8.98
9.06
9.17
9.04
9.98
10.02
AQUA
ACT
ADJ
United
ACT
ADJ
York
ACT
ADJ
11.45
11.69
10.78
10.71
10.35
8.94
9.60
9.30
6.93
5.84
6.57
7.54
8.34
8.69
7.28
6.50
9.20
8.80
8.90
10.19
10.10
8.80
9.20
5.70
5.66
5.74
6.59
7.15
4.66
10.4
11.2
10.68
10.92
8.32
7.93
5.02
4.72
3.92
8.81
8.61
7.69
10.8
11.1
10.9
11.1
10.2
10.2
7.69
7.38
7.30
7.96
8.33
8.53
8.99
8.83
8.43
8.45
8.81
8.00
7.84
7.65
8.38
8.49
8.71
9.15
9.01
9.05
9.02
9.32
10.8
10.7
10.4
10.5
10.4
10.0
9.5
9.4
9.1
9.1
9.50
12.41
13.24
14.26
15.49
13.77
13.29
13.01
7.77
12.56
11.96
12.52
12.21
11.97
11.56
11.42
9
10.2
10.2
10.7
Superior
ACT
ADJ
8.40
7.71
8.60
9.00
8.70
10.8
10.2
10.7
8.57
7.46
10.71
13.12
7.85
6.85
10.01
9.97
Attachment B
Attachment B includes:
A. Overall Returns on rate base
1. Actual
2. Company proposed pro forma and ratemaking adjustments
and
B. Equity Returns
1. Actual
2. Company proposed pro forma and ratemaking adjustments
10
Attachment B
1 of 2
COMPANY NAME
Summary of Returns
for the Year Ended June 30, 2014
OVERALL RETURN
EQUITY
RETURN
ACTUAL
ADJ
ACTUAL
ADJ
ROE
AUTH
YEAR
AUTH
ELECTRIC
$10,000,000 Revenues
PECO Energy
PPL Electric Utilities Corp.
Duquesne Light Company
West Penn Power Company*
Pennsylvania Power Company*
UGI Utilities, Inc.
Pennsylvania Electric Company*
Metropolitan Edison Company*
7.72
7.74
10.05
10.08
Settled
2010
7.26
7.80
7.55
7.50
9.50
9.77
10.09
9.29
10.01
7.44
12.46
9.21
10.40
Settled
11.50
12.91
10.58
10.10
10.10
2012
2014
1995
1988
1996
2007
2007
9.46
10.74
12.43
9.32
14.37
11.01
9.44
13.47
7.21
9.56
7.02
6.49
8.56
8.32
8.50
9.33
13.05
15.32
16.71
13.54
22.97
15.30
14.06
19.49
9.78
13.24
8.39
8.49
12.00
10.90
12.32
12.83
Settled
Settled
Settled
Settled
Settled
Settled
Settled
Settled
Settled
2013
2012
2010
1995
2008
2006
2009
2013
2009
8.23
9.53
8.7
7.54
7.98
8.68
8.7
7.82
10.51
13.01
10.7
8.81
10.02
11.42
10.7
9.32
Settled
Settled
Settled
Settled
Settled
2013
2012
2014
2009
2011
GAS
$10,000,000 Revenues
Columbia Gas of PA, Inc.*
Peoples Natl Gas LLC
PECO Energy
UGI Utilities, Inc.
Equitable Gas Company
National Fuel Gas Distribution Co.
UGI Penn Natural Gas, Inc.
Peoples TWP, LLC
UGI Central Penn Gas, Inc.
WATER
$10,000,000 Revenues
PA American Water Company
AQUA Pennsylvania
York Water Company
United Water Penna. Inc.
Superior Water Company
* Columbia Gas of Pennsylvania, Inc., West Penn Power Company, Pennsylvania Power Company, Pennsylvania Electric Company,
and Metropolitan Edison Company had a pending rate filing at Docket Nos. R-2014-2406274, R-2014-2428742, R-2014-2428744,
R-2014-2428743, and R-2014-2428745 respectively, and filed a letter with the Secretary in place of a report in accordance with 52 Pa.
Code § 71.4.
11
Attachment B
2 of 2
UGI Utilities, Inc.-Gas
Return on equity adjusted from 16.71% to 8.39% based on the following
company adjustments to actual results of operations.
1.
2.
3.
4.
$
$
$
$
158,298,000
(27,435,000)
6,181,000
(17,419,000)
Rate Base Plant in Service Increase
Normalization of Operating Revenue Decrease
Payroll Expense Increase
Tax Expense Decrease
National Fuel Gas Distribution Corporation
Return on equity adjusted from 22.97% to 12.00% based on the following
company adjustments to actual results of operations.
1.
2.
3.
4.
$ 32,781,000
$ 37,739,000
$ (43,103,000)
$ (33,322,000)
Rate Base Plant Increase
Rate Base Cash Working Capital Increase
Operating Revenue Decrease
Operating and Maintenance Decrease
UGI Penn Natural Gas, Inc.
Return on equity adjusted from 15.30% to 10.90% based on the following
company adjustments to actual results of operations.
1. $ 82,650,000
2. $ (14,174,000)
3. $ (4,240,000)
Rate Base Net Plant Increase
Rate Base Plant in Service Increase
Tax Expense Decrease
UGI Central Penn Gas, Inc.
Return on equity adjusted from 19.49% to 12.83% based on the following
company adjustments to actual results of operations.
1.
2.
3.
4.
$ 74,381,000
$ (10,578,000)
$ (5,503,000)
$ (4,947,000)
Rate Base Plant Increase
Rate Base Depreciation Decrease
Normalization of Operating Revenue Decrease
Tax Expense Decrease
12
Attachment C
ALLOWED RATES OF RETURN ON COMMON EQUITY
This is a historical chart that shows the most recent fully litigated rate cases for select companies in electric,
gas, and water. A docket number followed by their final return on equity and year is also given.
ELECTRIC
Docket Number
ROE (%)
Year
Recent PA PUC Allowed
PPL Electric Utilities Corp.
PECO Energy Company
West Penn Power Company
UGI - Electric
Pennsylvania Electric Company
Metropolitan Edison Company
R-2012-2290597
R-2010-2161575
R-00942986
R-00932862
R-00061367
R-00061366
10.40
Settled
11.50
10.58
10.10
10.10
2012
2010
1995
1996
2007
2007
Current Market Indicated ROE as calculated by the
Bureau of Technical Utility Services.
7.48-10.30
GAS
Recent PA PUC Allowed
Columbia Gas of Pa.
UGI Utilities, Inc. – Gas
Peoples Natural Gas Co.
UGI Penn Natural Gas
UGI Central Penn Gas
PECO Energy
R-2012-2321748
R-00953297
R-2012-2285985
R-2008-2079660
R-2008-2079675
R-2010-2161592
Settled
Settled
Settled
Settled
Settled
Settled
Current Market Indicated ROE as calculated by the
Bureau of Technical Utility Services.
2013
1995
2012
2009
2009
2010
8.16-9.36
WATER
Recent PA PUC Allowed
Aqua Pennsylvania
Penna American Water Co.
R-2011-2267958
R-2013-2355276
Current Market Indicated ROE as calculated by the
Bureau of Technical Utility Services.
13
Settled
Settled
2012
2013
8.05-10.08
Attachment D
The market indicated common equity cost rate range consists of data used from the barometer groups
and is based on a series of calculations to average the DCF methods.
Market Based Returns on Common Equity (1)
October 2, 2014
Electric Company Barometer Group
Cost Rates
%
(1) Current DCF
8.83
(2) 52-Week Average DCF
8.95
(3) Overall DCF (1) + (2) / 2
8.89
(4) Market Indicated Common Equity Cost Rate Range
@ 1 standard deviation around the mean.²
7.48-10.3
(5) CAPM Check of DCF Reasonableness
9.27
(6) Recent Commission Approved ROEs:
PPL Electric Utilities, R-2012-2290597³
10.40
(7)
Distribution System Improvement Charge (DSIC) Return
Barometer Group Companies
Consolidated Edison
Dominion Resources
PPL Corporation
Public Service Enterprise Group
Pepco Holdings
UIL Holdings
1
As calculated by the Bureau of Technical Utility Services
2
Standard Deviation of 12 DCF observations
3
ROEs from base rate cases within last two years,
fully litigated or stipulated for DSIC purposes
Any questions concerning DSIC should be directed to Andrew Herster
of the Bureau of Technical Utility Services at (717) 783-5392.
14
10.10%
Attachment D
Barometer electric companies are used to calculate a current DCF in the first chart. The second chart
demonstrates the companies 52 week average DCF. A final average of the two calculations is also
shown at the bottom.
Electric Company Barometer Group
Calculation of a Current Dividend Yield
Consolidated Edison
Dominion Resources
PPL Corporation
Public Service Enterprise Group
Pepco Holdings
UIL Holdings
Group Average D1/Po
Group Average G
DCF
Closing
Market
Price (Po)
10/1/2014
($)
56.94
69.26
33.10
37.29
26.80
35.53
Latest
Indicated
Dividend
Do
($)
2.52
2.40
1.49
1.48
1.22
1.73
Ind. Div.
Plus 1/2
Div. Growth
Rate (D1)
($)
2.55
2.46
1.50
1.50
1.22
1.73
Current
Dividend
Yield(D1/Po)
(%)
4.47
3.55
4.55
4.02
4.55
4.87
4.33
4.50
8.83
DCF
(%)
7.08
9.54
7.27
8.35
9.92
10.58
Electric Company Barometer Group
52-week Average Dividend Yield Calculation
Consolidated Edison
Dominion Resources
PPL Corporation
Public Service Enterprise Group
Pepco Holdings
UIL Holdings
Group Average Do / Pa
Group Average G
DCF
High
($)
59.24
73.75
35.56
41.38
27.92
40.68
Low
($)
52.23
61.36
28.95
31.25
18.19
34.34
Latest
Average
Indicated
Dividend
Average (Pa) Dividend (Do) Yield (Do/Pa)
($)
($)
(%)
55.74
2.52
4.52
67.56
2.40
3.55
32.26
1.49
4.62
36.32
1.48
4.08
23.06
1.22
5.29
37.51
1.73
4.61
4.45
4.50
8.95
Average of Current and 52-Week
15
8.89
DCF
(%)
7.13
9.55
7.34
8.41
10.66
10.32
Attachment D
Multiple sources of the Barometer companies projected 5 year Earnings Per Share are used to calculate
the Group Average Dividend Growth Estimate.
Development of a Representative Dividend Growth Rate
for the Barometer Group of Six Electric Companies
5 Year Forecast
Consolidated Edison
Dominion Resources
PPL Corporation
Public Service Enterprise Group
Pepco Holdings
UIL Holdings
Group Average
USE
Value Line
DPS
(%)
Value Line
EPS
(%)
Zack's
EPS
(%)
Yahoo
EPS
(%)
Morningstar
EPS
(%)
Avgerage
Earnings
Growth
(%)
2.00
5.00
2.00
2.50
0.00
0.00
1.92
2.00
5.50
0.00
2.00
7.00
4.50
3.50
2.80
5.50
-0.60
2.10
5.00
6.00
3.47
2.72
6.17
1.40
1.76
10.00
6.03
4.68
2.30
6.80
10.10
8.90
4.10
6.30
6.42
2.46
5.99
2.73
3.69
6.53
5.71
4.52
Sources: Morningstar, October 2, 2014 (http://financials.morningstar.com)
Value Line Investment Survey, October 2, 2014
Zacks, October 2, 2014 (www.zacks.com)
Yahoo!, October 2, 2014 (http://finance.yahoo.com/)
16
Growth
Estimate
(%)
2.61
5.99
2.73
4.33
5.37
5.71
4.46
4.50
Attachment D
The Common Equity Ratios of Electric Utility Barometer Companies table depicts each company’s
quarterly common equity ratio. The range of Reasonable Equity Ratios consists of the lowest and
highest common equity ratio for the barometer group companies.
Common Equity Ratios of Electric Utility Barometer Groups (2)
Company
2014 Common Equity Ratio (1)
Consolidated Edison
51.00%
Dominion Resources
42.00%
PPL Corporation
42.50%
Public Service Enterprise Group
55.50%
PEPCO Holdings, Inc.
50.50%
UIL Holdings
42.00%
Average
47.25%
Range of Reasonable Equity Ratios
42.00-55.50%
(1) Source: Value Line Investment Survey October 2, 2014
(2) The common equity ratios reported by Value Line exclude short-term
debt and current maturities of long-term debt.
17
Attachment D
The Capital Structure and Cost of Debt and Preferred Stock table shows the Schedule E and Schedule F
of each company’s quarterly earnings report.
Capital Structure and Cost of Debt and Preferred Stock for Pennsylvania Electrics - Twelve months ended June 30, 2014
PPL Electric
Duquesne Light
Company
UGI Utilities
Inc.
Schedule E
Total Debt
50.60%
41.93%
43.46%
43.43%
Total Preferred & Preference Stock
0.00%
5.10%
0.00%
0.00%
Total Common Equity
49.40%
52.90%
56.54%
56.57%
Schedule F
Cost of Debt
5.07%
5.32%
2.51%
4.71%
Cost of Preferred Stock
0.00%
5.89%
0.00%
0.00%
1) Source: Company supplied quarterly earnings report, Schedules E & F
18
West Penn
Power Co.
PECO Electric
Metropolitan Edison
Company
PA Electric
Company
1)
PA Power
Company
Attachment E
The market indicated common equity cost rate range consists of data used from the barometer groups
and is based on a series of calculations to average the DCF methods.
Market Based Returns on Common Equity (1)
October 2, 2014
Gas Distribution Company Barometer Group
Cost Rates
%
(1) Current DCF
8.81
(2) 52-Week Average DCF
8.71
(3) Overall DCF (1) + (2) / 2
8.76
(8) Market Indicated Common Equity Cost Rate Range
@ 1 standard deviation around the mean. 2
(5) CAPM Check of DCF Reasonableness
8.16-9.36
9.96
(6) Recent Commission Approved ROEs 3:
None within last two years
(7)
Distribution System Improvement Charge Return
Barometer Group Companies
AGL Resources, Inc.
New Jersey Resources
Northwest Natural Gas Company
Piedmont Natural Gas Company
South Jersey Industries
WGL Holdings
1
As calculated by the Bureau of Technical Utility Services
Standard Deviation of 12 DCF observations
3
ROEs from base rate cases within last two years,
fully litigated or stipulated for DSIC purposes
2
Any questions concerning DSIC should be directed to Andrew Herster
of the Bureau of Technical Utility Services at (717) 783-5392.
19
10.00%
Attachment E
Barometer gas companies are used to calculate a current DCF in the first chart. The second chart
demonstrates the companies 52 week average DCF. A final average of the two calculations is also
shown at the bottom.
AGL Resources
New Jersey Resources
Northwest Natural Gas
Piedmont Natural Gas
South Jersey Industries
WGL Holdings
Gas Company Barometer Group
Calculation of a Current Dividend Yield
Closing
Latest
Ind. Div.
Market
Indicated
Plus 1/2
Price (Po)
Dividend
Div. Growth
10/1/2014
Do
Rate (D1)
($)
($)
($)
51.16
1.96
2.00
49.94
1.68
1.70
42.40
1.84
1.86
33.66
1.28
1.30
53.18
1.89
1.97
42.32
1.76
1.78
Current
Dividend
Yield(D1/Po)
(%)
3.92
3.41
4.39
3.86
3.70
4.21
Group Average D1 / Po
Group Average G
DCF
DCF
(%)
8.72
7.88
9.13
8.21
9.70
8.92
3.91
4.90
8.81
Gas Company Barometer Group
52-week Average Dividend Yield Calculation
AGL Resources
New Jersey Resources
Northwest Natural Gas
Piedmont Natural Gas
South Jersey Industries
WGL Holdings
High
($)
55.30
57.79
47.50
37.86
61.18
45.65
Low
($)
44.56
42.54
40.05
31.61
51.77
35.35
Latest
Average
Indicated
Dividend
Average (Pa) Dividend (Do) Yield (Do/Pa)
($)
($)
(%)
49.93
1.96
3.93
50.17
1.68
3.35
43.78
1.84
4.20
34.74
1.28
3.69
56.48
1.89
3.35
40.50
1.76
4.35
Group Average Do / Pa
Group Average G
DCF
3.81
4.90
8.71
Average of Current and 52-Week
20
8.76
DCF
(%)
8.73
7.82
8.94
8.04
9.35
9.06
Attachment E
Multiple sources of the Barometer companies projected 5 year Earnings Per Share are used to calculate
the Group Average Dividend Growth Estimate.
Development of a Representative Dividend Growth Rate
for the Barometer Group of Gas Companies
5 Yr Forecast
Value Line
DPS
Value Line
EPS
Zack's
EPS
Yahoo
EPS
Morningstar
EPS
Avgerage
Earnings
Growth
Growth
Estimate
(%)
(%)
(%)
(%)
(%)
(%)
(%)
AGL Resources
New Jersey Resources
Northwest Natural Gas
Piedmont Natural Gas
South Jersey Industries
WGL Holdings
4.50
2.50
2.50
3.00
8.00
2.50
10.50
6.00
6.50
4.00
8.00
4.00
4.00
3.60
3.70
4.30
6.00
4.90
3.60
4.00
4.50
6.00
4.85
5.60
4.70
3.00
4.60
6.00
5.10
6.70
4.48
4.30
4.35
6.50
4.71
4.80
4.48
4.73
4.35
6.00
4.71
Group Average
USE
3.83
6.50
4.42
4.59
4.83
5.17
4.85
4.90
Sources: Morningstar, October 2, 2014 (http://financials.morningstar.com)
Value Line Investment Survey, October 2, 2014
Zacks, October 2, 2014 (www.zacks.com)
Yahoo!, October 2, 2014 (http://finance.yahoo.com/)
21
Attachment F
The market indicated common equity cost rate range consists of data used from the barometer groups
and is based on a series of calculations to average the DCF methods.
Market Based Returns on Common Equity ¹
October 2, 2014
Water Company Barometer Group
Cost Rates
%
(1) Current DCF
9.14
(2) 52-Week Average DCF
9.00
(3) Average DCF
9.07
(4) Market Indicated Common Equity Cost Rate Range
@ 1 standard deviation around the mean. 2
(5) CAPM Check of DCF Reasonableness
3
(6) Recent Commission Approved ROEs :
Columbia Water Company, R-2013-2360798
(6)
Distribution System Improvement Charge Return
Barometer Group Companies
American States Water Company
Connecticut Water Service, Inc.
Middlesex Water Company
California Water Service Group
SJW Corporation
Aqua America , Inc.
American Water Works Co., Inc.
1
As calculated by the Bureau of Technical Utility Services
Standard Deviation of 14 DCF observations
3
ROEs from base rate cases within last two years,
fully litigated or stipulated for DSIC purposes
2
Any questions concerning DSIC should be directed to Andrew Herster
of the Bureau of Technical Utility Services at (717) 783-5392.
22
8.05-10.08
9.33
9.75
10.00%
Attachment F
Barometer water companies are used to calculate a current DCF in the first chart. The second chart
demonstrates the companies 52 week average DCF. A final average of the two calculations is also
shown at the bottom.
Calculation of a Current Dividend Yield
American States Water Company
Connecticut Water Service, Inc.
Middlesex Water Company
California Water Service Group
SJW Corporation
Aqua America, Inc.
American Water Works Co., Inc.
Closing
Market
Price (Po)
Latest
Indicated
Dividend
Ind. Div.
Plus 1/2
Div. Growth
Current
Dividend
10/1/2014
($)
30.30
32.46
19.51
22.17
26.77
23.50
48.10
Do
($)
0.85
0.99
0.76
0.65
0.75
0.61
1.24
Rate (D1)
($)
0.89
1.00
0.77
0.67
0.77
0.64
1.29
Yield(D1/Po)
(%)
2.93
3.10
3.93
3.03
2.87
2.71
2.67
Group Average D1/Po
Group Average G
DCF
Growth
(%)
6.00
5.82
3.31
6.50
7.00
6.00
7.73
3.04
6.10
9.14
DCF
(%)
8.93
8.92
7.24
9.53
9.87
8.71
10.41
9.09
52-week High-Low Dividend Yield Calculation
American States Water Company
Connecticut Water Service, Inc.
Middlesex Water Company
California Water Service Group
SJW Corporation
Aqua America , Inc.
American Water Works Co., Inc.
Average
Group Average Do / Pa
Group Average G
DCF
High
($)
34.00
36.45
22.14
24.78
30.91
26.29
50.71
Low
($)
26.45
30.68
19.06
19.65
25.46
22.40
40.05
Latest
Average
Indicated
Dividend
Average (Pa) Dividend (Do) Yield (Do/Pa)
($)
($)
(%)
30.23
0.85
2.81
33.57
0.99
2.95
20.60
0.76
3.69
22.22
0.65
2.93
28.19
0.75
2.66
24.35
0.61
2.51
45.38
1.24
2.73
2.90
6.10
9.00
Average of Current and 52-Week
23
9.07
Growth
(%)
6.00
5.82
3.31
6.50
7.00
6.00
7.73
DCF
(%)
8.81
8.77
7.00
9.43
9.66
8.51
10.47
8.95
Attachment F
Multiple sources of the Barometer companies projected 5 year Earnings Per Share are used to calculate
the Group Average Dividend Growth Estimate.
Development of a Representative Dividend Growth Rate
for the Barometer Group of Water Companies
5 Yr Forecast
American States Water Company
Connecticut Water Service, Inc.
Middlesex Water Company
California Water Service Group
SJW Corporation
Aqua America, Inc.
American Water Works Co., Inc.
Group Average
USE
Value Line
Value Line
Zacks
Yahoo
Reuters
Avgerage
Earnings
Growth
DPS
EPS
EPS
EPS
EPS
Growth
Estimate
(%)
(%)
(%)
(%)
(%)
(%)
(%)
9.00
3.00
2.00
7.00
5.00
9.00
7.50
6.00
5.00
4.50
7.50
7.00
8.50
7.50
1.00
5.00
5.50
7.60
1.00
5.00
2.70
6.00
14.00
4.00
8.10
16.65
8.29
2.72
1.37
-0.57
14.80
6.16
5.82
3.31
5.22
6.81
8.20
7.73
6.00
5.82
3.31
6.50
7.00
6.00
7.73
6.07
6.57
5.02
5.83
7.21
6.18
6.05
6.10
6.00
Sources: Reuters,October 2, 2014 (http://reuters.com)
Value Line Investment Survey, October 2, 2014
Zacks, October 2, 2014 (www.zacks.com)
Yahoo!,October 2, 2014 (http://finance.yahoo.com/)
24