Exhibit No. ___ (CAP-9)
1 UNITED STATES OF AMERICA
2 BEFORE THE
3 FEDERAL ENERGY REGULATORY COMMISSION
4
5 IN THE MATTER OF
6 PORTLAND NATURAL GAS TRANSMISSION SYSTEM
7 DOCKET NO. RP10-729-000
8
9 PREPARED ANSWERING
10 TESTIMONY OF DAVID C. PARCELL
11 ON BEHALF OF
12 THE CANADIAN ASSOCIATION OF PETROLEUM PRODUCERS
13
14
15 I. INTRODUCTION
16
17 Q. PLEASE STATE YOUR NAME, OCCUPATION, AND BUSINESS ADDRESS.
18 A. My name is David C. Parcell. I am President and Senior Economist of Technical
19 Associates, Inc. My business address is Suite 601, 1051 East Cary Street, Richmond,
20 Virginia 23219.
21
22 Q. PLEASE DESCRIBE YOUR BACKGROUND AND EXPERIENCE.
23 A. I hold a B.A. (1969) and M.A. (1970) degrees in economics from Virginia Polytechnic
24 Institute and State University (Virginia Tech) and a M.B.A. (1985) from Virginia
25 Commonwealth University. I have been continuously employed by Technical Associates
26 since 1970. The large majority of my consulting experience has involved the provision
27 of cost of capital testimony in utility ratemaking proceedings. I have previously testified
28 in over 460 utility proceedings before some 50 regulatory agencies in the United States
29 and Canada, including over 20 natural gas pipeline proceedings before the Federal
30 Energy Regulatory Commission.
31 A more complete description of my background and experience is contained in
32 Exhibit No. CAP-10.
33
34 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING?
35 A. I have been retained The Canadian Association of Petroleum Producers (CAPP) to
36 evaluate the cost of equity for Portland Natural Gas Transmission System (PNGTS), in
Prepared Answering Testimony of David C. Parcell
RP10-729
Exhibit No._____(CAP-9)
Page 2 of 28
1 connection with this Section 4 rate proceeding.
2
3 Q. PLEASE CONTRAST YOUR COST OF EQUITY RECOMMENDATIONS WITH
4 THOSE OF PNGTS.
5 A. PNGTS has submitted a Section 4 rate filing that includes a cost of capital of 10.60
6 percent, which in turn reflects a cost of equity of 13.41 percent. My analysis indicates
7 that this proposed return on equity is substantially excessive, for the reasons explained
8 below.
9 My testimony and conclusions more properly relate to the cost of equity models
10 and methodologies employed by the Commission in recent decisions and other directives
11 involving interstate natural gas pipeline companies. In so doing, I have primarily relied
12 on the two-stage DCF model preferred by the Commission. I have also considered the
13 current appropriateness of including Master Limited Partnerships (MLPs) in the proxy
14 group as cited by the Commission in its April 17, 2008 Policy Statement in Docket No.
15 PL07-2-000 (Policy Statement). My DCF analyses are applied to a group of seven
16 publicly-traded corporations and MLPs ...
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