SCHEDULES
Prepared by
KATHLEEN C. McSHANE
FOSTER ASSOCIATES, INC.
February 2010
Original : 2010-03-04
GI-4
Document 1.2
40 pages
Requête 3724-2010
Schedule 1
Page 1 of 2
TREND IN INTEREST RATES AND OUTSTANDING BOND YIELDS
(Percent Per Annum)
Government Securities
T-Bills
1/
U.S.
Canadian
Year
10 Year
Canadian
U.S.
Long-Term
2/
U.S.
Canadian
Canada Bonds
Over 10
3/
Years
Canadian
Inflation
Indexed Bonds
Canadian
A-Rated
4/
Utility Bonds
Canadian
A-Rated Spread
Over Long Canadas
Moody's U.S. Utility
Long-Term
A-Rated Bonds
Exchange Rates
(Canadian dollars
in U.S. funds)
1.44
1.28
1.33
1.22
1.12
9.86
9.36
8.64
7.59
8.30
0.86
0.84
0.82
0.77
0.73
Annual
1/
2/
3/
4/
1990
1991
1992
1993
1994
12.81
8.73
6.59
4.84
5.54
7.49
5.38
3.43
3.02
4.34
10.76
9.42
8.05
7.22
8.43
8.55
7.86
7.01
5.87
7.08
10.69
9.72
8.68
7.86
8.69
8.61
8.14
7.67
6.59
7.39
10.85
9.76
8.77
7.85
8.63
4.62
4.28
4.41
12.13
11.00
10.01
9.08
9.81
1995
1996
1997
1998
1999
6.89
4.21
3.26
4.73
4.69
5.44
5.04
5.11
4.79
4.71
8.08
7.20
6.11
5.30
5.55
6.58
6.44
6.32
5.26
5.68
8.41
7.75
6.66
5.59
5.72
6.85
6.73
6.58
5.54
5.91
8.28
7.50
6.42
5.47
5.69
4.68
4.61
4.14
4.02
4.07
9.29
8.38
7.19
6.38
6.92
0.88
0.63
0.53
0.79
1.20
7.89
7.75
7.60
7.04
7.62
0.73
0.73
0.72
0.68
0.67
2000
2001
2002
2003
2004
5.45
3.78
2.55
2.86
2.21
5.85
3.34
1.63
1.03
1.44
5.89
5.49
5.27
4.78
4.55
5.98
4.99
4.56
4.02
4.27
5.71
5.77
5.67
5.31
5.11
5.88
5.50
5.41
5.03
5.08
5.89
5.76
5.65
5.26
5.05
3.69
3.59
3.49
3.04
2.34
7.02
7.25
7.22
6.78
6.28
1.31
1.48
1.55
1.46
1.17
8.24
7.73
7.35
6.54
6.14
0.67
0.65
0.64
0.72
0.77
2005
2006
2007
2008
2009
2.73
4.05
4.13
2.26
0.31
3.29
4.86
4.42
1.28
0.15
4.04
4.21
4.25
3.56
3.27
4.27
4.79
4.58
3.61
3.29
4.38
4.26
4.30
4.04
3.85
4.52
4.87
4.80
4.22
4.10
4.36
4.28
4.31
4.03
3.85
1.81
1.67
1.95
1.90
1.86
5.53
5.47
5.61
6.41
6.24
1.16
1.21
1.31
2.37
2.39
5.62
6.06
6.06
6.54
5.99
0.83
0.89
0.94
0.94
0.88
Rates on new issues.
30-year maturities through January 2002. Theoretical 30-year yield, February 2002 to January 2006.
Terms to maturity of l0 years or more.
Series is comprised of the CBRS Utilities Index through 1995; CBRS 30-year Utilities Index from 1996- August 2000;
a series of liquid long-term utility bonds maintained by Foster Associates from September 2000 forward.
Source: www.bankofcanada.ca; Globe and Mail; www.federalreserve.gov
www.ustreas.gov
Schedule 1
Page 2 of 2
TREND IN INTEREST RATES AND OUTSTANDING BOND YIELDS
(Percent Per Annum)
Government Securities
T-BILLS
U.S. 1/
Canadian
Year
2004
10 Year
Canadian
U.S.
Long-Term
U.S. 2/
Canadian
Canada Bonds
Over 10
Years 3/
Canadian
Inflation
Indexed Bonds
Canadian
A-Rated
Utility Bonds 5/
Canadian
A-Rated Spread
Over Long Canadas
Moody's U.S. Utility
Long-Term
A-Rated Bonds
Exchange Rates
(Canadian dollars
in U.S. funds)
q1
q2
q3
q4
q1
q2
q3
q4
q1
q2
q3
q4
q1
q2
q3
q4
q1
q2
q3
q4
q1
q2
q3
q4
2.12
1.98
2.23
2.53
2.47
2.46
2.73
3.25
3.70
4.17
4.14
4.16
4.17
4.29
4.17
3.90
2.76
2.60
2.23
1.45
0.61
0.21
0.22
0.21
0.94
1.13
1.58
2.11
2.67
3.01
3.50
4.00
4.57
4.84
5.00
5.04
5.11
4.82
4.26
3.48
1.73
1.74
1.44
0.19
0.24
0.16
0.16
0.06
4.41
4.74
4.66
4.40
4.27
3.93
3.88
4.07
4.18
4.51
4.14
4.00
4.10
4.39
4.43
4.09
3.65
3.68
3.66
3.26
2.99
3.28
3.38
3.42
4.00
4.60
4.26
4.22
4.33
4.05
4.21
4.49
4.65
5.11
4.79
4.59
4.68
4.85
4.64
4.16
3.55
3.94
3.89
3.06
2.87
3.39
3.41
3.49
5.09
5.29
5.14
4.92
4.72
4.39
4.20
4.19
4.23
4.54
4.21
4.07
4.17
4.35
4.45
4.21
4.07
4.10
4.11
3.88
3.68
3.90
3.89
3.95
4.96
5.35
5.08
4.93
4.70
4.36
4.39
4.63
4.70
5.19
4.91
4.70
4.82
4.98
4.86
4.53
4.35
4.58
4.44
3.50
3.62
4.24
4.17
4.35
4.99
5.22
5.13
4.87
4.69
4.35
4.19
4.21
4.25
4.57
4.23
4.08
4.18
4.38
4.46
4.21
4.03
4.07
4.13
3.91
3.65
3.86
3.94
3.96
2.50
2.38
2.29
2.18
2.05
1.86
1.75
1.59
1.53
1.81
1.67
1.68
1.77
1.94
2.09
2.01
1.80
1.60
1.78
2.42
2.13
1.97
1.76
1.57
6.17
6.48
6.37
6.09
5.86
5.59
5.32
5.36
5.43
5.75
5.45
5.27
5.36
5.61
5.79
5.68
5.75
5.99
6.33
7.56
7.28
6.43
5.63
5.62
1.08
1.19
1.23
1.17
1.13
1.21
1.12
1.17
1.20
1.21
1.23
1.20
1.19
1.25
1.34
1.47
1.68
1.89
2.21
3.69
3.60
2.54
1.73
1.68
6.06
6.45
6.11
5.95
5.72
5.43
5.49
5.82
5.92
6.41
6.09
5.82
5.92
6.08
6.19
6.05
6.16
6.30
6.58
7.13
6.44
6.35
5.54
5.65
0.76
0.74
0.77
0.83
0.82
0.81
0.84
0.85
0.87
0.90
0.89
0.87
0.86
0.92
0.97
1.02
0.99
0.99
0.95
0.82
0.80
0.87
0.92
0.94
2007
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
4.17
4.19
4.16
4.16
4.29
4.43
4.56
3.99
3.96
3.96
3.91
3.82
5.12
5.16
5.04
4.91
4.73
4.82
4.96
4.01
3.82
3.94
3.15
3.36
4.17
4.03
4.11
4.14
4.49
4.55
4.52
4.42
4.34
4.31
3.98
3.99
4.83
4.56
4.65
4.63
4.90
5.03
4.78
4.54
4.59
4.48
3.97
4.04
4.22
4.09
4.20
4.19
4.38
4.49
4.45
4.46
4.44
4.38
4.16
4.10
4.93
4.68
4.84
4.81
5.01
5.12
4.92
4.83
4.83
4.74
4.40
4.45
4.23
4.10
4.21
4.20
4.42
4.51
4.48
4.47
4.44
4.39
4.15
4.10
1.79
1.75
1.77
1.76
1.99
2.08
2.07
2.14
2.07
2.05
2.07
1.91
5.41
5.28
5.39
5.45
5.62
5.75
5.78
5.76
5.83
5.73
5.69
5.62
1.19
1.19
1.19
1.26
1.24
1.26
1.33
1.30
1.39
1.35
1.53
1.52
6.01
5.78
5.97
5.90
6.10
6.24
6.18
6.17
6.22
6.07
6.00
6.07
0.85
0.85
0.87
0.90
0.93
0.94
0.94
0.95
1.01
1.06
1.00
1.01
2008
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
3.38
3.04
1.87
2.68
2.64
2.48
2.39
2.40
1.89
1.85
1.67
0.83
1.96
1.85
1.38
1.43
1.89
1.90
1.68
1.72
0.92
0.46
0.01
0.11
3.88
3.64
3.43
3.58
3.71
3.74
3.70
3.53
3.75
3.76
3.32
2.69
3.67
3.53
3.45
3.77
4.06
3.99
3.99
3.83
3.85
4.01
2.93
2.25
4.18
4.09
3.94
4.08
4.13
4.08
4.10
4.01
4.23
4.28
3.90
3.45
4.35
4.41
4.30
4.49
4.72
4.53
4.59
4.43
4.31
4.35
3.45
2.69
4.16
4.04
3.88
4.02
4.09
4.10
4.11
4.02
4.25
4.33
3.96
3.45
1.96
1.85
1.60
1.72
1.61
1.47
1.54
1.57
2.23
2.51
2.65
2.10
5.81
5.73
5.71
5.97
5.98
6.02
6.08
6.25
6.65
7.86
7.47
7.36
1.63
1.64
1.77
1.89
1.85
1.94
1.98
2.24
2.42
3.58
3.57
3.91
6.07
6.22
6.20
6.22
6.36
6.32
6.44
6.32
6.98
8.01
7.18
6.20
1.00
1.02
0.97
0.99
0.99
0.98
0.98
0.94
0.94
0.82
0.81
0.82
2009
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
0.86
0.59
0.39
0.20
0.20
0.24
0.24
0.20
0.22
0.22
0.21
0.19
0.24
0.26
0.21
0.14
0.14
0.19
0.18
0.15
0.14
0.05
0.06
0.06
3.06
3.12
2.79
3.09
3.39
3.36
3.46
3.37
3.31
3.42
3.22
3.61
2.87
3.02
2.71
3.16
3.47
3.53
3.52
3.40
3.31
3.41
3.21
3.85
3.77
3.70
3.57
3.84
3.99
3.86
3.95
3.89
3.84
3.92
3.84
4.08
3.58
3.71
3.56
4.05
4.34
4.32
4.31
4.18
4.03
4.23
4.20
4.63
3.80
3.70
3.46
3.74
3.93
3.91
4.01
3.94
3.87
3.95
3.83
4.09
2.27
2.32
1.81
2.05
2.00
1.86
1.73
1.81
1.74
1.60
1.58
1.53
7.57
7.26
7.01
6.84
6.48
5.98
5.76
5.57
5.55
5.59
5.52
5.76
3.80
3.56
3.44
3.00
2.49
2.12
1.81
1.68
1.71
1.67
1.68
1.68
6.52
6.38
6.41
6.55
6.53
5.96
5.68
5.54
5.41
5.55
5.54
5.86
0.81
0.79
0.79
0.84
0.91
0.86
0.93
0.91
0.93
0.93
0.95
0.96
2010
Jan
0.16
0.08
3.34
3.63
3.94
4.51
3.90
1.49
5.53
1.59
5.73
0.94
2005
2006
2007
2008
2009
1/
2/
3/
4/
5/
Rates on new issues.
20-year constant maturities for 1974-1978; 30-year maturities, 1978-January 2002. Theoretical 30-year yield, February 2002 to January 2006.
Terms to maturity of l0 years or more.
Series discontinued June 2007.
Series is comprised of the CBRS Utilities Index through 1995; CBRS 30-year Utilities Index from 1996- August 2000;
a series of liquid long-term utility bonds maintained by Foster Associates from September 2000 forward.
Note: Monthly data reflect rate in effect at end of month.
Source: www.bankofcanada.ca; Globe and Mail; www.federalreserve.gov
RBC Capital Markets, www.ustreas.gov
Schedule 2
Page 1 of 3
EQUITY RETURN AWARDS AND CAPITAL STRUCTURES ADOPTED BY
REGULATORY BOARDS FOR CANADIAN UTILITIES
(Percentages)
Common
Stock
Equity
(6)
Equity
Return
(7)
Forecast
30-Year
Bond Yield
(8)
D-99-09; D-2009-159
60.00
0.00
40.00
8.89
4.22
2009-216
2009-216
RP-2002-0158; EB-2006-0034; EB-2007-0615
D-2009-156
G-55-07; L-55-08
G-158-09
G-14-06; G-158-09
G-35-09; G-158-09
RP-2002-0158; EB-2006-0520; EB-2007-0606
57.00
54.10
61.33
54.00
56.20
60.00
60.00
60.00
60.60
0.00
6.90
2.67
7.50
3.80
0.00
0.00
0.00
3.40
43.00
39.00
36.00
38.50
40.00
40.00
40.00
40.00
36.00
9.00
9.00
8.39
9.20
9.12
9.50
10.00
10.00
8.54
n/a
n/a
4.23
4.30
4.35
n/a
n/a
n/a
4.23
EUB
2009-216
64.00
0.00
36.00
9.00
n/a
2009-216
2009-216
58.00
54.10
6.00
6.90
36.00
39.00
9.00
9.00
n/a
n/a
Regulator
(2)
2/99; 12/09
Régie
11/09
11/09
1/04; 7/07; 2/08
12/09
5/07; 11/08
12/09
12/09
12/09
1/04; 5/06; 1/08
EUB
EUB
OEB
Régie
BCUC
BCUC
BCUC
BCUC
OEB
11/09
Gazifère
Gas Distributors
AltaGas Utilities
ATCO Gas
Enbridge Gas Distribution Inc
Gaz Metropolitain
Pacific Northern Gas-West
Terasen Gas
Terasen Gas (Vancouver Island)
Terasen Gas(Whistler)
Union Gas
Debt
(4)
Preferred
Stock
(5)
Decision
Date
(1)
Order/
File
Number
(3)
Electric Utilities
AltaLink
ATCO Electric
Transmission
Distribution
EPCOR
Transmission
Distribution
FortisAlberta Inc.
FortisBC Inc.
Hydro One Transmission
Maritime Electric
Nova Scotia Power
Ontario Electricity Distributors
Ontario Power Generation
11/09
11/09
EUB
EUB
11/09
11/09
11/09
5/05; 12/09
8/07
2/09
3/06;11/08
12/09
11/08
EUB
EUB
EUB
BCUC
OEB
IRAC
NSUARB
OEB
OEB
2009-216
2009-216
2009-216
G-52-05; G-158-09
EB-2006-0501
UE-09-02
2006 NSUARB 23; 2008 NSUARB 140
EB-2009-0084
EB-2007-0905
63.00
59.00
59.00
60.00
60.00
59.50
53.30
60.00
53.00
0.00
0.00
0.00
0.00
0.00
0.00
9.20
0.00
0.00
37.00
41.00
41.00
40.00
40.00
40.50
37.50
40.00
47.00
9.00
9.00
9.00
9.90
8.35
9.75
9.35
9.75
8.65
n/a
n/a
n/a
n/a
4.16
na
na
4.25
4.75
Gas Pipelines
Foothills Pipe Lines (Yukon) Ltd.
TransCanada PipeLines
Trans Quebec & Maritimes Pipeline
Westcoast Energy
12/05; 12/09
5/07; 12/09
3/09
12/06; 11/08
NEB
NEB
NEB
NEB
RH-2-94;TG-08-2005; NEB Letter 12-09
RH-2-94;TG-06-2007; NEB Letter 12-09
RH-1-2008
RH-2-94; TG-05-2006
64.00
60.00
60.00
64.00
0.00
0.00
0.00
0.00
36.00
40.00
40.00
36.00
8.52
8.52
9.70
8.57
4.30
4.30
n/a
4.36
1/
ROE for first six months of 2009; PNG capital structure and ROE currently in proceeding before the BCUC.
2/
Capital structure and ROE not specified; ROE is the NEB's calculation at TQM's requested common equity ratio of 40%.
3/
Multi-pipeline ROE for 2009; 2010 ROE not yet determined.
Source: Regulatory Decisions.
1/
2/
3/
Schedule 2
Page 2 of 3
RATES OF RETURN ON COMMON EQUITY ADOPTED BY
REGULATORY BOARDS FOR CANADIAN UTILITIES
Gazifère
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
14.25
14.25
14.00
12.50
12.25
12.60
12.25
11.75
11.00
10.00
10.13
10.01
10.08
10.30
9.86
10.10
9.34
9.31
9.18
8.82
Gas Distributors
ATCO Gas
13.25
13.25
12.25
12.25
NA
NA
NA
10.50
9.38
NA
NA
9.75
9.75
9.50
9.50
9.50
8.93
8.51
8.75
9.00
Enbridge Gas Distribution
13.25
13.13
13.13
12.30
11.60
11.65
11.88
11.50
10.30
9.51
9.73
9.54
9.66
9.69
NA
9.57
8.74
8.39
8.39
8.39
Gaz Metro
14.25
14.25
14.00
12.50
12.00
12.00
12.00
11.50
10.75
9.64
9.72
9.60
9.67
9.89
9.45
9.69
8.95
8.73
9.05
8.76
Pacific Northern Gas 3/
15.00
14.00
13.25
NA
11.50
12.75
11.75
11.00
10.75
10.00
10.25
10.00
9.88
10.17
9.80
9.68
9.45
9.02
9.27
9.12
Terasen Gas 3/
NA
NA
12.25
NA
10.65
12.00
11.00
10.25
10.00
9.25
9.50
9.25
9.13
9.42
9.15
9.03
8.80
8.37
8.62
8.47
Union Gas
13.75
13.50
13.50
13.00
12.50
11.75
11.75
11.00
10.44
9.61
9.95
9.95
9.95
9.95
9.62
9.62
8.89
8.54
8.54
8.54
Mean of Gas Distributors
13.90
13.63
13.06
12.51
11.65
12.03
11.68
10.96
10.27
9.60
9.83
9.68
9.67
9.77
9.50
9.52
8.96
8.59
8.77
8.71
9.00
Electric Utilities
AltaLink
ATCO Electric
FortisAlberta Inc.
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
9.40
9.60
9.50
8.93
8.51
8.75
13.50
13.50
13.25
11.88
NA
NA
11.25
1/
1/
1/
1/
1/
1/
9.40
9.60
9.50
8.93
8.51
8.75
9.00
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
9.50
9.50
9.60
9.50
8.93
8.51
8.75
9.00
FortisBC Inc. 3/
13.50
NA
11.75
11.50
11.00
12.25
11.25
10.50
10.25
9.50
10.00
9.75
9.53
9.82
9.55
9.43
9.20
8.77
9.02
8.87
Newfoundland Power
13.95
13.25
NA
NA
NA
NA
11.00
NA
9.25
9.25
9.59
9.59
9.05
9.75
9.75
9.24
9.24
8.60
8.95
8.95
Nova Scotia Power
NA
NA
NA
11.75
NA
NA
10.75
NA
NA
NA
NA
NA
10.15
NA
NA
9.55
9.55
9.55
na
9.35
Ontario Electricity Distributors
NA
NA
NA
NA
NA
NA
NA
NA
NA
9.35
9.88
9.88
9.88
9.88
9.88
9.88
9.00
9.00
8.57
8.01
TransAlta Utilities
13.50
13.50
13.25
11.88
NA
12.25
11.25
1/
2/
9.25
9.25
NA
9.40
NA
NA
NA
NA
NA
na
na
Mean of Electric Utilities
13.61
13.42
12.75
11.75
11.00
12.25
11.10
10.50
9.75
9.34
9.68
9.74
9.59
9.63
9.66
9.51
9.11
8.78
8.80
8.88
TransCanada PipeLines
13.25
13.50
13.25
12.25
11.25
12.25
11.25
10.67
10.21
9.58
9.90
9.61
9.53
9.79
9.56
9.46
8.88
8.46
8.72
8.57
Westcoast Energy
13.25
13.75
12.50
12.25
11.50
12.25
11.25
10.67
10.21
9.58
9.90
9.61
9.53
9.79
9.56
9.46
8.88
8.46
8.72
8.57
Mean of Gas Pipelines
13.25
13.63
12.88
12.25
11.38
12.25
11.25
10.67
10.21
9.58
9.90
9.61
9.53
9.79
9.56
9.46
8.88
8.46
8.72
8.57
Mean of All Companies
13.68
13.56
12.94
12.16
11.50
12.13
11.36
10.84
10.15
9.50
9.79
9.68
9.62
9.71
9.59
9.51
9.02
8.66
8.78
8.77
Gas Pipelines (NEB)
1/
Negotiated settlement, details not available.
2/
Negotiated settlement, implicit ROE made public is 10.5%.
3/
Allowed ROEs for 2009 for first six months
Source: Regulatory Decisions
Schedule 2
Page 3 of 3
COMPARISON BETWEEN ALLOWED RETURNS
FOR CANADIAN AND U.S. UTILITIES
Canadian Utilities
U.S. Utilities
U.S. Gas Utilities
U.S. Electric Utilities
Year
Allowed
ROE
Average
Long Canada
Yield
Equity Risk
Premium
Allowed
ROE
Average
Long Treasury
Yield
Equity Risk
Premium
Allowed
ROE
Average
Long Treasury
Yield
Equity Risk
Premium
Allowed
ROE
Average
Long Treasury
Yield
Equity Risk
Premium
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
13.68
13.56
12.94
12.16
11.50
12.13
11.36
10.84
10.15
9.50
9.79
9.68
9.62
9.71
9.59
9.51
9.02
8.66
8.78
8.77
10.69
9.72
8.68
7.86
8.69
8.41
7.75
6.66
5.59
5.72
5.71
5.77
5.67
5.31
5.11
4.38
4.26
4.30
4.04
3.85
2.99
3.85
4.26
4.30
2.81
3.72
3.62
4.18
4.56
3.78
4.08
3.92
3.95
4.40
4.48
5.13
4.76
4.37
4.74
4.92
12.69
12.51
12.06
11.37
11.34
11.51
11.29
11.34
11.59
10.74
11.41
11.05
11.10
10.98
10.66
10.50
10.39
10.30
10.42
10.36
8.62
8.09
7.68
6.58
7.41
6.81
6.72
6.57
5.53
5.91
5.88
5.47
5.41
5.03
5.09
4.52
4.87
4.80
4.22
4.10
4.07
4.43
4.39
4.79
3.93
4.70
4.57
4.77
6.06
4.83
5.53
5.58
5.69
5.95
5.56
5.98
5.52
5.51
6.20
6.27
12.67
12.46
12.01
11.35
11.35
11.43
11.19
11.29
11.51
10.66
11.39
10.95
11.03
10.99
10.59
10.46
10.44
10.24
10.37
10.19
8.62
8.09
7.68
6.58
7.41
6.81
6.72
6.57
5.53
5.91
5.88
5.47
5.41
5.03
5.09
4.52
4.87
4.80
4.22
4.10
4.05
4.38
4.34
4.77
3.94
4.62
4.47
4.72
5.98
4.75
5.51
5.48
5.62
5.96
5.50
5.94
5.57
5.44
6.15
6.10
12.70
12.55
12.09
11.41
11.34
11.55
11.39
11.40
11.66
10.77
11.43
11.09
11.16
10.97
10.73
10.54
10.36
10.36
10.46
10.48
8.62
8.09
7.68
6.58
7.41
6.81
6.72
6.57
5.53
5.91
5.88
5.47
5.41
5.03
5.09
4.52
4.87
4.80
4.22
4.10
4.08
4.47
4.42
4.83
3.93
4.74
4.67
4.83
6.13
4.86
5.55
5.62
5.75
5.94
5.64
6.02
5.49
5.56
6.24
6.39
1990-1993
13.08
9.24
3.85
12.16
7.74
4.42
12.12
7.74
4.38
12.19
7.74
4.45
1994-1997
11.46
7.88
3.58
11.37
6.88
4.49
11.32
6.88
4.44
11.42
6.88
4.54
1998-2009
9.40
4.98
4.42
10.79
5.07
5.72
10.74
5.07
5.67
10.83
5.16
5.71
Means:
Note: For U.S. Treasury yields, 30-year maturities used through January 2002; theoretical 30-year yield from
February 2002 to January 2005; 30-year maturities February 2002 forward.
Sources: Regulatory Research Associates; www.snl.com; various Canadian regulatory decisions;
Bank of Canada; Federal Reserve; U.S. Treasury.
Schedule 3
DEBT AND COMMON STOCK QUALITY RATINGS
OF CANADIAN UTILITIES
Bond Rating
Company
Debt Rated
DBRS
Senior Unsecured
Senior Secured
Senior Secured
Senior Secured
Senior Unsecured
Senior Unsecured
A
A
BBB(low)
A
A
A
A
A(high)
A
A(low)
A(low)
A(low)
BBB(high)
Hamilton Utilities
Hydro One
Hydro Ottawa Holding Inc.
London Hydro
Maritime Electric
Newfoundland Power
Nova Scotia Power
Toronto Hydro
Veridian Corp.
Senior Secured
Senior Unsecured
Issuer
Unsecured Debentures
Senior Unsecured
Senior Unsecured
Secured Debentures (DBRS)
Senior Unsecured (Moody's)
Senior Unsecured
Senior Unsecured
Senior Unsecured
Issuer
Senior Secured
Senior Secured
Senior Unsecured
Senior Unsecured
Issuer
Pipelines
Enbridge Pipelines
NOVA Gas Transmission
Trans Quebec & Maritimes
TransCanada PipeLines
Westcoast Energy
Senior Unsecured
Senior Unsecured
Senior Unsecured
Senior Unsecured
Senior Unsecured
A(high)
A
A(low)
A
A(low)
Gas Distributors
Enbridge Gas Distribution
Gaz Metropolitain
Pacific Northern Gas
Terasen Gas
Union Gas Limited
Electric Utilities
AltaLink L.P.
CU Inc.
Enersource
ENMAX
EPCOR Utilities Inc
FortisAlberta Inc.
FortisBC Inc
Medians
Gas Distributors
All Companies
1/
Moody's
AANR 1/
A1
A3
Baa1
Baa2
A(high)
A
Aa3
A
A(low)
A(high)
A
A2
Baa1
A
A
S&P
A3
A3
A3
A3
Withdrawn by company; BBB- prior to withdrawal.
Note: Debt ratings are for utility; Stock rankings are for parent.
Source: DBRS Bond Ratings, Moodys.com, Standard & Poor's, The Blue Book of CBS Stock Reports.
CBS
Stock Ranking
Very conservative
Average
Very conservative
AAA
BBB+
Very conservative
AA
Very conservative
BBB+
BBB+
A-
A+
A+
A
A
BBB+
NR 1/
BBB+
A
Very conservative
Very conservative
Very conservative
Very conservative
Very conservative
AABBB+
ABBB+
Very conservative
Very conservative
AA-
Very conservative
Very conservative
Very conservative
Very conservative
Schedule 4
CAPITAL STRUCTURE RATIOS
OF CANADIAN UTILITIES
(2008)
Long-term
Debt 1/
Short-Term
Debt
Preferred
Stock 2/
Common
Stock
Equity 3/
Gas Distributors 4/
Enbridge Gas Distribution
Gaz Metropolitain
Pacific Northern Gas
Terasen Gas
Union Gas
48.7%
62.3%
46.1%
59.0%
58.6%
8.1%
1.2%
0.4%
5.2%
2.0%
2.2%
0.0%
3.0%
0.0%
0.0%
41.1%
36.5%
50.4%
35.8%
39.4%
Electric Utilities
AltaLink L.P.
CU Inc.
Enersource
ENMAX Corp.
EPCOR Utilities Inc.
FortisAlberta Inc.
FortisBC Inc.
Hamilton Utilities
Hydro One Inc.
Hydro Ottawa Holding Inc.
London Hydro
Maritime Electric
Newfoundland Power
Nova Scotia Power
Toronto Hydro
Veridian
61.7%
56.6%
56.2%
37.3%
50.3%
60.0%
59.1%
36.3%
54.5%
44.1%
36.1%
53.6%
53.4%
54.3%
55.2%
39.2%
0.0%
0.0%
0.0%
4.6%
2.6%
0.5%
0.0%
0.0%
0.0%
0.0%
0.0%
6.2%
0.0%
0.8%
0.0%
0.0%
0.0%
5.2%
0.0%
0.0%
2.3%
0.0%
0.0%
0.0%
2.9%
0.0%
0.0%
0.0%
1.1%
4.7%
0.0%
0.0%
38.3%
38.3%
43.8%
58.1%
44.8%
39.4%
40.9%
63.7%
42.6%
55.9%
63.9%
40.2%
45.5%
40.1%
44.8%
60.8%
Pipelines
Enbridge Pipelines Inc.
Nova Gas Transmission Ltd.
Trans Quebec & Maritimes
TransCanada PipeLines Ltd.
Westcoast Energy Inc.
52.7%
61.4%
69.9%
54.1%
52.6%
7.0%
0.6%
0.0%
5.0%
1.2%
0.0%
0.0%
0.0%
1.2%
4.9%
40.4%
38.0%
30.1%
39.7%
41.3%
Medians
Gas Distributors
All Companies
58.6%
54.2%
2.0%
0.5%
0.0%
0.0%
39.4%
41.0%
Company
1/ Includes current portion of long-term debt and preferred securities classified as debt.
2/ Includes minority interest in preferred shares of subsidiary companies and preferred securities.
3/ Includes minority interest in common shares of subsidiary companies.
4/ The average of the four quarters ending September 2009 was used to better measure the actual sources of funds over the year due to the seasonal pattern of use of short-term
debt.
Source: Reports to Shareholders
Schedule 5
TRAILING FOUR QUARTERS CAPITAL STRUCTURE BASED ON TOTAL CAPITAL FOR BENCHMARK
SAMPLE OF U.S. DISTRIBUTION UTILITIES
Long Term
Debt %
Short Term
Debt %
Preferred %
Common
Equity %
AGL RESOURCES INC
CONSOLIDATED EDISON
NEW JERSEY RESOURCES
NICOR INC
NORTHWEST NATURAL GAS CO
NSTAR
PIEDMONT NATURAL GAS CO
SOUTH JERSEY INDUSTRIES INC
WGL HOLDINGS INC
44.3
49.7
36.0
25.3
43.0
49.0
38.9
41.1
34.8
12.5
1.5
8.4
22.8
9.1
12.2
16.8
13.9
7.6
0.0
1.0
0.0
0.0
0.0
0.9
0.0
0.0
1.4
43.2
47.8
55.6
51.9
47.9
37.9
44.3
45.0
56.2
Mean
Median
40.2
41.1
11.6
12.2
0.4
0.0
47.8
47.8
Company
Trailing four quarters ending calendar year 3rd quarter 2009.
Source: Company Annual Reports to Shareholders and 10-Ks.
Schedule 6
Page 1 of 2
HISTORIC EQUITY MARKET RISK PREMIUMS
(ARITHMETIC AVERAGES)
Canada
(1947-2009)
Stock Return
Bond Total Return
Risk Premium
12.0
6.8
5.2
Stock Return
Bond Income Return
Risk Premium
12.0
7.1
4.9
United States
(1947-2009)
Stock Return
Bond Total Return
Risk Premium
12.4
6.1
6.3
Stock Return
Bond Income Return
Risk Premium
12.4
6.0
6.4
Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation: 2009 Yearbook;
Ibbotson Associates, Canadian Risk Premia Over Time Report 2008; Canadian Institute of Actuaries,
Report on Canadian Economic Statistics 1924-2006; www.standardandpoors.com, TSX Review
www.federalreserve.gov, www.bankofcanada.gov
Schedule 6
Page 2 of 2
HISTORIC EQUITY MARKET RISK PREMIUMS
(Arithmetic Averages)
(1924-2009)
Stock Return
Bond Total Return
Risk Premium
11.6
6.4
5.2
Stock Return
Bond Income Return
Risk Premium
11.6
6.3
5.3
(1926-2009)
Stock Return
Bond Total Return
Risk Premium
11.8
5.7
6.1
Stock Return
Bond Income Return
Risk Premium
11.8
5.2
6.6
Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation: 2009 Yearbook;
Ibbotson Associates, Canadian Risk Premia Over Time Report 2008; Canadian Institute of Actuaries,
Report on Canadian Economic Statistics 1924-2006; www.standardandpoors.com, TSX Review
www.federalreserve.gov
Schedule 7
Page 1 of 2
10-YEAR ROLLING AVERAGE CANADIAN MARKET RETURNS
Canadian Stock
Returns
Canadian Bond
Total Returns
Canadian Risk
Premium Bond
Total Returns
Canadian Bond
Income Returns
Canadian Risk
Premium Bond
Income Returns
1947-1956
18.94%
1.40%
17.53%
3.21%
15.72%
1948-1957
16.84%
1.68%
15.17%
3.37%
13.47%
1949-1958
18.76%
1.35%
17.41%
3.50%
15.26%
1950-1959
16.95%
0.42%
16.54%
3.72%
13.23%
1951-1960
12.29%
1.14%
11.15%
3.96%
8.32%
1952-1961
13.16%
2.43%
10.73%
4.15%
9.01%
1953-1962
12.49%
2.54%
9.96%
4.31%
8.18%
1954-1963
13.84%
2.60%
11.24%
4.46%
9.38%
1955-1964
12.48%
2.30%
10.18%
4.67%
7.81%
1956-1965
10.36%
2.43%
7.94%
4.88%
5.48%
1957-1966
8.33%
2.94%
5.39%
5.10%
3.24%
1958-1967
12.20%
2.14%
10.07%
5.29%
6.91%
1959-1968
11.32%
2.62%
8.70%
5.57%
5.76%
1960-1969
10.78%
2.87%
7.92%
5.83%
4.95%
1961-1970
10.25%
4.35%
5.89%
6.12%
4.13%
1962-1971
7.77%
4.53%
3.24%
6.32%
1.45%
1963-1972
11.22%
4.34%
6.88%
6.55%
4.67%
1964-1973
9.69%
4.08%
5.60%
6.81%
2.88%
1965-1974
4.55%
3.22%
1.33%
7.20%
-2.65%
1966-1975
5.73%
3.40%
2.33%
7.61%
-1.88%
1967-1976
7.54%
5.15%
2.39%
7.99%
-0.45%
1968-1977
6.80%
5.97%
0.84%
8.28%
-1.48%
1969-1978
7.53%
6.18%
1.35%
8.55%
-1.03%
1970-1979
12.09%
6.11%
5.97%
8.84%
3.25%
1971-1980
15.46%
4.12%
11.33%
9.34%
6.12%
1972-1981
13.63%
2.67%
10.97%
10.26%
3.37%
1973-1982
11.45%
6.85%
4.59%
11.03%
0.42%
1974-1983
14.97%
7.64%
7.33%
11.49%
3.48%
1975-1984
17.32%
9.32%
8.00%
11.92%
5.40%
1976-1985
17.98%
11.56%
6.42%
12.14%
5.84%
1977-1986
17.77%
11.42%
6.36%
12.18%
5.60%
1978-1987
17.29%
10.86%
6.43%
12.31%
4.98%
1979-1988
15.43%
11.78%
3.65%
12.41%
3.01%
1980-1989
13.09%
13.67%
-0.58%
12.38%
0.71%
1981-1990
8.59%
13.80%
-5.20%
12.20%
-3.61%
1982-1991
10.82%
16.54%
-5.72%
11.59%
-0.77%
1983-1992
10.12%
13.55%
-3.43%
10.98%
-0.85%
1984-1993
9.83%
14.88%
-5.05%
10.55%
-0.72%
1985-1994
10.05%
12.33%
-2.27%
10.09%
-0.04%
1986-1995
9.00%
12.43%
-3.43%
9.79%
-0.79%
1987-1996
10.94%
12.10%
-1.17%
9.57%
1.36%
1988-1997
11.85%
13.80%
-1.96%
9.19%
2.65%
1989-1998
10.58%
14.17%
-3.59%
8.68%
1.90%
1990-1999
11.61%
11.83%
-0.21%
8.23%
3.38%
1991-2000
13.83%
12.86%
0.98%
7.69%
6.14%
1992-2001
11.38%
10.81%
0.57%
7.27%
4.11%
1993-2002
10.28%
10.51%
-0.23%
6.93%
3.34%
1994-2003
9.69%
9.03%
0.67%
6.65%
3.04%
1995-2004
11.16%
10.92%
0.24%
6.26%
4.90%
1996-2005
12.12%
9.79%
2.32%
5.86%
6.25%
1997-2006
11.01%
8.69%
2.32%
5.50%
5.51%
1998-2007
10.47%
7.27%
3.20%
5.24%
5.23%
1999-2008
7.33%
7.22%
0.12%
5.09%
2.24%
2000-2009
7.67%
7.51%
0.16%
4.85%
2.81%
Source: Canadian Institute of Actuaries, Report on Canadian Economic Statistics 1924-2006;
Ibbotson Associates, Canadian Risk Premia Over Time Report 2008;
TSX Review
Schedule 7
Page 2 of 2
10-YEAR ROLLING AVERAGE U.S. MARKET RETURNS
1947-1956
1948-1957
1949-1958
1950-1959
1951-1960
1952-1961
1953-1962
1954-1963
1955-1964
1956-1965
1957-1966
1958-1967
1959-1968
1960-1969
1961-1970
1962-1971
1963-1972
1964-1973
1965-1974
1966-1975
1967-1976
1968-1977
1969-1978
1970-1979
1971-1980
1972-1981
1973-1982
1974-1983
1975-1984
1976-1985
1977-1986
1978-1987
1979-1988
1980-1989
1981-1990
1982-1991
1983-1992
1984-1993
1985-1994
1986-1995
1987-1996
1988-1997
1989-1998
1990-1999
1991-2000
1992-2001
1993-2002
1994-2003
1995-2004
1996-2005
1997-2006
1998-2007
1999-2008
2000-2009
US Stock Returns
19.38%
17.74%
21.52%
20.84%
17.71%
18.00%
15.29%
17.67%
14.06%
12.15%
10.48%
13.96%
10.73%
8.68%
9.04%
7.78%
10.55%
6.80%
2.51%
4.98%
8.37%
5.26%
4.81%
7.50%
10.34%
8.42%
8.67%
12.38%
15.66%
15.15%
14.61%
15.86%
16.88%
18.19%
14.63%
18.17%
16.80%
15.55%
15.05%
15.58%
16.04%
18.85%
20.03%
18.98%
18.39%
14.15%
11.17%
13.04%
14.00%
10.74%
10.02%
7.23%
0.67%
0.91%
US Bond Total
Returns
0.85%
1.86%
0.91%
0.04%
1.41%
1.90%
2.47%
2.23%
1.86%
2.06%
2.98%
1.32%
1.90%
1.62%
1.45%
2.68%
2.56%
2.33%
2.41%
3.26%
4.57%
5.42%
5.33%
5.71%
4.11%
2.97%
6.44%
6.61%
7.73%
9.90%
10.68%
10.48%
11.56%
13.50%
14.51%
16.25%
13.02%
14.78%
12.46%
12.53%
9.98%
11.84%
12.18%
9.47%
11.00%
9.44%
10.42%
8.74%
10.37%
7.98%
8.19%
7.60%
8.88%
7.51%
US Risk Premium
Bond Total Returns
18.54%
15.88%
20.62%
20.80%
16.31%
16.10%
12.82%
15.44%
12.20%
10.09%
7.50%
12.64%
8.83%
7.06%
7.58%
5.10%
7.99%
4.48%
0.10%
1.72%
3.80%
-0.16%
-0.52%
1.79%
6.24%
5.45%
2.23%
5.77%
7.93%
5.25%
3.93%
5.38%
5.32%
4.69%
0.12%
1.92%
3.78%
0.76%
2.59%
3.05%
6.06%
7.01%
7.85%
9.51%
7.39%
4.71%
0.75%
4.30%
3.63%
2.76%
1.82%
-0.37%
-8.21%
-6.60%
Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation: 2009 Yearbook,
www.federalreserve.gov, www.standardandpoors.com
US Bond Income
Returns
2.53%
2.66%
2.75%
2.93%
3.14%
3.28%
3.42%
3.52%
3.66%
3.80%
3.95%
4.07%
4.29%
4.49%
4.73%
4.98%
5.17%
5.43%
5.74%
6.12%
6.46%
6.72%
6.96%
7.25%
7.57%
8.10%
8.86%
9.25%
9.69%
10.02%
10.13%
10.21%
10.31%
10.31%
10.13%
9.80%
9.17%
8.85%
8.34%
7.97%
7.69%
7.56%
7.25%
6.93%
6.76%
6.49%
6.32%
6.08%
5.93%
5.64%
5.49%
5.31%
5.17%
5.02%
US Risk Premium
Bond Income
Returns
16.85%
15.07%
18.77%
17.91%
14.58%
14.72%
11.87%
14.15%
10.40%
8.34%
6.53%
9.89%
6.44%
4.20%
4.30%
2.80%
5.38%
1.37%
-3.23%
-1.14%
1.91%
-1.46%
-2.15%
0.25%
2.77%
0.33%
-0.19%
3.14%
5.96%
5.13%
4.49%
5.65%
6.57%
7.88%
4.50%
8.38%
7.63%
6.70%
6.71%
7.61%
8.35%
11.29%
12.78%
12.06%
11.63%
7.66%
4.85%
6.96%
8.07%
5.11%
4.53%
1.92%
-4.50%
-4.11%
Schedule 8
FIVE-YEAR STANDARD DEVIATIONS OF MARKET RETURNS FOR 10 SECTOR INDICES OF S&P/TSX COMPOSITE
Five Year Periods Ending:
S&P / TSX Composite
1997
(%)
3.57
1998
(%)
4.68
1999
(%)
4.84
2000
(%)
5.40
2001
(%)
5.87
2002
(%)
5.83
2003
(%)
4.97
2004
(%)
4.59
2005
(%)
4.04
2006
(%)
3.24
2007
(%)
2.86
2008
(%)
4.35
2009
(%)
4.88
Average
(%)
4.55
10 Sector Indices
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
3.69
3.57
5.60
4.27
6.62
4.13
7.99
5.87
3.66
3.12
4.36
4.01
6.16
5.89
7.73
4.93
9.17
6.98
5.82
3.80
4.62
3.70
7.31
5.92
8.19
4.69
10.35
7.22
7.37
4.00
4.99
4.04
7.97
6.22
9.38
5.12
12.27
7.29
7.87
4.80
5.38
4.17
8.30
6.17
9.00
6.50
15.16
7.40
8.46
5.06
5.73
4.76
8.10
6.06
9.39
7.18
17.12
7.25
8.71
4.88
5.35
4.45
6.98
4.58
8.93
6.92
16.64
5.89
7.54
4.49
5.00
4.37
5.72
4.23
8.68
6.87
17.09
5.65
5.74
4.09
4.35
4.05
5.56
3.77
6.98
6.48
15.81
5.67
4.97
3.36
3.69
3.88
5.46
3.36
6.57
5.16
13.36
5.88
4.64
3.13
3.08
2.97
5.40
2.97
5.45
4.08
10.20
5.59
4.18
3.49
3.84
3.24
7.04
3.99
4.92
4.87
11.82
7.96
5.08
4.04
4.07
3.36
7.37
5.38
5.38
5.48
11.68
8.48
5.07
4.32
4.47
3.89
6.69
4.83
7.48
5.57
12.98
6.70
6.09
4.05
Mean
Median
4.85
4.20
5.89
5.85
6.34
6.57
7.00
6.76
7.56
6.95
7.92
7.21
7.18
6.41
6.75
5.68
6.10
5.27
5.51
4.90
4.74
4.13
5.68
4.90
6.06
5.38
6.27
5.71
0.61
0.72
0.55
0.64
0.57
0.64
0.74
0.85
0.71
0.82
0.71
0.80
0.65
0.71
Ratios of Standard Deviations
S&P/TSX Utilities Index as a Percent of:
10 Sector Indices (Mean)
0.64
10 Sector Indices (Median)
0.74
Source: TSX Review
0.65
0.65
0.63
0.61
0.69
0.71
0.67
0.73
0.62
0.68
0.63
0.70
Schedule 9
5-YEAR PRICE BETAS FOR S&P/TSX SECTOR INDICES
Consumer
Discretionary
Consumer
Staples
Energy
Financials
Health Care
Industrials
Information
Technology
Materials
Telecommunication
Services
Utilities
1997
0.82
0.62
0.97
0.94
0.60
0.97
1.57
1.32
0.64
0.53
1998
0.80
0.60
0.85
1.12
1.01
0.93
1.41
1.12
0.92
0.55
1999
0.73
0.44
0.90
1.00
1.00
0.78
1.55
1.04
1.11
0.30
2000
0.69
0.23
0.66
0.78
1.09
0.72
1.78
0.74
0.92
0.14
2001
0.68
0.10
0.49
0.66
0.98
0.82
2.13
0.60
0.94
-0.03
2002
0.73
0.08
0.43
0.66
0.99
0.86
2.28
0.57
0.93
-0.06
2003
0.74
-0.08
0.26
0.38
0.85
0.91
2.74
0.43
0.83
-0.25
2004
0.80
-0.07
0.17
0.39
0.82
1.05
2.87
0.41
0.58
-0.13
2005
0.83
0.07
0.48
0.56
0.72
1.13
2.68
0.77
0.74
0.00
2006
0.86
0.37
1.03
0.68
0.85
1.06
2.07
1.32
0.52
0.25
2007
0.73
0.54
1.44
0.51
0.54
0.96
1.12
1.45
0.62
0.46
2008
0.59
0.32
1.43
0.61
0.48
0.81
1.43
1.30
0.55
0.49
2009
0.56
0.28
1.35
0.80
0.41
0.83
1.22
1.24
0.47
0.41
Source: TSX Review
Schedule 10
Page 1 of 2
TSE 300 SUB-INDEX COMPOUND RETURNS AND BETAS
Metals/Minerals
Gold/Precious Metals
Oil and Gas
Paper/Forest Products
Consumer Products
Industrial Products
1/
Real Estate
Transportation/Environmental
Pipelines
Utilities
Communications/Media
Merchandising
Finance
Conglomerates
56-03
56-97
0.08
0.10
0.10
0.07
0.11
0.07
0.05
0.10
0.12
0.11
0.13
0.10
0.12
0.11
0.08
0.10
0.08
0.07
0.12
0.10
0.05
0.11
0.12
0.11
0.15
0.11
0.13
0.11
Intercept
Adjusted R Square
Beta
1/
Data only available starting July 1961
Source: TSX Review
Compound Returns
64-73
74-83
0.07
0.16
0.15
0.05
0.10
0.08
0.01
0.13
0.05
0.03
0.19
0.11
0.12
0.13
0.11
0.16
0.12
0.12
0.14
0.11
0.17
0.18
0.14
0.18
0.15
0.12
0.12
0.15
Betas
84-93
94-03
56-03
56-97
64-73
74-83
84-93
94-03
0.07
0.11
0.05
0.10
0.11
0.06
-0.02
0.03
0.14
0.11
0.13
0.09
0.12
0.09
0.07
-0.03
0.15
0.03
0.10
0.01
0.01
0.09
0.13
0.16
0.07
0.07
0.18
0.14
1.15
0.85
1.06
1.02
0.83
1.17
1.00
0.94
0.68
0.54
0.77
0.78
0.83
0.94
1.23
0.96
1.20
1.07
0.86
1.02
1.18
1.04
0.85
0.48
0.77
0.86
0.85
1.03
1.14
0.36
1.25
1.15
0.84
1.11
1.21
0.94
0.80
0.50
0.96
0.93
0.95
1.26
1.22
1.31
1.40
1.00
0.90
0.87
1.28
1.08
0.92
0.47
0.69
0.84
0.71
0.97
1.37
1.24
0.98
1.27
0.89
1.08
1.06
1.22
0.76
0.40
0.95
0.83
0.93
1.20
0.87
0.64
0.52
0.85
0.73
1.69
0.46
0.62
0.02
0.79
0.80
0.46
0.77
0.68
0.18
47%
-0.088
0.18
44%
-0.082
0.12
1%
-0.020
0.15
1%
-0.008
0.14
11%
-0.056
0.12
9%
-0.053
Schedule 10
Page 2 of 2
S&P/TSX COMPOSITE SECTOR COMPOUND RETURNS AND BETAS
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
Compound Returns 1/
88-09
88-97
00-09
0.062
0.114
0.111
0.132
0.029
0.059
0.065
0.069
0.121
0.102
Intercept
Adjusted R Square
Beta
1/
Data only available starting December 1987
Source: TSX Review
0.102
0.127
0.084
0.183
0.155
0.083
0.218
0.034
0.154
0.115
0.018
0.094
0.176
0.121
-0.088
0.054
-0.157
0.120
0.024
0.143
88-09
Betas
88-97
00-09
0.738
0.341
0.793
0.802
0.758
0.941
1.706
0.971
0.691
0.288
0.904
0.727
0.765
1.039
0.807
1.131
1.213
1.257
0.578
0.624
0.672
0.121
0.789
0.597
0.616
0.930
2.015
0.856
0.515
0.149
0.11
15%
-0.034
0.14
1%
-0.017
0.14
40%
-0.126
Schedule 11
BETAS FOR REGULATED CANADIAN UTILITIES
"Raw" Monthly Price Betas
Five Year Period Ending:
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010 3/
Canadian Utilities
Emera
Enbridge
Fortis
PNG
Terasen Inc 1/
TransCanada Pipelines
0.46
na
0.35
0.35
0.51
0.40
0.40
0.54
na
0.53
0.44
0.56
0.53
0.57
0.48
na
0.46
0.51
0.42
0.59
0.56
0.55
0.52
0.44
0.37
0.30
0.53
0.52
0.63
0.40
0.43
0.30
0.39
0.46
0.36
0.62
0.55
0.48
0.49
0.55
0.48
0.55
0.54
0.41
0.26
0.33
0.47
0.36
0.21
0.38
0.27
0.07
0.23
0.44
0.25
0.15
0.27
0.20
-0.10
0.14
0.42
0.18
-0.08
0.19
0.15
-0.18
0.13
0.44
0.12
-0.09
0.05
-0.05
-0.37
-0.06
0.37
0.02
-0.38
0.03
0.01
-0.32
0.01
0.49
-0.02
-0.16
0.20
0.07
-0.19
0.21
0.54
0.06
-0.15
0.32
0.12
0.22
0.48
0.54
na
0.34
0.58
0.24
0.54
0.65
0.35
na
0.52
0.19
0.17
0.30
0.21
0.26
na
0.38
0.06
0.16
0.30
0.20
0.44
na
0.39
0.38
0.39
0.51
0.48
0.24
na
0.44
Mean
Median
0.41
0.40
0.53
0.54
0.50
0.50
0.46
0.52
0.42
0.40
0.53
0.55
0.37
0.36
0.26
0.25
0.14
0.18
0.11
0.13
-0.06
-0.05
0.01
0.01
0.11
0.07
0.34
0.33
0.48
0.53
0.25
0.24
0.26
0.25
0.41
0.42
TSE Gas/Electric Index
S&P/TSX Utilities
0.42
0.55
0.48
0.63
0.52
0.67
0.52
0.65
0.46
0.53
0.55
0.55
0.38
0.30
0.21
0.14
0.17
-0.03
0.14
-0.06
NA
-0.25
NA
-0.13
NA
0.00
NA
0.25
NA
0.46
NA
0.49
NA
0.41
NA
0.56
2002
2003
2004
2005
2006
2007
2008
2009
2010 3/
COMPANY
1993
1994
1995
1996
1997
1998
Adjusted Betas 2/
Five Year Period Ending:
1999
2000
2001
Canadian Utilities
Emera
Enbridge
Fortis
PNG
Terasen Inc
TransCanada Pipelines
0.64
NA
0.56
0.57
0.67
0.60
0.60
0.69
NA
0.69
0.62
0.71
0.69
0.71
0.65
NA
0.64
0.67
0.61
0.72
0.71
0.70
0.68
0.62
0.58
0.53
0.69
0.68
0.75
0.60
0.62
0.53
0.59
0.64
0.57
0.75
0.70
0.65
0.66
0.70
0.65
0.70
0.69
0.60
0.50
0.55
0.65
0.57
0.47
0.58
0.51
0.38
0.48
0.63
0.50
0.43
0.51
0.46
0.26
0.42
0.61
0.45
0.28
0.46
0.43
0.21
0.41
0.63
0.41
0.27
0.37
0.29
0.08
0.29
0.58
0.35
0.08
0.35
0.33
0.12
0.34
0.66
0.32
0.22
0.47
0.38
0.21
0.47
0.69
0.37
0.23
0.54
0.41
0.48
0.65
0.69
na
0.56
0.72
0.49
0.69
0.77
0.56
na
0.68
0.45
0.44
0.53
0.47
0.50
na
0.58
0.37
0.44
0.53
0.46
0.62
na
0.59
0.59
0.59
0.67
0.65
0.49
na
0.63
Mean
Median
0.61
0.60
0.68
0.69
0.67
0.66
0.64
0.68
0.61
0.60
0.69
0.70
0.58
0.57
0.50
0.50
0.43
0.45
0.40
0.41
0.29
0.29
0.33
0.33
0.40
0.38
0.56
0.55
0.65
0.68
0.50
0.49
0.50
0.50
0.60
0.61
TSE Gas/Electric Index
S&P/TSX Utilities
0.61
0.70
0.65
0.76
0.68
0.78
0.68
0.77
0.64
0.69
0.70
0.70
0.59
0.53
0.47
0.42
0.44
0.31
0.42
0.29
NA
0.16
NA
0.24
NA
0.33
NA
0.50
NA
0.64
NA
0.66
NA
0.60
NA
0.71
COMPANY
1/
Due to its purchase by Kinder Morgan, Terasen betas are calculated through November 2005.
Adjusted beta = "raw" beta * 67% + market beta of 1.0 * 33%.
3/
Three-year beta based on weekly data calculated through January 2010
2/
Source: Standard and Poor's Research Insight and TSX Review.
Schedule 12
Page 1 of 3
DCF-BASED EQUITY RISK PREMIUM STUDY FOR
BENCHMARK U.S. DISTRIBUTION UTILITIES
(Annual Averages of Monthly Data)
1995
Expected
Dividend
Yield 1/
I/B/E/S EPS
Growth
Forecast
DCF Cost
6.3
4.2
10.6
6.8
Long Treasury
Yield
Risk Premium
3.7
Moody's
Spread
1.1
1996
6.0
4.2
10.2
6.7
3.4
1.0
1997
5.5
4.4
10.0
6.6
3.4
1.0
1998
4.8
4.8
9.5
5.5
4.0
1.5
1999
5.1
4.8
9.9
5.9
4.0
1.7
2000
5.5
5.1
10.6
5.9
4.7
2.4
2001
5.1
5.6
10.7
5.5
5.2
2.3
2002
5.0
5.5
10.4
5.4
5.0
1.9
2003
4.9
4.9
9.8
5.0
4.8
1.5
2004
4.5
4.3
8.7
5.1
3.6
1.0
2005
4.1
4.4
8.4
4.5
3.9
1.1
2006
4.1
4.6
8.7
4.9
3.8
1.2
2007
3.9
4.8
8.7
4.8
3.9
1.3
2008
4.3
5.1
9.5
4.2
5.2
2.3
2009
4.8
5.4
10.1
4.1
6.1
1.9
9.2
4.5
4.7
1.6
Means for Long Treasury Yields:
Under 5.0
4.4
4.8
5.0-5.99
4.9
5.0
9.9
5.5
4.4
1.7
6.0-6.99
5.7
4.4
10.2
6.5
3.7
1.3
7.0 and above
6.4
4.3
10.6
7.3
3.3
0.9
1995 - 2009
4.9
4.8
9.7
5.4
4.3
1.5
1999 - 2009
4.6
4.9
9.6
5.0
4.6
1.7
Means:
1/
Dividend Yield is adjusted for I/B/E/S/ growth
Source: Standard & Poor's Research Insight, I/B/E/S and www.federalreserve.gov
Schedule 12
Page 2 of 3
DCF-BASED EQUITY RISK PREMIUM STUDY FOR
BENCHMARK U.S. DISTRIBUTION UTILITIES
Regression Analysis Results 1995-2009
Equation 1:
Equity Risk Premium = 7.30 - 0.55 (30-Year Treasury Yield)
t-statistics:
Long-term Bond Yield = -9.62
R2 = 34%
Equity Risk Premium at Long-Term Bond
Yield of 4.70%
= 4.7%
ROE at Long-Term Bond Yield of 4.70%
= 9.4%
Equation 2:
Equity Risk Premium = 4.75 - 0.34 (30-Year Treasury Yield) + 0.92 (Spread)
Where Spread = Spread between A-rated Utility Bond Yields and 30-year Treasury Yields
t-statistics:
Long-term Bond Yield = -7.93
Utility/government bond yield spread = 13.64
R2 = 68%
Equity Risk Premium at Long-term Bond
Yield of 4.70% and Spread of 1.60%
= 4.6%
ROE at Long-Term Bond Yield of 4.70% and
= 9.3%
Schedule 12
Page 3 of 3
DCF-BASED EQUITY RISK PREMIUM STUDY FOR
BENCHMARK U.S. DISTRIBUTION UTILITIES
Regression Analysis Results 1999-2009
Equation 1:
Equity Risk Premium = 6.93 - 0.47 (30-Year Treasury Yield)
t-statistics:
Long-term Bond Yield = -4.54
R2 = 14%
Equity Risk Premium at Long-Term Bond
Yield of 4.70%
= 4.7
ROE at Long-Term Bond Yield of 4.70%
= 9.4%
Equation 2:
Equity Risk Premium = 5.28 - 0.47 (30-Year Treasury Yield) + 0.98 (Spread)
Where Spread = Spread between A-rated Utility Bond Yields and 30-year
Treasury Yields
t-statistics:
Long-term Bond Yield = -6.77
Utility/government bond yield spread = 12.65
R2 = 61%
Equity Risk Premium at Long-term Bond
Yield of 4.70% and Spread of 1.60%
ROE at Long-Term Bond Yield of 4.70% and
= 4.6
= 9.3%
Schedule 13
HISTORIC UTILITY EQUITY RISK PREMIUMS
Canada
(1956-2009)
Utilities Index Return
Bond Total Return
Risk Premium
12.1
7.6
4.5
Utilities Index Return
Bond Income Return
Risk Premium
12.1
7.8
4.3
United States
(1947-2009)
S&P / Moody's Gas
Distribution Index Return
Bond Total Return
Risk Premium
11.9
6.1
5.8
Distribution Index Return
Bond Income Return
Risk Premium
11.9
6.0
5.9
Electric Index Return
Bond Total Return
Risk Premium
10.9
6.1
4.8
Electric Index Return
Bond Income Return
Risk Premium
10.9
6.0
4.9
S&P / Moody's Gas
S&P/Moody's
S&P/Moody's
Notes:
The Canadian Utilities Index is based on the Gas/Electric Index of the TSE 300 (from 1956 to 1987) and on the S&P/TSX Utilities Index from 19882009.
The S&P/Moody's Gas Distribution Index reflects S&P's Natural Gas Distributors Index from 1947 to 1984, when S&P eliminated its gas distribution
index. The 1985-2001 data are for Moody's Gas index. The index was terminated in July 2002. The 2002-2009 returns were estimated using
simple averages of the prices and dividends for the utilities that were included in Moody's Gas Index as of the end of 2001. These LDCs include
AGL Resources, Keyspan Corp., Laclede Group, Northwest Natural, Peoples Energy and WGL Holdings.
The S&P/Moody's Electric Index reflects S&P's Electric Index from 1947 to 1998 and Moody's Electric Index from 1999 to 2001. The 2002 to 2009
data were estimated using simple average of the prices and dividends for the utilities included in Moody's Electric Index as of the end of 2001.
These utilities include American Electric Power, Centerpoint Energy, CH Energy, Cinergy, Consolidated Edison, Constellation, Dominion
Resources, DPL, DTE Energy, Duke Energy, Energy East, Exelon, FirstEnergy, IDACORP, Nisource, OGE Energy, Pepco Holdings, PPL, Progress
Energy, Public Service Enterprise Grp., Southern Co., Teco and Xcel Energy.
Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation: 2009 Yearbook;
Ibbotson Associates, Canadian Risk Premia Over Time Report 2008; Canadian Institute of Actuaries,
Report on Canadian Economic Statistics 1924-2006; www.standardandpoors.com, TSX Review
Mergent Corporate News Reports, www.federal reserve.com,
S&P Research Insight
Schedule 14
Page 1 of 2
10-YEAR ROLLING AVERAGE RETURNS
FOR CANADIAN UTILITIES AND GOVERNMENT BONDS
S&P/TSX Utilities
Returns
Canadian Risk
Canadian Bond Premium Bond Total
Total Returns
Returns
Canadian Bond
Income Returns
Canadian Risk
Premium Bond
Income Returns
1956-1965
14.3%
2.4%
11.9%
4.9%
9.4%
1957-1966
10.1%
2.9%
7.1%
5.1%
5.0%
1958-1967
11.3%
2.1%
9.2%
5.3%
6.0%
1959-1968
10.8%
2.6%
8.2%
5.6%
5.2%
1960-1969
7.9%
2.9%
5.0%
5.8%
2.1%
1961-1970
7.2%
4.4%
2.8%
6.1%
1.0%
1962-1971
6.9%
4.5%
2.4%
6.3%
0.6%
1963-1972
9.2%
4.3%
4.9%
6.5%
2.7%
1964-1973
6.9%
4.1%
2.8%
6.8%
0.1%
1965-1974
6.1%
3.2%
2.8%
7.2%
-1.1%
1966-1975
4.7%
3.4%
1.3%
7.6%
-2.9%
1967-1976
9.3%
5.1%
4.1%
8.0%
1.3%
1968-1977
9.6%
6.0%
3.6%
8.3%
1.3%
1969-1978
9.2%
6.2%
3.1%
8.6%
0.7%
1970-1979
13.6%
6.1%
7.5%
8.8%
4.8%
1971-1980
13.8%
4.1%
9.7%
9.3%
4.5%
1972-1981
12.2%
2.7%
9.5%
10.3%
1.9%
1973-1982
15.4%
6.9%
8.5%
11.0%
4.3%
1974-1983
17.2%
7.6%
9.6%
11.5%
5.7%
1975-1984
19.5%
9.3%
10.2%
11.9%
7.6%
1976-1985
19.7%
11.6%
8.1%
12.1%
7.5%
1977-1986
17.3%
11.4%
5.9%
12.2%
5.2%
1978-1987
15.9%
10.9%
5.1%
12.3%
3.6%
1979-1988
15.4%
11.8%
3.7%
12.4%
3.0%
1980-1989
12.8%
13.7%
-0.9%
12.4%
0.4%
1981-1990
11.1%
13.8%
-2.7%
12.2%
-1.1%
1982-1991
12.1%
16.5%
-4.5%
11.6%
0.5%
1983-1992
8.9%
13.6%
-4.7%
11.0%
-2.1%
1984-1993
10.4%
14.9%
-4.5%
10.5%
-0.1%
1985-1994
9.2%
12.3%
-3.1%
10.1%
-0.9%
1986-1995
7.2%
12.4%
-5.2%
9.8%
-2.6%
1987-1996
8.8%
12.1%
-3.3%
9.6%
-0.7%
1988-1997
12.0%
13.8%
-1.8%
9.2%
2.8%
1989-1998
11.2%
14.2%
-2.9%
8.7%
2.5%
1990-1999
8.2%
11.8%
-3.6%
8.2%
0.0%
1991-2000
12.8%
12.9%
-0.1%
7.7%
5.1%
1992-2001
13.7%
10.8%
2.9%
7.3%
6.4%
1993-2002
13.7%
10.5%
3.1%
6.9%
6.7%
1994-2003
14.0%
9.0%
5.0%
6.7%
7.3%
1995-2004
14.2%
10.9%
3.3%
6.3%
8.0%
1996-2005
17.7%
9.8%
7.9%
5.9%
11.9%
1997-2006
16.0%
8.7%
7.3%
5.5%
10.5%
1998-2007
13.5%
7.3%
6.2%
5.2%
8.3%
1999-2008
11.1%
7.2%
3.9%
5.1%
6.0%
2000-2009
15.7%
7.5%
8.2%
4.9%
10.9%
Source:
Ibbotson Associates, Canadian Risk Premia Over Time Report 2008; Canadian Institute of Actuaries,
Report on Canadian Economic Statistics 1924-2006 TSX Review
Schedule 14
Page 2 of 2
10-YEAR ROLLING AVERAGE RETURNS
FOR U.S. UTILITIES AND GOVERNMENT BONDS
S&P/Moody's Gas
Distributors
Returns
S&P/Moody's
Electric Returns
US Bond Total
Returns
US Gas Risk
Premium Bond
Total Returns
1947-1956
12.4%
10.4%
0.8%
11.5%
9.5%
2.5%
9.8%
7.8%
1948-1957
12.6%
12.6%
1.9%
10.8%
10.8%
2.7%
10.0%
10.0%
1949-1958
15.7%
16.3%
0.9%
14.8%
15.4%
2.7%
12.9%
13.6%
1950-1959
12.6%
14.3%
0.0%
12.6%
14.3%
2.9%
9.7%
11.4%
1951-1960
14.6%
16.0%
1.4%
13.2%
14.6%
3.1%
11.5%
12.9%
1952-1961
15.9%
17.2%
1.9%
14.0%
15.3%
3.3%
12.6%
13.9%
1953-1962
14.3%
15.4%
2.5%
11.9%
12.9%
3.4%
10.9%
11.9%
1954-1963
15.0%
15.5%
2.2%
12.8%
13.2%
3.5%
11.5%
12.0%
1955-1964
13.5%
14.7%
1.9%
11.6%
12.8%
3.7%
9.8%
11.0%
1956-1965
12.4%
13.7%
2.1%
10.4%
11.7%
3.8%
8.6%
9.9%
1957-1966
9.9%
13.0%
3.0%
6.9%
10.0%
4.0%
6.0%
9.1%
1958-1967
10.8%
11.7%
1.3%
9.5%
10.4%
4.1%
6.7%
7.6%
1959-1968
8.6%
8.7%
1.9%
6.7%
6.8%
4.3%
4.3%
4.5%
1960-1969
6.9%
6.9%
1.6%
5.2%
5.3%
4.5%
2.4%
2.4%
1961-1970
7.9%
6.0%
1.5%
6.4%
4.6%
4.7%
3.2%
1.3%
1962-1971
4.7%
3.3%
2.7%
2.1%
0.7%
5.0%
-0.3%
-1.6%
1963-1972
6.5%
3.6%
2.6%
4.0%
1.0%
5.2%
1.4%
-1.6%
1964-1973
3.8%
0.7%
2.3%
1.4%
-1.6%
5.4%
-1.7%
-4.7%
1965-1974
2.7%
-3.4%
2.4%
0.3%
-5.8%
5.7%
-3.0%
-9.1%
1966-1975
5.1%
1.4%
3.3%
1.9%
-1.9%
6.1%
-1.0%
-4.8%
1967-1976
11.4%
4.1%
4.6%
6.8%
-0.4%
6.5%
4.9%
-2.3%
1968-1977
11.4%
5.3%
5.4%
6.0%
-0.1%
6.7%
4.7%
-1.4%
1969-1978
9.4%
4.1%
5.3%
4.1%
-1.2%
7.0%
2.4%
-2.9%
1970-1979
14.6%
5.5%
5.7%
8.9%
-0.2%
7.2%
7.4%
-1.8%
1971-1980
14.7%
4.9%
4.1%
10.6%
0.8%
7.6%
7.1%
-2.7%
1972-1981
13.6%
6.7%
3.0%
10.6%
3.8%
8.1%
5.5%
-1.4%
1973-1982
12.0%
9.9%
6.4%
5.6%
3.4%
8.9%
3.2%
1.0%
1974-1983
17.1%
13.1%
6.6%
10.5%
6.5%
9.2%
7.9%
3.8%
1975-1984
18.7%
18.1%
7.7%
11.0%
10.4%
9.7%
9.0%
8.4%
1976-1985
18.2%
15.6%
9.9%
8.3%
5.7%
10.0%
8.2%
5.6%
1977-1986
15.9%
16.0%
10.7%
5.3%
5.4%
10.1%
5.8%
5.9%
1978-1987
14.0%
14.4%
10.5%
3.6%
3.9%
10.2%
3.8%
4.2%
1979-1988
16.4%
16.5%
11.6%
4.8%
4.9%
10.3%
6.1%
6.2%
1980-1989
17.1%
19.8%
13.5%
3.6%
6.3%
10.3%
6.8%
9.4%
1981-1990
13.9%
19.3%
14.5%
-0.6%
4.8%
10.1%
3.8%
9.2%
1982-1991
17.0%
20.3%
16.3%
0.7%
4.0%
9.8%
7.2%
10.5%
1983-1992
19.0%
17.3%
13.0%
5.9%
4.3%
9.2%
9.8%
8.2%
1984-1993
17.2%
17.3%
14.8%
2.5%
2.5%
8.9%
8.4%
8.4%
1985-1994
14.2%
13.5%
12.5%
1.8%
1.0%
8.3%
5.9%
5.1%
1986-1995
15.3%
14.0%
12.5%
2.8%
1.5%
8.0%
7.3%
6.1%
1987-1996
13.9%
11.2%
10.0%
3.9%
1.2%
7.7%
6.2%
3.5%
1988-1997
16.8%
14.6%
11.8%
5.0%
2.8%
7.6%
9.3%
7.0%
1989-1998
14.5%
15.2%
12.2%
2.3%
3.0%
7.2%
7.2%
8.0%
1990-1999
10.0%
10.2%
9.5%
0.5%
0.7%
6.9%
3.1%
3.2%
1991-2000
12.7%
15.8%
11.0%
1.7%
4.8%
6.8%
5.9%
9.1%
1992-2001
11.0%
12.3%
9.4%
1.6%
2.9%
6.5%
4.6%
5.8%
1993-2002
9.8%
10.6%
10.4%
-0.6%
0.2%
6.3%
3.5%
4.3%
1994-2003
10.1%
11.1%
8.7%
1.3%
2.4%
6.1%
4.0%
5.1%
1995-2004
12.8%
14.0%
10.4%
2.4%
3.7%
5.9%
6.8%
8.1%
US Electric Risk
Premium Bond
Total Returns
US Bond Income
Returns
US Gas Risk
Premium Bond
Income Returns
US Electric Risk
Premium Bond
Income Returns
1996-2005
9.6%
11.7%
8.0%
1.6%
3.7%
5.6%
3.9%
6.0%
1997-2006
10.7%
13.6%
8.2%
2.5%
5.4%
5.5%
5.2%
8.1%
1998-2007
8.8%
12.3%
7.6%
1.2%
4.7%
5.3%
3.5%
7.0%
1999-2008
9.6%
7.3%
8.9%
0.8%
-1.6%
5.2%
4.5%
2.1%
2000-2009
9.8%
10.4%
7.5%
2.3%
2.8%
5.0%
4.8%
5.3%
Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation: 2009 Yearbook;
www.standardandpoors.com, Mergent Corporate News Reports,
www.federal reserve.com
Schedule 15
INDIVIDUAL COMPANY RISK DATA FOR BENCHMARK SAMPLE OF U.S. DISTRIBUTION UTILITIES
Safety
Forecast Common
Equity Ratio
2012-2014
Value Line
Forecast Return
On Average
Common Equity
2012-2014
S&P
Dividend Payout
Forecast
2012-2014
2009 Q4
Beta
AGL Resources
Consolidated Edison
New Jersey Resources
Nicor Inc.
Northwest Nat. Gas
NSTAR
Piedmont Natural Gas
South Jersey Inds.
WGL Holdings Inc.
2
1
1
3
1
1
2
2
1
49.0%
51.5%
66.5%
74.0%
53.0%
53.5%
52.0%
63.5%
64.0%
13.6%
9.5%
11.7%
12.0%
11.6%
15.2%
14.3%
14.9%
10.8%
57.0%
63.4%
53.3%
60.0%
61.4%
60.0%
58.6%
50.8%
59.3%
0.75
0.65
0.65
0.75
0.60
0.65
0.65
0.65
0.65
0.67
0.45
0.53
0.71
0.46
0.52
0.55
0.52
0.55
Mean
Median
2
1
58.6%
53.5%
12.6%
12.0%
58.2%
59.3%
0.67
0.65
0.55
0.53
Moody's
Business
Risk
Profile
Debt
Rating
Debt
Rating
39.4%
48.5%
51.2%
44.0%
45.3%
36.8%
41.9%
47.5%
51.7%
Excellent
Excellent
Excellent
Excellent
Excellent
Excellent
Excellent
Excellent
Excellent
AAA
AA
AAA+
A
BBB+
AA-
Baa1
Baa1
Aa3
A2
A3
A2
A3
Baa1
A2
45.1%
45.3%
Excellent
Excellent
A
A
A3
A3
Calculated
Common Equity
Ratio 2008
Weekly Betas 1/
1/ "Raw" betas calculated using weekly data against the NYSE Composite (260 weeks ending December 28, 2009).
2/ Rating for New Jersey Resources is New Jersey Natural Gas. Rating for South Jersey Industries is South Jersey Gas Co. Rating for WGL Holdings is Washington Gas Light.
Rating for Nicor Inc. is for Northern Illinois Gas.
Source: Standard and Poor's Research Insight, Value Line (November and December 2009), January 8, 2010 Value Line Index, www.Moodys.com, www.yahoo.com,
Standard and Poor's, Issuer Ranking: U.S. Invester-Owned Electric Utilities, Strongest To Weakest (December 28, 2009) and
Standard and Poor's, Issuer Ranking: U.S. Natural Gas Distributors And Integrated Gas Companies, Strongest To Weakest (January 12, 2010).
2/
Schedule 16
DCF COST OF EQUITY FOR BENCHMARK SAMPLE OF U.S. DISTRIBUTION UTILITIES
(BASED ON ANALYSTS' EARNINGS GROWTH FORECASTS)
Annualized Last
Paid Dividend
(1)
Average High/Low
Monthly Close Prices
11/1/2009-1/26/2010
(2)
Expected Dividend
Yield 1/
(3)
Average I/B/E/S/
Long-Term
EPS Forecasts
(4)
DCF Cost of
Equity 2/
(5)
AGL Resources
Consolidated Edison
New Jersey Resources
Nicor Inc.
Northwest Nat. Gas
NSTAR
Piedmont Natural Gas
South Jersey Inds.
WGL Holdings Inc.
1.72
2.36
1.36
1.86
1.66
1.60
1.08
1.32
1.47
35.70
43.77
36.53
40.42
44.08
34.44
25.15
37.31
32.80
5.0
5.6
4.0
4.8
4.0
4.9
4.6
3.9
4.7
4.0
3.4
7.0
4.4
6.0
5.6
6.6
11.5
5.0
9.0
9.0
11.0
9.2
10.0
10.5
11.2
15.4
9.7
Mean
Median
1.60
1.60
36.69
36.53
4.6
4.7
5.9
5.6
10.6
10.0
Company
1/
2/
Expected Dividend Yield = (Col (1) / Col (2)) * (1 + Col (4))
Expected Dividend Yield (Col (3)) + I/B/E/S Growth Forecast (Col (4))
Source: Standard and Poor's Research Insight, Yahoo.com and I/B/E/S (December 2009)
Schedule 17
DCF COSTS OF EQUITY FOR BENCHMARK SAMPLE OF U.S. DISTRIBUTION UTILITIES
(SUSTAINABLE GROWTH)
Average High/Low
Expected
Monthly Close Prices
Forecast Return on
11/1/2009-1/26/2010 Dividend Yield 1/
Common Equity
(2)
(3)
(4)
Forecast Earnings
Retention Rate
(5)
BR Growth
(4th Qtr.2009)
(6)
SV Growth
(4th Qtr. 2009)
(7)
Sustainable
4/
Growth
(4th Qtr. 2009)
(8)
DCF Cost
5/
of Equity
(9)
2/
3/
Company
Annualized Last
Dividend Paid
(1)
AGL RESOURCES INC
CONSOLIDATED EDISON
NEW JERSEY RESOURCES
NICOR INC
NORTHWEST NATURAL GAS CO
NSTAR
PIEDMONT NATURAL GAS CO
SOUTH JERSEY INDUSTRIES INC
WGL HOLDINGS INC
1.72
2.36
1.36
1.86
1.66
1.60
1.08
1.32
1.47
35.70
43.77
36.53
40.42
44.08
34.44
25.15
37.31
32.80
5.1
5.6
3.9
4.8
4.0
4.9
4.5
3.8
4.7
13.6
9.5
11.7
12.0
11.6
15.2
14.3
14.9
10.8
43.0
36.6
46.7
40.0
38.6
40.0
41.4
49.2
40.7
5.8
3.5
5.4
4.8
4.5
6.1
5.9
7.3
4.4
0.38
0.15
0.51
0.08
0.57
0.00
-0.54
0.72
0.01
6.2
3.6
5.9
4.9
5.0
6.1
5.4
8.1
4.4
11.3
9.2
9.9
9.7
9.0
11.0
9.9
11.9
9.1
Mean
Median
1.60
1.60
36.69
36.53
4.60
4.68
12.62
12.00
41.80
40.73
5.31
5.44
0.21
0.15
5.5
5.4
10.1
9.9
1/ Expected Dividend Yield = (Col (1) / Col (2)) * (1 + Col (8))
2/ BR Growth = Col (4) * (Col (5) / 100)
3/ SV Growth = Percent expected growth in number of shares of stock * Percent of funds from new equity
financing that accrues to existing shareholders [ 1- B/M ]
4/ Col (6) + Col (7)
5/ Expected Dividend Yield Col (3) + Sustainable Growth Col (8)
Source: Standard and Poors Research Insight, Value Line (November and December 2009) , www.yahoo.com
Schedule 18
DCF COSTS OF EQUITY FOR BENCHMARK SAMPLE OF U.S. DISTRIBUTION UTILITIES
(THREE-STAGE MODEL)
Stage 1:
I/B/E/S
EPS Forecasts
(3)
Growth Rates
Stage 2:
Average of
Stage 1 & 3
(4)
Company
Annualized Last
Paid Dividend
(1)
Average High/Low Monthly
Close Prices
11/1/2009-1/26/2010
(2)
AGL RESOURCES INC
CONSOLIDATED EDISON
NEW JERSEY RESOURCES
NICOR INC
NORTHWEST NATURAL GAS CO
NSTAR
PIEDMONT NATURAL GAS CO
SOUTH JERSEY INDUSTRIES INC
WGL HOLDINGS INC
1.72
2.36
1.36
1.86
1.66
1.60
1.08
1.32
1.47
35.70
43.77
36.53
40.42
44.08
34.44
25.15
37.31
32.80
4.0
3.4
7.0
4.4
6.0
5.6
6.6
11.5
5.0
Mean
Median
1.60
1.60
36.69
36.53
5.9
5.6
Stage 3:
GDP Growth 1/
DCF Cost of
Equity 2/
(5)
4.5
4.2
6.0
4.7
5.5
5.3
5.8
8.3
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
9.7
10.1
9.3
9.6
9.1
10.0
9.9
10.4
9.6
5.5
5.3
5.0
5.0
9.8
9.7
1/ Forecast nominal rate of GDP growth, 2011-20
2/ Internal Rate of Return: Stage 1 growth rate applies for first 5 years; Stage 2 growth rate applies for years 6-10; Stage 3 growth thereafter.
Source: Standard & Poor's Research Insight; www.yahoo.com; Blue Chip Financial Forecasts (December 2009); I/B/E/S (December 2009)
Schedule 19
MARKET VALUE CAPITAL STRUCTURES FOR
BENCHMARK SAMPLE OF CANADIAN DISTRIBUTION UTILITIES AND U.S. UTILITIES
Canadian Utilities
Emera Inc.
Enbridge Inc.
Fortis Inc.
Transcanada Corp.
Debt and Preferred Shares
at Par in Millions
(September 2009)
Common Share Price Average
High/Low Monthly Close
11/1/2009-1/26/2010
Common Shares Outstanding
in Millions
(December 2009)
Total Market
Capitalization
Market Value
Common
Equity Ratio
3,992
2,784
11,861
6,382
20,883
42.17
23.97
45.99
27.43
34.46
126
113
376
171
684
5,299
2,697
17,269
4,683
23,557
57.0%
49.2%
59.3%
42.3%
53.0%
$10,701
$5,299
52.2%
53.0%
Mean
Median
MARKET VALUE CAPITAL STRUCTURES FOR U.S. UTILITIES
AGL Resources
Consolidated Edison
New Jersey Resources
Nicor Inc.
Northwest Nat. Gas
NSTAR
Piedmont Natural Gas
South Jersey Inds.
WGL Holdings Inc.
Debt and Preferred Shares
at Par in Millions $
(September 2009)
Common Share Price Average
High/Low Monthly Close
11/1/2009-1/26/2010
Common Shares Outstanding
in Millions
(September 2009)
Total Market
Capitalization in
Millions $
Market Value
Common
Equity Ratio
2,285
10,973
605
864
709
2,887
1,099
1,042
856
35.70
43.77
36.53
40.42
44.08
34.44
25.15
37.31
32.80
77
275
42
45
27
107
73
30
50
2,745
12,040
1,519
1,835
1,169
3,679
1,842
1,112
1,645
54.6%
52.3%
71.5%
68.0%
62.2%
56.0%
62.6%
51.6%
65.8%
$3,065
$1,835
60.5%
62.2%
Mean
Median
Source:
Annual Reports to Shareholders, Standard & Poor's Research Insight, www.yahoo.com
Schedule 20
Page 1 of 2
QUANTIFICATION OF IMPACT ON EQUITY RETURN REQUIREMENT FOR DIFFERENCE
BETWEEN MARKET VALUE AND BOOK VALUE CAPITAL STRUCTURES:
CANADIAN UTILITIES
Formula for After-Tax Weighted Average Cost of Capital:
WACC AT
=
(Debt Cost)(1-tax rate)(Debt Ratio) + (Equity Cost)(Equity Ratio)
APPROACH 1:
The after-tax weighted average cost of capital (WACC AT) is invariant to changes in the capital structure. The cost of equity increases as leverage (debt ratio) increases,
=
WACC AT(ML)
WACC AT(LL)
Where LL = less levered (lower debt ratio)
ML = more levered (higher debt ratio)
ASSUMPTIONS:
Debt Cost
Equity Cost
Tax Rate
CEQ Ratio
Debt Ratio
CEQ Ratio
Debt Ratio
=
=
=
=
=
(1)
(1)
(2)
(2)
Market Cost of Long Term Debt for A rated utility
6.30%
CAPM Cost of Equity
9.25%
28.4%
53.0%
47.0%
40.0%
60.0%
STEPS:
1.
Estimate WACC AT for the less levered sample (common equity ratio of 53.0%)
WACC AT
2.
=
(6.30%)(1-.284)(47.0%) + (9.25%)(53.0%)
=
7.02%
Estimate Cost of Equity for sample at 40.0% common equity ratio withWACC AT unchanged at 7.02%
WACC AT
=
7.02% =
Cost of Equity at 40.0% Equity Ratio =
3.
(Debt Cost)(1-tax rate)(Debt Ratio) + (Equity Cost)(Equity Ratio)
(6.30%)(1-.284)(60.0%) + (X)(40.0%)
10.79%
Difference between Equity Return at 53.0% and 40.0% common equity ratios:
10.79% - 9.25% =
1.54% (154 basis points)
Schedule 20
Page 2 of 2
APPROACH 2:
After-Tax Cost of Capital Falls as Debt Ratio Increases; Cost of Equity Increases
=
WACC AT(ML) x
(1-tDLL)
WACC AT(LL)
(1-tDML)
Where LL,ML as before
t = tax rate
D = debt ratio
ASSUMPTIONS:
Debt Cost
Equity Cost
Tax Rate
CEQ Ratio
Debt Ratio
CEQ Ratio
Debt Ratio
=
=
=
=
=
(1)
(1)
(2)
(2)
Market Cost of Long Term Debt for A rated utility
6.30%
Cost of Equity
9.25%
28.4%
53.0%
47.0%
40.0%
60.0%
STEPS:
1. Estimate WACC AT for less levered sample (common equity ratio
WACC AT
=
=
of 53.0%)
(6.30%)(1-.284)(47.0%) + (9.25%)(53.0%)
7.02%
2. Estimate WACC AT for more levered firm (common equity ratio of 40.0%)
WACC AT(ML) = WACC AT(LL) x (1-t x Debt RatioML)/(1-t x Debt RatioLL)
WACC AT(ML)
=
7.02%
WACC AT(ML)
=
6.72%
x
(1-.284 x 60.0%)
(1-.284 x 47.0%)
3. Estimate Cost of Equity at new WACC AT for more levered firm:
WACC AT(ML) = (Debt Cost)(1-tax rate)(Debt Ratio ML) + (Equity Cost)(Equity RatioML)
6.72% =
(6.30%)(1-.284)(60.0%) + (X)(40.0%)
Cost of Equity at 40.0% Equity Ratio =
10.04%
4. Difference between Equity Return at 53.0% and 40.0% common equity ratios:
10.04% - 9.25% =
0.79% (79 basis points)
ESTIMATE OF IMPACT OF CHANGE IN CAPITAL STRUCTURE ON COST OF EQUITY
79-154 Basis Points (Midpoint of 116)
Schedule 21
Page 1 of 2
QUANTIFICATION OF IMPACT ON EQUITY RETURN REQUIREMENT FOR DIFFERENCE
BETWEEN MARKET VALUE AND BOOK VALUE CAPITAL STRUCTURES:
BENCHMARK SAMPLE OF U.S. DISTRIBUTION UTILITIES
Formula for After-Tax Weighted Average Cost of Capital:
WACC AT
=
(Debt Cost)(1-tax rate)(Debt Ratio) + (Equity Cost)(Equity Ratio)
APPROACH 1:
The after-tax weighted average cost of capital (WACC AT) is invariant to changes in the capital structure. The cost of equity increases as leverage (debt ratio) increases,
=
WACC AT(ML)
WACC AT(LL)
Where LL = less levered (lower debt ratio)
ML = more levered (higher debt ratio)
ASSUMPTIONS:
Debt Cost
Equity Cost
Tax Rate
CEQ Ratio
Debt Ratio
CEQ Ratio
Debt Ratio
=
=
=
=
=
(1)
(1)
(2)
(2)
Market Cost of Long Term Debt for A rated utility
6.30%
Midpoint of DCF-Based Risk Premium and DCF Cost of Equity Test Results
9.70%
28.4%
62.0%
38.0%
48.0%
52.0%
STEPS:
1.
2.
3.
Estimate WACC AT for the less levered sample (common equity ratio of 62.0%)
WACC AT
=
(6.30%)(1-.284)(38.0%) + (9.70%)(62.0%)
=
7.73%
Estimate Cost of Equity for sample at 48.0% common equity ratio with WACC AT unchangedat 7.73%
Tax Rate Declines to Canadian Level
WACC AT
=
(Debt Cost)(1-tax rate)(Debt Ratio) + (Equity Cost)(Equity Ratio)
7.73% =
(6.30%)(1-.284)(52.0%) + (X)(48.0%)
Cost of Equity at 48.0% Equity Ratio =
11.21%
Difference between Equity Return at 62.0% and 48.0% common equity ratios:
11.21% - 09.70% =
1.51% (151 basis points)
Schedule 21
Page 2 of 2
APPROACH 2:
After-Tax Cost of Capital Falls as Debt Ratio Increases; Cost of Equity Increases
=
WACC AT(ML) x
(1-tDLL)
WACC AT(LL)
(1-tDML)
Where LL,ML as before
t = tax rate
D = debt ratio
ASSUMPTIONS:
Debt Cost
Equity Cost
Tax Rate
CEQ Ratio
Debt Ratio
CEQ Ratio
Debt Ratio
=
=
=
=
=
(1)
(1)
(2)
(2)
Market Cost of Long Term Debt for A rated utility
6.30%
Cost of Equity
9.70%
28.4%
62.0%
38.0%
48.0%
52.0%
STEPS:
1. Estimate WACC AT for less levered sample (common equity ratio of 62.0%)
WACC AT
=
(6.30%)(1-.284)(38.0%) + (9.70%)(62.0%)
=
7.73%
2. Estimate WACC AT for more levered firm (common equity ratio of 48.0%)
Tax Rate Declines to Canadian Level
WACC AT(ML) = WACC AT(LL) x (1-t x Debt RatioML)/(1-t x Debt RatioLL)
WACC AT(ML)
=
7.73%
WACC AT(ML)
=
7.38%
x
(1-.284 x 52.0%)
(1-.284 x 38.0%)
3. Estimate Cost of Equity at new WACC AT for more levered firm:
WACC AT(ML) = (Debt Cost)(1-tax rate)(Debt Ratio ML) + (Equity Cost)(Equity RatioML)
7.38% =
(6.30%)(1-.284)(52.0%) + (X)(48.0%)
Cost of Equity at 48.0% Equity Ratio =
10.50%
4. Difference between Equity Return at 62.0% and 48.0% common equity ratios:
10.50% - 09.70% =
0.80% (80 basis points)
ESTIMATE OF IMPACT OF CHANGE IN CAPITAL STRUCTURE ON COST OF EQUITY
Approximately 80 to 151 basis points (Midpoint of 116)
Schedule 22
INDIVIDUAL COMPANY RISK DATA FOR BBB RATED SAMPLE OF U.S. UTILITIES
Safety
Forecast Common
Equity Ratio
2012-2014
Value Line
Forecast Return
On Average
Common Equity
2012-2014
Dividend Payout
Forecast
2012-2014
ALLETE
Alliant Energy
Ameren Corp.
Atmos Energy
Black Hills
Constellation Energy
DTE Energy
Entergy Corp.
Exelon Corp.
FirstEnergy Corp.
Hawaiian Elec.
OGE Energy
Pepco Holdings
PG&E Corp.
Pinnacle West Capital
Portland General
PPL Corp.
Public Serv. Enterprise
Sempra Energy
South Jersey Inds.
Xcel Energy Inc.
2
2
3
2
3
3
3
2
1
2
3
2
3
2
3
2
3
3
2
2
2
51.0%
58.5%
54.0%
51.0%
59.5%
53.0%
45.0%
42.0%
57.0%
47.5%
55.5%
46.5%
48.0%
54.0%
52.0%
50.0%
45.5%
57.0%
57.0%
63.5%
48.5%
9.9%
10.2%
8.2%
9.5%
9.6%
10.0%
10.2%
14.5%
20.0%
14.5%
10.6%
12.0%
7.8%
12.2%
8.8%
8.6%
20.2%
16.3%
12.2%
14.9%
10.8%
69.1%
61.9%
56.7%
56.0%
52.0%
28.6%
58.8%
45.0%
48.0%
52.0%
70.9%
49.2%
67.5%
51.8%
67.7%
60.0%
50.7%
45.3%
35.0%
50.8%
55.0%
0.70
0.70
0.80
0.65
0.80
0.80
0.75
0.70
0.85
0.80
0.70
0.75
0.80
0.55
0.75
0.70
0.70
0.80
0.85
0.65
0.65
0.58
0.69
0.78
0.60
0.77
0.65
0.73
0.56
0.86
0.69
0.61
0.77
0.92
0.45
0.64
0.57
0.68
0.66
0.75
0.52
0.48
57.8%
56.0%
45.6%
45.4%
46.5%
26.7%
40.4%
38.8%
45.5%
37.2%
41.9%
43.5%
41.4%
43.8%
47.0%
47.3%
36.5%
46.0%
50.6%
47.5%
44.0%
Mean
Median
2
2
52.2%
52.0%
11.9%
10.6%
53.9%
52.0%
0.74
0.75
0.67
0.66
44.3%
45.4%
Moody's
S&P
Debt
Rating
Debt
Rating 2/
Strong
Excellent
Satisfactory
Excellent
Satisfactory
Satisfactory
Strong
Strong
Strong
Strong
Strong
Strong
Strong
Excellent
Strong
Strong
Satisfactory
Strong
Strong
Excellent
Excellent
BBB+
BBB+
BBBBBB+
BBBBBBBBB
BBB
BBB
BBB
BBB
BBB+
BBB
BBB+
BBBBBB+
BBB
BBB
BBB+
BBB+
BBB+
Baa1
Baa1
Baa3
Baa2
Baa3
Baa3
Baa2
Baa3
Baa1
Baa3
Baa1
Baa1
Baa3
Baa1
Baa3
Baa2
Baa2
Baa2
Baa1
Baa1
Baa1
Strong
Strong
BBB
BBB
Baa2
Baa2
Calculated
Common Equity Business
2009 Q4
Ratio 2008
Risk Profile
Beta
Weekly Betas 1/
1/ "Raw" betas calculated using weekly data against the NYSE Composite (260 weeks ending December 28, 2009). Portland General only has data for 187 weeks.
2/ Rating for South Jersey Industries is South Jersey Gas Co.
Source: Standard and Poor's Research Insight, Value Line (November and December 2009), January 8, 2010 Value Line Index, www.Moodys.com, www.yahoo.com,
Standard and Poor's, Issuer Ranking: U.S. Regulated Electric Utilities, Strongest To Weakest (December 28, 2009) and
Standard and Poor's, Issuer Ranking: U.S. Natural Gas Distributors And Integrated Gas Companies, Strongest To Weakest (January 12, 2010).
Standard and Poor's, Issuer Ranking: U.S. Energy Merchants/Power Developers/Trading and Marketing Companies, Strongest to Weakest (November 5, 2009).
Schedule 23
VALUE LINE BETAS FOR BENCHMARK AND BBB RATED SAMPLES OF U.S. UTILITIES
Company
Benchmark Sample
AGL RESOURCES INC
CONSOLIDATED EDISON
NEW JERSEY RESOURCES
NICOR INC
NORTHWEST NATURAL GAS CO
NSTAR
PIEDMONT NATURAL GAS CO
SOUTH JERSEY INDUSTRIES INC
WGL HOLDINGS INC
Mean
Median
Average of Annual Medians
BBB Rated Sample
ALLETE
ALLIANT ENERGY
AMEREN CORP
ATMOS ENERGY
BLACK HILLS
CONSTELLATION ENERGY
DTE ENERGY
ENTERGY CORP
EXELON CORP
FIRSTENERGY CORP
HAWAIIAN ELECTRIC
OGE ENERGY
PEPCO HOLDINGS
PG&E CORP
PINNACLE WEST CAPITAL
PORTLAND GENERAL
PPL CORP
PUBLIC SERVICE ENTERPRISE GROU
SEMPRA ENERGY
SOUTH JERSEY INDUSTRIES
XCEL ENERGY
Mean
Median
Average of Annual Medians
Source: Value Line 4th Quarter Issues
4Q 2005
4Q 2006
4Q 2007
4Q 2008
4Q 2009
Average
0.90
0.60
0.75
1.10
0.70
0.75
0.75
0.65
0.80
0.95
0.75
0.80
1.30
0.75
0.80
0.80
0.70
0.85
0.85
0.75
0.85
1.00
0.90
0.75
0.85
0.85
0.85
0.75
0.65
0.70
0.70
0.60
0.70
0.70
0.75
0.75
0.75
0.65
0.65
0.75
0.60
0.65
0.65
0.65
0.65
0.84
0.68
0.75
0.97
0.71
0.73
0.75
0.72
0.78
0.78
0.75
0.86
0.80
0.85
0.85
0.70
0.70
0.67
0.65
0.77
0.75
0.75
nmf
0.85
0.75
0.70
1.00
0.95
0.70
0.80
0.75
0.75
0.70
0.75
0.90
1.10
0.90
na
1.00
0.90
1.00
0.65
0.80
0.90
0.95
0.75
0.80
1.05
0.95
0.75
0.85
0.90
0.80
0.70
0.75
0.90
1.15
1.00
nmf
0.95
1.00
1.10
0.70
0.90
0.95
0.80
0.80
0.85
1.10
0.85
0.80
0.85
0.90
0.85
0.70
0.85
0.95
0.95
1.00
nmf
0.90
0.95
1.00
0.85
1.05
0.75
0.70
0.80
0.65
0.85
0.75
0.70
0.75
0.90
0.85
0.75
0.75
0.75
0.85
0.75
0.70
0.80
0.85
0.90
0.75
0.75
0.70
0.70
0.80
0.65
0.80
0.80
0.75
0.70
0.85
0.80
0.70
0.75
0.80
0.55
0.75
0.70
0.70
0.80
0.85
0.65
0.65
0.83
0.80
0.78
0.73
0.96
0.86
0.74
0.79
0.86
0.81
0.71
0.77
0.86
0.92
0.88
0.70
0.87
0.90
0.97
0.72
0.83
0.84
0.80
0.89
0.90
0.90
0.88
0.78
0.75
0.74
0.75
0.82
0.83
0.82
Schedule 24
DCF COST OF EQUITY FOR BBB RATED SAMPLE OF U.S. UTILITIES
(BASED ON ANALYSTS' EARNINGS GROWTH FORECASTS)
Annualized Last
Paid Dividend
(1)
Average High/Low
Monthly Close Prices
11/1/2009-1/26/2010
(2)
Expected Dividend
Yield 1/
(3)
ALLETE
Alliant Energy
Ameren Corp.
Atmos Energy
Black Hills
Constellation Energy
DTE Energy
Entergy Corp.
Exelon Corp.
FirstEnergy Corp.
Hawaiian Elec.
OGE Energy
Pepco Holdings
PG&E Corp.
Pinnacle West Capital
Portland General
PPL Corp.
Public Serv. Enterprise
Sempra Energy
South Jersey Inds.
Xcel Energy Inc.
1.76
1.50
1.54
1.34
1.42
0.96
2.12
3.00
2.10
2.20
1.24
1.45
1.08
1.68
2.10
1.02
1.38
1.33
1.56
1.32
0.98
32.95
29.46
26.35
28.64
25.45
33.35
41.53
80.19
48.40
44.53
20.22
35.30
16.44
43.49
35.56
19.91
31.17
31.92
53.45
37.31
20.63
5.6
5.3
6.0
4.9
5.9
3.3
5.3
4.0
4.4
5.1
6.8
4.4
6.9
4.1
6.4
5.5
4.9
4.4
3.1
3.9
5.1
4.0
4.3
3.0
5.0
6.0
14.8
3.0
6.8
2.2
3.3
10.5
6.0
5.5
7.3
8.0
6.8
11.5
5.3
7.0
11.5
7.3
9.6
9.6
9.0
9.9
11.9
18.1
8.3
10.8
6.6
8.4
17.3
10.4
12.4
11.5
14.4
12.3
16.4
9.7
10.1
15.4
12.4
Mean
Median
1.58
1.45
35.06
32.95
5.0
5.1
6.6
6.0
11.6
10.8
Company
1/
2/
Expected Dividend Yield = (Col (1) / Col (2)) * (1 + Col (4))
Expected Dividend Yield (Col (3)) + I/B/E/S Growth Forecast (Col (4))
Source: Standard and Poor's Research Insight, Yahoo.com and I/B/E/S (December 2009)
Average I/B/E/S/ LongDCF Cost of
Term
Equity 2/
EPS Forecasts
(4)
(5)
Schedule 25
DCF COSTS OF EQUITY FOR BBB RATED SAMPLE OF U.S. UTILITIES
(SUSTAINABLE GROWTH)
Company
Annualized Last
Dividend Paid
(1)
Average High/Low
Expected
Monthly Close Prices
Forecast Return on
11/1/2009-1/26/2010 Dividend Yield 1/
Common Equity
(2)
(3)
(4)
Forecast Earnings
Retention Rate
(5)
BR Growth
(4th Qtr.2009)
(6)
SV Growth
(4th Qtr. 2009)
(7)
Sustainable
4/
Growth
(4th Qtr. 2009)
(8)
DCF Cost
of Equity 5/
(9)
2/
3/
ALLETE
Alliant Energy
Ameren Corp.
Atmos Energy
Black Hills
Constellation Energy
DTE Energy
Entergy Corp.
Exelon Corp.
FirstEnergy Corp.
Hawaiian Elec.
OGE Energy
Pepco Holdings
PG&E Corp.
Pinnacle West Capital
Portland General
PPL Corp.
Public Serv. Enterprise
Sempra Energy
South Jersey Inds.
Xcel Energy Inc.
1.76
1.50
1.54
1.34
1.42
0.96
2.12
3.00
2.10
2.20
1.24
1.45
1.08
1.68
2.10
1.02
1.38
1.33
1.56
1.32
0.98
32.95
29.46
26.35
28.64
25.45
33.35
41.53
80.19
48.40
44.53
20.22
35.30
16.44
43.49
35.56
19.91
31.17
31.92
53.45
37.31
20.63
5.6
5.3
6.1
4.9
5.8
3.1
5.3
4.0
4.8
5.3
6.3
4.4
6.7
4.1
6.1
5.3
4.9
4.5
3.2
3.8
5.0
9.9
10.2
8.2
9.5
9.6
10.0
10.2
14.5
20.0
14.5
10.6
12.0
7.8
12.2
8.8
8.6
20.2
16.3
12.2
14.9
10.8
30.9
38.1
43.3
44.0
48.0
71.4
41.2
55.0
52.0
48.0
29.1
50.8
32.5
48.2
32.3
40.0
49.3
54.7
65.0
49.2
45.0
3.1
3.9
3.6
4.2
4.6
7.1
4.2
8.0
10.4
6.9
3.1
6.1
2.5
5.9
2.9
3.4
10.0
8.9
7.9
7.3
4.9
1.53
0.22
0.02
0.90
0.01
0.14
0.27
-0.48
-0.43
0.00
0.19
0.50
-0.72
0.51
0.22
0.25
-0.14
-0.30
0.21
0.72
0.06
4.6
4.1
3.6
5.1
4.6
7.3
4.5
7.5
10.0
6.9
3.3
6.6
1.8
6.4
3.1
3.7
9.8
8.6
8.1
8.1
4.9
10.2
9.4
9.6
10.0
10.5
10.4
9.8
11.5
14.8
12.2
9.6
11.0
8.5
10.5
9.2
9.0
14.7
13.2
11.3
11.9
9.9
Mean
Median
1.58
1.45
35.06
32.95
4.97
4.98
11.95
10.61
46.10
48.00
5.66
4.85
0.17
0.19
5.8
5.1
10.8
10.4
1/ Expected Dividend Yield = (Col (1) / Col (2)) * (1 + Col (8))
2/ BR Growth = Col (4) * (Col (5) / 100)
3/ SV Growth = Percent expected growth in number of shares of stock * Percent of funds from new equity
financing that accrues to existing shareholders [ 1- B/M ]
4/ Col (6) + Col (7)
5/ Expected Dividend Yield Col (3) + Sustainable Growth Col (8)
Source: Standard and Poors Research Insight, Value Line (November and December 2009) , www.yahoo.com
Schedule 26
DCF COSTS OF EQUITY FOR BBB RATED SAMPLE OF U.S. UTILITIES
(THREE-STAGE MODEL)
Annualized Last
Paid Dividend
(1)
Average High/Low Monthly
Close Prices
11/1/2009-1/26/2010
(2)
Stage 1:
I/B/E/S
EPS Forecasts
(3)
Growth Rates
Stage 2:
Average of
Stage 1 & 3
(4)
ALLETE
Alliant Energy
Ameren Corp.
Atmos Energy
Black Hills
Constellation Energy
DTE Energy
Entergy Corp.
Exelon Corp.
FirstEnergy Corp.
Hawaiian Elec.
OGE Energy
Pepco Holdings
PG&E Corp.
Pinnacle West Capital
Portland General
PPL Corp.
Public Serv. Enterprise
Sempra Energy
South Jersey Inds.
Xcel Energy Inc.
1.76
1.50
1.54
1.34
1.42
0.96
2.12
3.00
2.10
2.20
1.24
1.45
1.08
1.68
2.10
1.02
1.38
1.33
1.56
1.32
0.98
32.95
29.46
26.35
28.64
25.45
33.35
41.53
80.19
48.40
44.53
20.22
35.30
16.44
43.49
35.56
19.91
31.17
31.92
53.45
37.31
20.63
4.0
4.3
3.0
5.0
6.0
14.8
3.0
6.8
2.2
3.3
10.5
6.0
5.5
7.3
8.0
6.8
11.5
5.3
7.0
11.5
7.3
Mean
Median
1.58
1.45
35.06
32.95
6.6
6.0
Company
Stage 3:
GDP Growth 1/
DCF Cost of
Equity 2/
(5)
4.5
4.7
4.0
5.0
5.5
9.9
4.0
5.9
3.6
4.2
7.8
5.5
5.3
6.2
6.5
5.9
8.2
5.2
6.0
8.3
6.1
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
10.2
10.1
10.4
9.9
11.2
10.4
9.7
9.3
8.7
9.6
13.7
9.5
12.1
9.6
12.3
11.0
11.7
9.4
8.3
10.4
10.7
5.8
5.5
5.0
5.0
10.4
10.2
1/ Forecast nominal rate of GDP growth, 2011-20
2/ Internal Rate of Return: Stage 1 growth rate applies for first 5 years; Stage 2 growth rate applies for years 6-10; Stage 3 growth thereafter.
Source: Standard & Poor's Research Insight; www.yahoo.com; Blue Chip Financial Forecasts (December 2009); I/B/E/S (December 2009)
Schedule 27
COMMON EQUITY RATIOS FOR BENCHMARK AND BBB RATED
SAMPLES OF U.S. UTILITIES
Company
2004
2005
2006
2007
2008
Average
Benchmark Sample
AGL RESOURCES INC
CONSOLIDATED EDISON
NEW JERSEY RESOURCES
NICOR INC
NORTHWEST NATURAL GAS CO
NSTAR
PIEDMONT NATURAL GAS CO
SOUTH JERSEY INDUSTRIES INC
WGL HOLDINGS INC
41%
49%
44%
43%
49%
37%
53%
45%
52%
41%
46%
47%
42%
47%
34%
52%
45%
56%
43%
47%
50%
51%
48%
34%
47%
44%
52%
42%
49%
50%
52%
47%
36%
46%
50%
54%
39%
48%
51%
44%
45%
37%
42%
47%
52%
41%
48%
48%
46%
47%
36%
48%
46%
53%
46%
45%
46%
46%
46%
47%
47%
49%
45%
45%
46%
47%
46%
62%
48%
49%
57%
48%
46%
39%
50%
41%
43%
28%
45%
36%
47%
47%
58%
35%
29%
47%
45%
42%
61%
48%
52%
41%
50%
49%
40%
44%
39%
45%
29%
50%
39%
40%
53%
57%
37%
32%
49%
45%
42%
63%
58%
50%
39%
50%
47%
39%
46%
43%
44%
27%
54%
39%
43%
51%
53%
39%
37%
56%
44%
44%
64%
59%
47%
46%
57%
50%
41%
41%
42%
43%
29%
51%
43%
44%
49%
50%
41%
42%
58%
50%
44%
58%
56%
46%
45%
47%
27%
40%
39%
45%
37%
42%
44%
41%
44%
47%
47%
37%
46%
51%
47%
44%
61%
54%
49%
46%
50%
44%
40%
44%
42%
43%
31%
49%
40%
44%
50%
53%
38%
37%
52%
46%
43%
45%
46%
45%
45%
46%
44%
47%
46%
44%
45%
45%
44%
46%
Mean
Median
Average of Annual Medians
BBB Rated Sample
ALLETE
ALLIANT ENERGY
AMEREN CORP
ATMOS ENERGY
BLACK HILLS
CONSTELLATION ENERGY
DTE ENERGY
ENTERGY CORP
EXELON CORP
FIRSTENERGY CORP
HAWAIIAN ELECTRIC
OGE ENERGY
PEPCO HOLDINGS
PG&E CORP
PINNACLE WEST CAPITAL
PORTLAND GENERAL
PPL CORP
PUBLIC SERVICE ENTERPRISE GROU
SEMPRA ENERGY
SOUTH JERSEY INDUSTRIES
XCEL ENERGY
Mean
Median
Average of Annual Medians
Source: Standard and Poor's Research Insight
Schedule 28
MULTI-PIPELINE AND REVISED FORMULA PIPELINE ROEs
Forecast Long
Change in
Canada
Forecast Long
Underlying
Canada From
1995
NEB ROE 1/
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011F 2/
Average
1996-2009
1/
2/
NEB ROE
per
RH-2-94
Sept/Oct
Corporate Yield
Spread 1/
50% of
Change in
Change in
Yield Spread
Long Canadas
from 1995
50% of
Change in
Corporate
Bond Yields
ROE
Incorporating
Change in
Both Long
Canadas and
Corporate
Bond Yields
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
9.25
8.03
7.14
6.53
5.69
6.12
5.73
5.63
5.98
5.68
5.55
4.78
4.22
4.55
4.36
4.30
4.70
-1.22
-2.11
-2.72
-3.56
-3.13
-3.52
-3.62
-3.27
-3.57
-3.70
-4.47
-5.03
-4.70
-4.89
-4.95
-4.55
12.25
11.25
10.67
10.21
9.58
9.90
9.61
9.53
9.79
9.56
9.46
8.88
8.46
8.71
8.57
8.52
8.82
0.71
0.42
0.27
0.28
0.99
0.94
1.56
1.31
1.32
0.97
0.98
0.96
1.07
1.18
2.58
1.84
1.72
-0.29
-0.45
-0.43
0.27
0.23
0.84
0.60
0.61
0.26
0.26
0.25
0.36
0.47
1.87
1.13
1.01
-0.61
-1.06
-1.36
-1.78
-1.57
-1.76
-1.81
-1.64
-1.79
-1.85
-2.24
-2.52
-2.35
-2.45
-2.48
-2.28
-0.14
-0.22
-0.21
0.14
0.11
0.42
0.30
0.31
0.13
0.13
0.13
0.18
0.23
0.93
0.56
0.50
11.50
10.97
10.68
10.61
10.80
10.91
10.74
10.92
10.59
10.53
10.14
9.91
10.13
10.74
10.34
10.48
9.6
10.7
Spread represents differential between Dex A rated Long-term Corporate Bond Index and benchmark Government of Canada bond yield.
2011 Long Canada based on January 2010 Consensus Economics, Consensus Forecasts ’ 4.1% 10-year Canada bond yield forecast for
January 2011 plus a January 2010 daily average spread between 10-year and 30-year Canada bond yields of 0.56% . Corporate spread for 2011
is average of spreads at the end of December 2009 and January 2010.
Source: NEB Decisions, Bank of Canada, PC Bond Analytics (TSX Group Inc.)