Exhibit HIO-85 in High Island Offshore System, LLC's proceeding under RP03-221: Prepared direct testimony of J Peter Williamson.

Jnofflclal FERC-Generated P D F o f 20040426-0283 Received by FERC OSEC 11/19/2003 in D o c k e t # : RP03-221-000 Exhibit No. HIO-85 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION High Island Offshore System, L.L.C. Docket No. RP03- Prepared Direct Testimony Of J. Peter Williamson 1 Q. Please state your name and business address. 2 A. My name is 1. Peter Williamson. My business address is 89 Main Street, West 3 Lebanon, New Hampshire 03784, and P.O. Box 5160, Hanover, New 4 Hampshire 03755. 5 Q* What is your occupation? 6 A. I am the Laurence F. Whittemore Professor of Finance Emeritus at the Amos 7 Tuck School of Business Administration, Dartmouth College. I have retired qmw 8 from teaching and continue to act as a consultant to various organizations, 9 both business and nonprofit institutions, on matters pertaining to corporate 10 finance and investments. I have testified in numerous proceedings before 11 the Federal Energy Regulatory Commission and other regulatory agencies 12 regarding cost of equity, capital structure and other financial matters. My 13 education and qualifications are set out in some detail in my Exhibit No. 14 HIO-86. 15 Q. What is the purpose of your direct testimony in this case? 16 A. I have been asked to verify the capital structure appropriate for use by High 17 Island Offshore System, L.L.C. ("HIOS" or "the Company") in this 18 proceeding, the cost of long-term debt for the Company, and its cost of 19 common equity. In addition, I have been asked to verify that the 20 management fee proposed by the Company will be sufficient to provide a ~mF t~. ::~':.?.YI g:3"J~,:.%! ~ O l . :? . . . . . . . . . . . . . . . . . . 1 . j.l: . . . . . . . ;. . . . . . . . . , ~ ~z~ , , : , ,., ~i~,~l .......... ~.I..I~..D ..... Jnofflclal FERC-Generated P D F o f 20040426-0283 Received by FERC OSEC 11/19/2003 in D o c k e t # : RP03-221-000 1 necessary cash cushion to protect the Company from insolvency due to 2 variations in revenues and expenses. 3 Summary 4 Q. Please summarize your verification of the capital structure that should be 5 used for H1OS. 8 A. The Company is using 60% equity and 40% debt as its capita] structure for 7 purposes of this proceeding. HIOS's long-term capital structure as of the 8 end of the test period will consist entirely of equity. However 100% equity 9 financing is, I believe, unacceptable to the FERC for ratemaking purposes. 1 10 believe that a capital structure for ratemaking purposes of 60% common 11 equity and 40% long-term debt is reasonable and appropriate, and I shall 12 present the reasons for that ...