PENNSYLVANIA PUBLIC UTILITY COMMISSION
Public Meeting held July 16, 2013
Docket Number: M-2013-2371435
BUREAU OF TECHNICAL UTILITY SERVICES
REPORT ON THE QUARTERLY EARNINGS
OF JURISDICTIONAL UTILITIES
FOR THE PERIOD ENDED
March 31, 2013
Robert F. Powelson, Chairman
John F. Coleman, Jr., Vice Chairman
Wayne E. Gardner, Dissenting Statement
James H. Cawley, Dissenting
Pamela A. Witmer
TABLE OF CONTENTS
Page No.
Introduction .....................................................................................................
5
Columbia Gas of Pennsylvania had a pending rate filing at Docket No. R-2012-2321748 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
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 D – Development of a Representative Dividend Growth
Rate…………………………………………………..........
16
Multiple sources of the Barometer water 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 ..........................................
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.
3
20
Attachment E – Development of a Representative Dividend Growth
Rate…………………………………………………..........
21
Multiple sources of the Barometer water 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 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 March 31, 20131. 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, Peoples TWP, LLC, Pennsylvania American Water Company and The York Water
Company had a pending rate filing at Docket No. R-2012-2321748, R-2013-2355886 and R-2013-2355276, R-20122336379, 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 - EIGHT MAJORS
EQUITY RETURNS BY QUARTER
QTR
END
2007
2008
2009
2010
2011
2012
2013
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
Peco
ACT ADJ
PPL
ACT ADJ
Duq
ACT ADJ
12.27
12.74
10.90
9.68
10.39
10.84
11.44
11.27
11.58
10.33
10.97
9.15
8.38
8.82
8.84
9.82
10.36
7.70
7.05
6.68
7.17
7.44
9.06
10.00
11.04
10.47
6.27
6.68
7.17
7.44
8.75
10.00
11.04
10.47
7.62
8.00
8.80
8.12
10.52
10.90
9.67
9.05
9.20
7.48
8.28
8.00
8.80
8.12
10.34
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
9.61
11.34
11.03
11.07
11.38
11.26
12.01
12.66
11.56
11.27
7.91
8.31
9.41
8.89
6.98
8.31
9.41
8.89
6.02
7.56
4.88
6.24
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
W Penn
ACT
ADJ
3.91
4.06
3.70
3.48
4.20
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
3.45
4.06
3.70
3.48
4.25
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
7
PaPwr
ACT
ADJ
UGI
ACT ADJ
6.81
4.69
7.07
6.35
8.67
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
13.50
10.73
12.33
9.08
8.63
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
6.81
4.69
5.54
4.78
7.09
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
10.06
7.15
8.81
8.17
8.65
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
Penelec
ACT
ADJ
13.91
13.77
14.03
12.56
15.07
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
13.91
13.77
13.29
11.78
14.25
5.83
7.67
9.51
9.21
9.96
6.97
7.32
8.10
8.62
6.38
8.18
8.43
7.54
8.08
8.58
7.74
7.67
MetEd
ACT ADJ
8.46
9.05
9.25
8.48
9.20
5.22
7.20
9.74
4.23
4.71
5.89
8.24
6.12
10.56
7.68
9.90
4.24
3.90
3.44
5.72
5.39
5.01
8.46
9.05
8.63
7.82
8.50
4.69
6.93
8.63
3.36
3.77
4.47
6.83
4.86
9.21
6.43
7.50
5.23
4.64
4.01
6.28
6.81
6.47
Attachment A
GAS UTILITIES – EIGHT MAJORS
EQUITY RETURNS BY QUARTER
QTR
END
Columbia
ACT ADJ
Peoples
ACT ADJ
PECO
ACT ADJ
UGI
ACT ADJ
2007 4
21.55
2008 1
18.51
2
19.13
3
20.52
4 5.52 10.71 18.96
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
12.65 5.32 3.21 14.44
11.28
15.69
11.99
14.58
11.68 2.30 2.74 12.70
9.00 2.48 2.43 12.62
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
3
4 12.50 7.67
2011 1
2
3
5.67
4
2012 1 8.65 11.24
2 9.00 10.17
3 9.27 8.88 6.21
4
11.24
2013 1
12.49
14.84
16.52
19.61
19.67
18.24
16.55
15.71
13.60
13.79
13.68
14.65
8.47
9.35
9.57
9.89
10.21
11.74
11.97
12.56
11.69
8.98
8.72
9.98
12.42
14.63
9.94
11.34
10.79
11.15
12.06
12.09
12.03
13.48
15.10
15.13
Equitable
ACT ADJ
NFG
ACT ADJ
11.43 -3.12
.10 15.00 11.63
11.51 -2.02 0.69 16.50 12.29
10.93
15.70 12.09
9.81
15.60 11.58
11.01
16.42 11.22
9.88 5.89 9.51 15.64 9.79
10.50 7.21 9.73 14.35 8.79
9.05 8.40 10.13 14.74 12.48
11.41 9.84 9.86 14.74 12.48
11.69 10.31 9.18 18.80 10.46
11.48 9.47 8.99 19.13 10.33
UGI Penn
ACT ADJ
Peoples TWP
ACT ADJ
7.16
7.71
6.09
3.99
6.84
6.19
5.25
4.46
-
-
2.21
4.11
7.84
8.86
8.31
8.58
8.77
7.95
11.79 8.87 8.56 18.19 10.99 8.62 9.03
11.88 8.78 8.67 18.97 11.29 9.57 10.12
13.11 9.48 9.78 19.87 12.11 13.08 12.17
13.92 10.81 10.71 20.83 12.97 14.08 12.65
11.98 10.40 9.93 21.16 13.05 14.32 11.48
9.18 7.99 8.89 19.62 12.34 14.01 9.35
8.95 2.29 8.05 15.76 10.51 13.22 9.63
9.90 5.51 7.51 14.10 10.06 13.63 10.40
10.05 5.84 7.79 13.88 10.39 13.16 10.66
9.44 7.27 8.05 15.11 10.17 13.31 10.63
10.27 12.42 8.40 19.33 10.25 13.28 10.58
8
8.56
7.69
6.94
5.07
4.94
4.98
4.30
4.97
3.75
7.42
6.50
6.41
5.09
3.84
3.27
2.96
3.15
3.65
3.27
6.52
6.10
5.78
6.75
5.24
4.57
7.02
5.05
9.57
9.06
6.94
6.67
5.56
3.39
6.43
7.41
6.94
Attachment A
WATER UTILITIES – FOUR MAJORS
EQUITY RETURNS BY QUARTER
QTR
END
2007
2008
2009
2010
2011
2012
2013
PAWC
ACT
ADJ
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
8.06
7.99
8.65
8.85
8.06
7.99
8.65
9.43
8.72
9.30
9.58
9.18
8.10
9.30
9.58
8.52
8.98
9.06
9.17
9.54
8.98
9.06
9.17
9.04
AQUA
ACT
ADJ
10.53
11.09
10.87
11.45
11.69
10.97
10.51
10.44
10.78
10.71
10.19
10.10
10.35
8.94
10.68
10.92
8.32
7.93
9.50
12.41
13.24
7.77
12.56
11.96
United
ACT
ADJ
York
ACT
ADJ
7.70
7.51
8.70
8.70
7.15
8.80
9.20
5.70
5.66
5.74
6.59
7.15
4.66
9.14
8.82
6.70
6.00
8.40
9.60
9.30
6.93
5.84
6.57
7.54
8.34
8.69
9.42
9.20
6.74
10.60
8.20
7.28
6.50
9.20
8.80
8.90
8.29
7.20
8.01
8.25
10.00
8.40
7.71
8.60
9.00
8.70
10.4
11.2
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
8.00
7.84
7.65
8.38
8.49
8.71
10.8
10.7
10.4
10.5
10.4
10.0
9.5
9.4
9.1
9.1
9
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 March 31, 2013
OVERALL RETURN
EQUITY
RETURN
ACTUAL
ADJ
ACTUAL
ADJ
ROE
AUTH
YEAR
AUTH
ELECTRIC
$10,000,000 Revenues
PECO Energy
8.88
8.51
11.92
11.27
Settled
2010
PPL Electric Utilities Corp.
Duquesne Light Company
West Penn Power Company
Pennsylvania Power Company
UGI Utilities, Inc.
Pennsylvania Electric Company
Metropolitan Edison Company
6.48
8.19
7.21
7.85
10.21
6.04
5.17
5.81
7.95
7.21
7.76
7.98
7.09
5.86
7.56
10.12
9.23
8.89
12.77
5.30
5.01
6.24
9.74
9.23
8.74
9.84
7.67
6.47
10.40
Settled
11.50
12.91
10.58
10.10
10.10
2012
2007
1995
1988
1996
2007
2007
9.19
10.44
11.34
8.98
12.73
10.21
7.54
10.71
8.21
6.81
7.63
8.39
12.49
14.63
14.65
12.42
19.33
13.28
9.89
15.13
10.27
8.40
10.25
10.58
12.07
10.31
16.65
14.02
Settled
Settled
Settled
Settled
Settled
Settled
Settled
Settled
10.40
2011
2012
2010
1995
1991
2006
2007
2006
2007
9.56
8.87
13.24
11.96
7.38
7.47
8.53
8.71
Settled
Settled
Settled
Settled
2011
2012
2008
2009
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.
* Columbia Gas of Pennsylvania, Peoples TWP, LLC, Pennsylvania American Water Company and The York Water Company had a
pending rate filing at Docket No. R-2012-2321748, R-2013-2355886 and R-2013-2355276, R-2012-2336379, 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
Equitable Gas Company
Return on equity adjusted from 12.42% to 8.40% based on the following
company adjustments to actual results of operations.
1.
2.
3.
4.
$
$
$
$
77,659,000
8,173,000
4,703,000
6,555,000
Rate Base Increase Net Plant in Service
Weather Normalization Revenue
Weather Normalization Expense
Non-recurring Items Expense
UGI Utilities, Inc. - Gas
Return on equity adjusted from 19.33% to 10.25% based on the following
company adjustments to actual results of operations.
1.
2.
3.
4.
5.
$ 98,794,000
$ 21,852,000
$ (13,603,000)
$
2,958,000
$
2,343,000
Rate Base Increase Net Plant in Service
Rate Base Increase in Inventory
Normalization of Operating Revenue
Payroll Expense
Depreciation Expense
National Fuel Gas Distribution Corporation
Return on equity adjusted from 13.28% to 10.58% based on the following
company adjustments to actual results of operations
1. $
2. $
3. $
37,739,000
19,697,000
17,955,000
Rate Base Cash Working Capital Increase
Rate Base Increase in Plant
Increase in Operating Revenue
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
Recent PA PUC Allowed
PPL Electric Utilities Corp.
PECO Energy Company
West Penn Power Company
UGI - Electric
Pennsylvania Electric Company
Metropolitan Edison Company
Docket Number
- R-2012-2290597
- R-2010-2161575
- R-00942986
- R-00932862
- R-00061367
- R-00061366
ROE (%)
10.40
Settled
11.50
10.58
10.10
10.10
Current Market Indicated ROE as calculated by the
Bureau of Technical Utility Services.
Year
2012
2010
1995
1996
2007
2007
8.06-10.97
GAS
Recent PA PUC Allowed
Columbia Gas of Pa.
UGI Utilities, Inc. – Gas
Peoples Natural Gas Co.
UGI Central Penn Gas
PECO Energy
- R-2010-2215623
- R-00953297
- R-2012-2285985
- R-00061398
- R-2010-2161592
Settled
Settled
Settled
10.40
Settled
Current Market Indicated ROE as calculated by the
Bureau of Technical Utility Services.
2011
1995
2012
2007
2010
7.89-9.04
WATER
Recent PA PUC Allowed
Aqua Pennsylvania
Penna American Water Co.
- R-2011-2267958
- R-2011-2232243
Current Market Indicated ROE as calculated by the
Bureau of Technical Utility Services.
13
Settled
Settled
2012
2011
8.73-11.20
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)
June 21, 2013
Electric Company Barometer Group
Cost Rates
%
(1) Current DCF
9.64
(2) 52-Week Average DCF
9.39
(3) Overall DCF (1) + (2) / 2
9.51
(4) Market Indicated Common Equity Cost Rate Range
@ 1 standard deviation around the mean.²
8.06-10.97
(5) CAPM Check of DCF Reasonableness
8.68
(6) Recent Commission Approved ROEs:
PPL Electric Utilities, R-2012-2290597³
10.28
(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
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.
14
10.20%
Attachment D
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.
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)
6/20/2013
($)
55.78
54.66
28.52
31.61
19.42
37.15
Latest
Indicated
Dividend
Do
($)
2.46
2.25
1.47
1.44
1.08
1.73
Ind. Div.
Plus 1/2
Div. Growth
Rate (D1)
($)
2.48
2.31
1.48
1.45
1.09
1.73
Current
Dividend
Yield(D1/Po)
(%)
4.44
4.23
5.21
4.59
5.59
4.66
4.79
4.85
9.64
DCF
(%)
7.19
9.53
9.21
11.59
10.80
9.49
Electric Company Barometer Group
52-week Average Dividend Yield Calculation
Consolidated Edison
Dominion Resources
PPL Corporation
Public Service Enterprise Group
Pepco Holdings
UIL Holdings
Group Average Do / Pa
Group Average G
DCF
High
($)
65.98
61.85
33.55
37.00
22.72
42.14
Low
($)
53.63
48.94
27.32
29.05
18.67
32.33
Latest
Average
Indicated
Dividend
Average (Pa) Dividend (Do) Yield (Do/Pa)
($)
($)
(%)
59.81
2.46
4.11
55.40
2.25
4.06
30.44
1.47
4.83
33.03
1.44
4.36
20.70
1.08
5.22
37.24
1.73
4.65
4.54
4.85
9.39
Average of Current and 52-Week
15
9.51
DCF
(%)
6.86
9.36
8.83
11.36
10.43
9.48
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
(%)
1.50
5.50
2.00
1.50
1.00
2.50
6.00
3.30
4.60
-3.10
-0.10
6.00
6.50
2.87
2.27
7.27
6.00
-2.61
4.75
8.59
4.38
2.90
8.30
2.00
7.00
4.10
4.00
4.72
2.74
6.54
1.63
0.45
5.58
5.77
3.79
2.30
-2.50
6.00
4.00
3.20
Sources: Morningstar, June 21, 2013 (http://financials.morningstar.com)
Value Line Investment Survey, June 21, 2013
Zacks, June 21, 2013 (www.zacks.com)
Yahoo!, June 21, 2013 (http://finance.yahoo.com/)
16
Growth
Estimate
(%)
2.74
5.30
4.00
7.00
5.21
4.83
4.85
4.85
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
2013 Common Equity Ratio (1)
Consolidated Edison
53.00%
Dominion Resources
41.50%
PPL Corporation
46.00%
Public Service Enterprise Group
56.00%
PEPCO Holdings, Inc.
50.00%
UIL Holdings
45.50%
Average
48.67%
Range of Reasonable Equity Ratios
41.50-56.00%
(1) Source: Value Line Investment Survey June 21, 2013
(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 March 31, 2013
1)
PPL Electric
Duquesne Light
Company
UGI Utilities
Inc.
West Penn
Power Co.
PECO Electric
Metropolitan Edison
Company
PA Electric
Company
PA Power
Company
Schedule E
Total Debt
49.38%
38.34%
45.95%
48.77%
43.13%
47.67%
55.33%
39.20%
Total Preferred & Preference Stock
0.00%
5.59%
0.00%
0.00%
1.60%
0.00%
0.00%
0.00%
Total Common Equity
50.62%
56.06%
54.05%
51.23%
55.27%
52.33%
44.67%
60.80%
Schedule F
Cost of Debt
5.39%
4.93%
2.73%
5.10%
4.91%
5.96%
5.69%
6.42%
Cost of Preferred Stock
0.00%
5.89%
0.00%
0.00%
4.38%
0.00%
0.00%
0.00%
1) Source: Company supplied quarterly earnings report, Schedules E & F
18
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)
June 21, 2013
Gas Distribution Company Barometer Group
Cost Rates
%
(1) Current DCF
8.50
(2) 52-Week Average DCF
8.42
(3) Overall DCF (1) + (2) / 2
8.46
(8) Market Indicated Common Equity Cost Rate Range
@ 1 standard deviation around the mean. 2
(5) CAPM Check of DCF Reasonableness
7.89-9.04
8.44
(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
10.10%
Attachment E
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.
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
6/20/2013
Do
Rate (D1)
($)
($)
($)
41.86
1.88
1.90
41.92
1.60
1.62
41.98
1.82
1.84
32.85
1.24
1.26
55.92
1.77
1.85
41.78
1.68
1.71
Current
Dividend
Yield(D1/Po)
(%)
4.54
3.87
4.39
3.83
3.30
4.08
Group Average D1 / Po
Group Average G
DCF
DCF
(%)
8.99
7.87
8.28
8.06
9.30
8.53
4.00
4.50
8.50
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
($)
44.85
47.60
50.80
35.53
61.78
46.22
Low
($)
36.90
38.51
41.01
28.51
45.81
35.96
Latest
Average
Indicated
Dividend
Average (Pa) Dividend (Do) Yield (Do/Pa)
($)
($)
(%)
40.88
1.88
4.60
43.06
1.60
3.72
45.91
1.82
3.96
32.02
1.24
3.87
53.80
1.77
3.29
41.09
1.68
4.09
Group Average Do / Pa
Group Average G
DCF
DCF
(%)
9.05
7.72
7.85
8.10
9.29
8.54
3.92
4.50
8.42
Average of Current and 52-Week
8.46
Multiple sources of the Barometer companies projected 5 year Earnings Per Share are used to calculate
the Group Average Dividend Growth Estimate.
20
Attachment E
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
2.00
3.00
2.50
3.00
8.50
3.00
9.00
2.00
5.00
3.00
8.00
3.50
3.50
4.00
3.80
4.30
6.00
5.30
4.00
3.75
5.00
6.00
5.25
5.40
2.60
3.00
4.60
6.00
2.80
5.97
3.15
3.89
4.23
6.50
4.21
4.45
4.00
3.89
4.23
6.00
4.45
Group Average
USE
3.67
5.08
4.48
4.80
4.07
4.66
4.50
4.50
Sources: Morningstar, June 21, 2013 (http://financials.morningstar.com)
Value Line Investment Survey, June 21, 2013
Zacks, June 21, 2013 (www.zacks.com)
Yahoo!, June 21, 2013 (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
June 21, 2013
Water Company Barometer Group
Cost Rates
%
(1) Current DCF
9.96
(2) 52-Week Average DCF
9.96
(3) Average DCF
9.96
(4) Market Indicated Common Equity Cost Rate Range
@ 1 standard deviation around the mean. 2
8.73-11.2
(5) CAPM Check of DCF Reasonableness
8.85
(6) Recent Commission Approved ROEs 3:
Aqua Pennsylvania, R-2011-2267958,
ROE for DSIC Purposes Only
10.20
(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
10.10%
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
6/20/2013
($)
53.05
28.25
19.28
19.27
25.32
30.18
39.57
Do
($)
1.62
0.97
0.75
0.64
0.73
0.76
1.12
Rate (D1)
($)
1.68
0.98
0.76
0.66
0.75
0.79
1.16
Yield(D1/Po)
(%)
3.18
3.48
3.92
3.42
2.95
2.62
2.94
Group Average D1/Po
Group Average G
DCF
Growth
(%)
8.00
5.95
4.00
6.69
7.50
6.48
8.67
3.21
6.75
9.96
DCF
(%)
11.18
9.43
7.92
10.11
10.45
9.10
11.60
9.97
52-week High-Low Dividend Yield Calculation
American States Water Company
Connecticut Water Service, Inc.
Middlesex Water Company
California Water Service Group
SJW Corporation
Aqua America , Inc.
American Water Works Co., Inc.
High
($)
57.80
32.31
20.06
21.22
28.11
33.28
43.09
Low
($)
37.46
27.46
17.48
16.84
22.56
24.05
32.75
Latest
Average
Indicated
Dividend
Average (Pa) Dividend (Do) Yield (Do/Pa)
($)
($)
(%)
47.63
1.62
3.40
29.89
0.97
3.25
18.77
0.75
4.00
19.03
0.64
3.36
25.34
0.73
2.88
28.67
0.76
2.65
37.92
1.12
2.95
Group Average Do / Pa
Group Average G
DCF
3.21
6.75
9.96
Average of Current and 52-Week
23
9.96
Growth
(%)
8.00
5.95
4.00
6.69
7.50
6.48
8.67
DCF
(%)
11.40
9.20
8.00
10.05
10.38
9.13
11.62
9.97
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
(%)
(%)
(%)
(%)
(%)
(%)
(%)
8.00
2.50
1.50
6.00
4.50
8.00
7.50
8.00
6.00
4.00
5.50
7.50
8.00
9.50
2.00
4.00
5.50
8.00
2.00
6.00
2.70
6.00
14.00
5.93
8.50
12.57
7.81
0.37
9.24
2.61
13.09
6.14
5.95
2.36
6.69
8.04
8.13
8.67
8.00
5.95
4.00
6.69
7.50
6.48
8.67
5.43
6.93
5.10
6.45
7.62
6.57
6.75
6.75
6.00
Sources: Reuters, June 21, 2013 (http://reuters.com)
Value Line Investment Survey, June 21, 2013
Zacks, June 21, 2013 (www.zacks.com)
Yahoo!, June 21, 2013 (http://finance.yahoo.com/)
24