Direct testimony of J Peter Williamson on behalf of Enbridge Offshore Pipelines (UTOS), LLC under RP03-335.

Jnofflclal FERC-Generated PDF of 20030408-0216 Received by FERC OSEC 03/31/2003 in D o c k e t # : R P 0 3 - 3 3 5 - 0 0 0 Exhibit No. __(JPW-1) UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ENBRIDGE OFFSHORE PIPELINES (UTOS), 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 J. 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 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. B. 14 Q. What is the purpose of your direct testimony in this case? 15 A. I have been asked to verify the capital structure appropriate for use by 16 Enbndge Offshore Pipelines (UTOS), L.L.C. ("UTOS" or "the Company") in 17 this proceeding, the cost of long-term debt for the Company, and its cost of 18 common equity. In addition, I have been asked to verify that the lg management fee proposed by the Company is appropriate and sufficient to Jnofflclal FERC-Generated PDF of 20030408-0216 Received by FERC OSEC 03/31/2003 in D o c k e t # : R P 0 3 - 3 3 5 - 0 0 0 1 provide a necessary cash cushion to protect the Company from insolvency 2 due to variations in revenues and expenses. 3 Summary 4 Q. Please summarize your verification of the capital structure and cost of debt 5 that should be used for UTOS. 6 A. The Company is using in this proceeding the capital structure of its parent, 7 which does all of UTOS's financing. This structure is 44.37% equity and 8 55.63% debt. For the same reason, UTOS is using the cost of debt to its 9 parent, which is 6.87%. The use of the parent capital structure and cost of 10 debt, w h e n it is the parent that does the financing, is prescribed in Opinion 11 No. 414-A, Order on Rehearing, Transcontinental Gas Pipe Line Corporation, 84 12 FERC 61,084 (1998) and in Michigan Gas Storage Company, 87 FERC 61,038 13 (1999), as ...