Demande de modifier les tarifs de SCGM à compter du 1er octobre 2007
R-3630-2007
DR. BOOTH’S INFORMATION REQUESTS #1 ON DR. CARPENTER’S EVIDENCE
7 juin 2007
IR#1
Reference: Dr. Paul Carpenter’s Evidence, page 8.
Preamble:
With reference to Dr. Carpenter’s table of common equity ratios.
Request
a) Please indicate which increases in common equity ratios were the result of “black box”
settlement agreements where there is no indication of what was “traded off” by the utility
to achieve the increased common equity thickness.
b) Please indicate which increases in common equity ratios were associated with
“determinations by regulators” that business risk had increased and reference the specific
risks that were regarded as having increased.
IR#2
Preamble:
With reference to Dr. Carpenter’s comparisons with Gaz Metro on page 7-8.
Request
a) Please provide the current ROE formula and the current allowed ROE for the following
Canadian utilities: TransCanada Pipelines, Terasen (BC) Gas Utility, Enbridge
(Consumers) Gas Distribution, Union Gas, ATCO Gas and Emera.
b) Please indicate when the ROE formula was last reviewed for the utilities mentioned in a)
above and the result of the review.
c) Please provide the formula allowed ROE for each year since 1997 for the utilities
mentioned in a) above
d) Please provide the regulated common equity ratios for the utilities mentioned in a) above
since 1997.
Dr. Booth’s Information Requests #1 on Dr. Carpenter’s Evidence
R-3630-2007
Page 2
IR#3
Preamble:
With reference to Dr. Carpenter’s discussion of gas price volatility on pages 9-12.
Request
a)
b)
Does the fact that Canadian gas is now connected to US gas markets make hedging
that price risk more or less difficult? Are there more hedging vehicles available now
that it is one integrated market?
Does Dr. Carpenter agree that high prices mean that a commodity is more desirable,
that is, it is more valuable? Would Dr. Carpenter assert that a company is riskier if it
is marketing an undesirable product or a desirable product? Please provide any
evidence to support this conclusion.
IR#4
Preamble:
With reference to Dr. Carpenter’s discussion of new pipelines on page 12
a) Is it Dr. Carpenter’s view that the risks of new pipelines are the same as in service,
existing, pipelines? Please provide references to his own testimony where he has stated
that the risks are the same.
b) Please provide the “docket number” for the NEB decision that has allowed the MVP the
NEB formula allowed ROE plus 2.21% on a 30% common equity ratio. In Dr.
Carpenter’s judgment how much would the MVP risk premium have to be reduced
should it be allowed the same 38.5% common equity ratio as Gaz Metro?
IR#5
Preamble:
With reference to Dr. Carpenter’s discussion of diversification risk on page 13
a) Is this discussion of diversification the same principle underlying the Capital Asset
pricing model?
b) In previous testimony with colleagues from the Brattle group such as Drs Kolbe and
Vilbert has Dr. Carpenter supported the use of CAPM based estimates of the fair rate of
return?
c) Is Dr. Carpenter aware of testimony on the fair rate of return provided by Dr’s Kolbe and
Vilbert that has been based on the Fama French three factor model? If so please provide
Dr. Booth’s Information Requests #1 on Dr. Carpenter’s Evidence
R-3630-2007
Page 3
extracts from their most recent testimony that shows how they have used the Fama
French model in their estimates.
IR#6
Preamble:
With reference to Dr. Carpenter’s discussion of assurance that the utility will be allowed to earn
a fair ROE on page 13
a) Please provide the allowed and earned ROE for Gaz Metro from 1997,
b) Please also provide the allowed and actual ROE for Union Gas and Enbridge Gas
Distribution for whom Dr. Carpenter testified in 2006 for the same period.
c) On the basis of this ability to earn their allowed ROE since 1997 please rank Gaz Metro
relative to the two Ontario gas LDCs.
IR#7
Preamble:
With reference to Dr. Carpenter’s discussion of Gaz Metro’s business risk on page 14
a) Please provide the residential, industrial and commercial customer breakdown based on
revenues for each year since 1997,
b) Please provide the same data as in a) for Terasen Gas Utility, Union Gas and Enbridge
Gas Distribution
c) In Dr. Carpenter’s view how does the revenue composition affect Gaz Métro's business
risk?
IR#8
Preamble:
With reference to Dr. Carpenter’s discussion of Gaz Métro’s business risk on page 14
a) Is it Dr. Carpenters view that PBR increases or decreases Gaz Métro’s risk?
b) Please indicate whether Gaz Metro has failed to earn its allowed ROE at any time while
operating under PBR and by how much.
c) Dr. Chrétien reduces Gaz Metros’ risk premium due to the ability of Gaz Metro to earn
an above average ROE due to PBR. This implies that PBR reduces Gas Metros’ risk does
Dr. Carpenter agree with this assessment and can he provide extracts from any recent
Canadian testimony where he has discussed the impact of PBR on a regulated utility’s
business risk.
Dr. Booth’s Information Requests #1 on Dr. Carpenter’s Evidence
R-3630-2007
Page 4
IR#9
Preamble:
With reference to Dr. Carpenter’s discussion of Gaz Métro’s business risk on page 19.
a) Dr. Carpenter discusses the utilization of Gaz Métro’s assets as a risk factor. Would Dr.
Carpenter agree that changing the depreciation rate in response to changes in the
expected utilization of assets is one way of offsetting this risk?
b) Can Dr. Carpenter please indicate Gaz Metro’s composite depreciation rate and contrast
it with that allows Terasen Gas, Union Gas, Enbridge Gas Distribution.
IR#10
Preamble:
With reference to Dr. Carpenter’s discussion of Gaz Metro’s weather deferral account on page
19.
a) Please explain how this deferral account operates and whether Gaz Metro is held
responsible for volume variances
b) Please contrast Gaz Metro’s deferral account with that available to Enbridge Gas
Distribution, Union Gas and Terasen Gas.
c) In terms of shielding the utility from the effect of weather risk which of the four deferral
accounts discussed in a) and b) would Dr. Carpenter believe to be the most
comprehensive?
IR#11
Preamble:
With reference to Dr. Carpenter’s discussion of the decline in average consumption of gas by
Gaz Metro’s customers on page 23.
a) Please indicate why this is a risk factor if it can be predicted by the accuracy shown in the
graphs on Page 23, that is why has it made the consumption for natural gas more difficult
to forecast?
b) Please indicate whether Union Gas and EDGY for whom Dr. Carpenter testified in 2006
have suffered the same declining in average use.
c) Please indicate any decisions by the Ontario Energy Board and provide extracts from the
decisions that have specifically accepted declining average gas consumption as a risk
factor for Union Gas and EDGY.
Dr. Booth’s Information Requests #1 on Dr. Carpenter’s Evidence
R-3630-2007
Page 5
IR#12
Preamble:
With reference to Dr. Carpenter’s discussion of US gas LDCs on page 27
a) If US gas LDCs do not make extensive use of deferral accounts and have infrequent rate
hearings, does this make them more or less risky than Canadian gas LDCs.
b) What adjustment to the risk positioning of Canadian vs. US gas LDCs would Dr.
Carpenter make based on his answer to a) above.
c) How much would Dr. Carpenter adjust US Gas LDC’s beta estimates downwards to
reflect the two risks mentioned in a).
IR#13
Preamble:
With reference to Dr. Carpenter’s discussion of Gaz Métro’s market penetration on page 34.
a) Please indicate in detail the geographic economies of scale and scope available to Union
gas and EGDI and whether these are risk mitigating factors for them.
b) Please provide extracts from Dr. Carpenter’s 2006 testimony on behalf of Union Gas and
EGDI where he discussed the risk mitigating factors discussed in a) above.
c) Please indicate any studies that Gaz Metro has performed on the price elasticity of
demand for natural gas.
IR#14
Preamble:
With reference to Dr. Carpenter’s discussion of Gaz Metro’s ROE relative to US gas LDCs
a) Please indicate in detail whether Dr. Carpenter thinks that US allowed ROEs can be
compared to Canadian allowed ROEs
without adjusting for the fact that Canada is
a different country with a separate monetary policy and different tax and institutional
factors.
b) Please indicate what adjustments Dr. Carpenter has made to the graph on page 40 for the
different regulatory lag in the US and the absence of deferral accounts discussed earlier in
his testimony.
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