Direct and Answering Testimony of Commission Trial Staff under RP10-1398.

EXHIBIT NO. S-4 FEDERAL ENERGY REGULATORY COMMISSION OFFICE OF ADMINISTRATIVE LITIGATION EL PASO NATURAL GAS COMPANY DOCKET NO. RP10-1398-000 DIRECT AND ANSWERING TESTIMONY OF COMMISSION STAFF WITNESS KEVIN J. PEWTERBAUGH June 28, 2011 WASHINGTON, D.C. 20426 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION El Paso Natural Gas Company ) Docket No. RP10-1398-000 Summary of the Direct and Answering Testimony of Kevin J. Pewterbaugh Witness for the Trial Staff of the Federal Energy Regulatory Commission Trial Staff witness Kevin J. Pewterbaugh's direct and answering testimony, Exhibit No. S-4, presents Staff's depreciation, amortization, and negative net salvage rate proposals. His Exhibit No. S-5 contains a list of his prior testimony as well as the depreciation studies he performed. Exhibit No. S-6 contains his supporting schedules, and Exhibit No. S-7 contains his workpapers. Mr. Pewterbaugh has provided analyses supporting a remaining economic life of 40 years from March 31, 2011, for El Paso's facilities. He has based his analysis on the gas reserves, resources, and production from El Paso's supply areas. He has also considered demand for natural gas and potential competition in relation to this remaining economic life. Mr. Pewterbaugh made an adjustment to account for interim retirements, and based on his analyses, calculated a depreciation rate of 1.60 percent for El Paso's storage facilities, and 2.22 percent for its other transmission facilities. He has also shown that El Paso witness Edward H. Feinstein's analysis contains elements, namely "major retirements" and future additions, that should not be included in a depreciation calculation. Based on Mr. Pewterbaugh's analysis, he believes that El Paso's filed for rates are acceptable, but that Mr. Feinstein's calculated higher depreciation rates are not acceptable. Further, Mr. Pewterbaugh believes that a 2.20 percent rate for the Willcox lateral is reasonable and that its existing rate of 3.40 percent be lowered to that rate. With respect to the negative net salvage rate, he believes El Paso's proposal to increase this rate has not been justified, and that this rate should stay at its preexisting level. A summary of Mr. Pewterbaugh's recommendations is provided in Exhibit No. S- 6, Schedule No. 1. EXHIBIT NO. S-4 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION El Paso Natural Gas Company ) Docket No. RP10-1398-000 Prepared Direct and Answering Testimony of Kevin J. Pewterbaugh Witness for the Staff of the Federal Energy Regulatory Commission 1 INTRODUCTION 2 Q. Please state your name and business address. 3 A. My name ...