Answering Testimony with Revised Exhibit Numbering of the Canadian Association of Petroleum Producers under RP10-729.

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 ...