FUS-1315*;M-0099XXXX.O; QUARTERLY EARNINGS REPORT



PENNSYLVANIA PUBLIC UTILITY COMMISSIONPublic Meeting held October 31, 2013 Docket Number: M-2013-2389036BUREAU OF TECHNICAL UTILITY SERVICESREPORT ON THE QUARTERLY EARNINGSOF JURISDICTIONAL UTILITIESFOR THE PERIOD ENDEDJune 30,?2013Robert F. Powelson, ChairmanJohn F. Coleman, Jr., Vice ChairmanJames H. Cawley, DissentingPamela A. WitmerGladys M. BrownTABLE OF CONTENTS Page No.Introduction ..................................................................................................... 5Peoples TWP, LLC, Pennsylvania American Water Company, The York Water Company, and Duquesne Light Company had a pending rate filing at Docket Nos. R-2013-2355886, R-2013-2355276, R-2012-2336379, and R-2013-2372129 respectively, and filed a letter with the Secretary in place of a report in accordance with 52 Pa. Code § 71.4. Attachment A – Summary of Equity Returns……………………………… 6 Attachment B – Summary of Returns10This chart depicts the overall and equity returns (actual and adjusted) for the filing utilities for the current quarter. The last authorized equity return and the year authorized is also shown.Attachment C – Allowed Rates of Return on Common Equity13This is a historical chart that shows the most recent fully litigated rate cases for select companies in electric, gas, and water. A docket number followed by their final return on equity and year is also given. Attachment D – Market Based Returns on Equity – Electric14The market indicated common equity cost rate range consists of data used from the electric barometer groups and is based on a series of calculations to average the DCF methods. Also indicates Distribution System Improvement Charge Return.Attachment D – Electric Barometer Group Calculation of a Current and 52 Week Average Dividend Yield15Barometer water companies are used to calculate a current DCF in the first chart. The second chart demonstrates the companies 52 week average DCF. A final average of the two calculations is also shown at the bottom.Attachment D – Development of a Representative Dividend Growth Rate…………………………………………………...16Multiple sources of the Barometer water companies projected 5 year Earnings Per Share are used to calculate the Group Average Dividend Growth Estimate.Attachment D – Common Equity Ratios of Electric Barometer Companies17The Common Equity Ratios of Electric Utility Barometer Companies table depicts each company’s common equity ratio. The range of reasonable equity ratios consists of the lowest and highest common equity ratio in the quarter for the barometer group companies.Attachment D – Capital Structure and Cost of Debt and Preferred Stock 18The Capital Structure and Cost of Debt and Preferred Stock table is taken from the Schedule E and Schedule F of each Pennsylvania electric company’s quarterly earnings report. Attachment E – Market Based Returns on Equity – Gas19The market indicated common equity cost rate range consists of data used from the gas barometer groups and is based on a series of calculations to average the DCF methods. Also indicates Distribution System Improvement Charge Return.Attachment E – Gas Barometer Group Calculation of a Current and 52 Week Average Dividend Yield20Barometer water companies are used to calculate a current DCF in the first chart. The second chart demonstrates the companies 52 week average DCF. A final average of the two calculations is also shown at the bottom.Attachment E – Development of a Representative Dividend Growth Rate…………………………………………………...21Multiple sources of the Barometer water companies projected 5 year Earnings Per Share are used to calculate the Group Average Dividend Growth Estimate.Attachment F – Market Based Returns on Equity – Water22The market indicated common equity cost rate range consists of data used from the water barometer groups and is based on a series of calculations to average the DCF methods. Also indicates Distribution System Improvement Charge Return.Attachment F – Water Barometer Group Calculation of a Current and 52 Week Average Dividend Yield23Barometer water companies are used to calculate a current DCF in the first chart. The second chart demonstrates the companies 52 week average DCF. A final average of the two calculations is also shown at the bottom.Attachment F – Development of a Representative Dividend Growth Rate…………………………………………………...24Multiple sources of the Barometer water companies projected 5 year Earnings Per Share are used to calculate the Group Average Dividend Growth Estimate.Introduction:On September?20,?1991, the Commission initiated a rulemaking at L-00910061 pertaining to earnings disclosures by the public utilities subject to its jurisdiction. At that docket, the Commission stated that the submission of accurate, reliable and complete earnings disclosure reports, at regular intervals, is essential to the fulfillment of the broad regulatory oversight responsibilities entrusted to the Commission by the Legislature in the Public Utility Code. The earnings disclosure regulations promulgated by the Commission were adopted October?1,?1992, and published January?23,?1993 at, 23 Pa.B 463. Based upon those regulations, codified at 52 Pa. Code, Chapter 71, a reporting format was developed and distributed to the jurisdictional fixed utilities of Pennsylvania.All fixed utilities having jurisdictional revenues of $1,000,000 or more, for a calendar year, are required to file the report by March 31 of each year. Such reports are to be based upon the results of operations for the 12-month period ending December 31 of the prior year. Utilities having more than $10,000,000 in jurisdictional revenues are also required to file reports for the 12 months ending on March 31, June 30, and September 30 of each year. On November?30,?2004, however, the Pennsylvania General Assembly signed into law Act 183 concerning alternative telecommunications regulation and broadband deployment. As a result of Act 183, the reporting requirements for the PUC jurisdictional telecommunications companies of Pennsylvania have been streamlined at 3015 (e) of the Public Utility Code. A quarterly earnings report is not listed among those reports now required of PUC jurisdictional telecommunications utilities in Pennsylvania and, therefore, this report does not address telephone company earnings. The reports have been filed for the period ended June 30, 2013. The Finance Staff of the Bureau of Technical Utility Services has reviewed the reports and has prepared this summary report for public release. This Report sets forth the achieved return on equity for each company, the last allowed return for that utility, a market return as determined through the analysis of the barometer group data and the most recent returns allowed, per industry, by the Pennsylvania Public Utility Commission and by other regulatory bodies. Where a utility has not filed a report, the reasons for not filing are indicated.Questions pertaining to the preparation and contents of this Report should be directed to Ms. Erin Laudenslager, Manager - Finance, Bureau of Technical Utility Services, at (717) 705-4364.The equity return summaries that follow in Attachment A are, for each quarter;ACTUALBased on actual results of operationsandADJUSTED2. Based on company proposed pro forma and ratemaking adjustmentsELECTRIC UTILITIESEQUITY RETURNS BY QUARTERQTRENDPecoPPLDuqW PennPaPwrUGIPenelecMetEdACTADJACTADJACTADJACTADJACTADJACTADJACTADJACTADJ2008112.7410.976.686.688.008.004.064.064.694.6910.737.1513.7713.779.059.05210.909.157.177.178.808.803.703.707.075.5412.338.8114.0313.299.258.6339.688.387.447.448.128.123.483.486.354.789.088.1712.5611.788.487.82410.398.829.068.7510.5210.344.204.258.677.098.638.6515.0714.259.208.502009110.848.8410.0010.0010.9010.905.205.2010.028.767.557.556.395.835.224.69211.449.8211.0411.049.679.677.047.0411.8410.643.428.308.017.677.206.93311.2710.3610.4710.479.059.058.268.2610.178.496.969.0510.349.519.748.63411.587.709.209.208.588.4010.248.938.0311.159.719.214.233.36201017.487.486.696.69 12.6611.1910.1711.7010.439.964.713.7726.416.4112.2810.1913.4111.898.046.975.894.4736.636.6312.1910.2312.4611.978.377.328.246.83414.359.617.916.984.784.806.884.6912.9511.559.118.106.124.862011111.7411.348.318.318.436.8010.908.5513.4613.479.578.6210.569.21212.2511.039.419.4110.8610.3910.058.407.415.8114.1112.946.516.387.686.43310.3511.078.898.8910.059.5812.9511.2111.6710.0514.8412.938.738.189.907.50413.4111.3810.219.9713.3311.585.917.6014.609.796.458.434.245.232012112.8911.2610.9510.7111.6613.165.787.0215.048.425.767.543.904.64212.6312.0110.8110.4210.619.158.958.9514.618.536.488.083.444.01313.1412.6610.339.9210.6310.459.699.5415.859.487.348.585.726.28411.5511.566.024.8810.279.249.549.548.418.2714.608.985.417.745.396.812013111.9211.277.566.2410.129.749.239.238.898.7412.779.845.307.675.016.47211.4010.747.807.3712.3412.348.858.7011.5310.495.868.215.366.79 GAS UTILITIESEQUITY RETURNS BY QUARTERQTRColumbiaPeoplesPECOUGIEquitableNFGUGI PennPeoples TWPENDACTADJACTADJACTADJACTADJACTADJACTADJACTADJACTADJ2008118.5111.2815.6911.51-2.020.6916.5012.297.716.197.696.50219.1311.9914.5810.9315.7012.096.095.256.946.41320.5211.682.302.7412.709.8115.6011.583.994.465.075.0945.5210.7118.969.002.482.4312.6211.0116.4211.224.943.84200919.8511.0516.748.145.829.0613.929.885.899.5115.649.79--4.983.27211.4510.6116.519.727.629.6413.2610.507.219.7314.358.794.302.96310.979.1720.067.848.9510.596.969.058.4010.1314.7412.482.218.314.973.15414.806.4710.669.2814.5811.419.849.8614.7412.484.118.583.753.6520101 15.9111.6910.31 9.18 18.8010.467.848.7729.655.2515.9711.489.478.9919.1310.338.867.95314.8411.798.878.5618.1910.998.629.03412.507.6710.219.9416.5211.888.788.6718.9711.299.5710.123.279.572011111.7411.3419.6113.119.489.7819.8712.1113.0812.176.529.06211.9710.7919.6713.9210.8110.7120.8312.9714.0812.656.106.9435.678.4712.5611.1518.2411.9810.409.9321.1613.0514.3211.485.786.67411.6912.0616.559.187.998.8919.6212.3414.019.356.755.56201218.6511.248.9812.0915.718.952.298.0515.7610.5113.229.635.243.3929.0010.178.7212.0313.609.905.517.5114.1010.0613.6310.404.576.4339.278.886.219.359.9813.4813.7910.055.847.7913.8810.3913.1610.667.027.41411.249.5712.4215.1013.689.447.278.0515.1110.1713.3110.635.056.942013112.499.8914.6315.1314.6510.2712.428.4019.3310.2513.2810.58210.857.1516.598.3514.4314.4013.0210.2110.408.9220.1810.2510.9810.27WATER UTILITIESEQUITY RETURNS BY QUARTERQTRPAWCAQUAUnitedYorkSuperiorENDACTADJACTADJACTADJACTADJACTADJ200818.068.067.518.829.207.2027.997.9910.5310.978.706.706.748.0138.658.6511.0910.518.706.0010.608.2548.859.4310.8710.447.158.408.2010.002009111.4510.788.809.607.288.40211.6910.719.209.306.507.7135.706.939.208.6045.665.848.809.00201018.728.105.746.578.908.7029.309.306.597.5439.589.5810.1910.357.158.3449.188.5210.108.944.668.6910.411.22011110.688.325.028.8110.811.1210.927.934.728.6111.110.233.927.6910.910.247.698.0010.810.0201218.988.987.387.8410.79.529.069.067.307.6510.49.439.179.179.507.777.968.3810.59.149.549.0412.4112.568.338.4910.49.12013113.2411.968.538.71214.2612.528.999.158.577.85 Attachment B includes:A. Overall Returns on rate base1. Actual2. Company proposed pro forma and ratemaking adjustmentsandB. Equity Returns1. Actual2. Company proposed pro forma and ratemaking adjustmentsAttachment B1 of 2Summary of Returnsfor the Year Ended June 30, 2013?OVERALLRETURNEQUITYRETURNROEYEARCOMPANY NAMEACTUALADJ ACTUALADJAUTHAUTHELECTRIC??$10,000,000 RevenuesPECO Energy 8.618.2411.4010.74Settled2010PPL Electric Utilities Corp.6.636.397.807.3710.402012Duquesne Light Company*Settled2007West Penn Power Company8.898.8912.3412.3411.501995Pennsylvania Power Company 7.807.708.858.7012.911988UGI Utilities, Inc. 9.468.4011.5310.4910.581996Pennsylvania Electric Company 6.307.365.868.2110.102007Metropolitan Edison Company 5.376.065.366.7910.102007GAS$10,000,000 RevenuesColumbia Gas of PA, Inc.8.416.5110.857.15Settled2013Peoples Natl Gas LLC11.336.7116.598.35Settled2012PECO Energy10.4110.4014.4314.40Settled2010UGI Utilities, Inc.10.368.2413.0210.21Settled1995Equitable Gas Company7.857.0110.408.92Settled1991National Fuel Gas Distribution Co.13.187.6220.1810.25Settled2006UGI Penn Natural Gas, Inc.8.878.2810.9810.27Settled2007Peoples TWP, LLC*Settled2006UGI Central Penn Gas, Inc.10.769.9314.3313.2210.402007WATER 10,000,000 RevenuesPA American Water Company*Settled2011AQUA Pennsylvania10.209.2514.2612.52Settled2012York Water Company*Settled2008United Water Penna. Inc.7.637.728.999.15Settled2009Superior Water Company6.966.698.577.85Settled2011* Peoples TWP, LLC, Pennsylvania American Water Company, The York Water Company, and Duquesne Light Company had a pending rate filing at Docket Nos. R-2013-2355886, R-2013-2355276, R-2012-2336379, and R-2013-2372129 respectively, and filed a letter with the Secretary in place of a report in accordance with 52 Pa. Code § 71.4.Attachment B2 of 2Columbia Gas of Pennsylvania, Inc.Return on equity adjusted from 10.85% to 7.15% based on the following company adjustments to actual results of operations.$ (4,546,000)Decrease in Operating Revenue$ 5,785,000Annualization of Rider USP Expense$ 4,088,000Annualization of Pension Expense$24,529,000Federal Income Tax AdjustmentPeoples Natural Gas CompanyReturn on equity adjusted from 16.59% to 8.35% based on the following company adjustments to actual results of operations.$79,605,000Rate Base Increase Plant Normalization$29,019,000Rate Base Increase in Deferred Taxes$ (30,640,000)Normalization of Operating Revenue$ (15,513,000)Normalization of Operating Expense$ 9,432,000Normalization of O&M Expense$ 9,077,000Normalization of Income TaxesNational Fuel Gas Distribution CorporationReturn on equity adjusted from 20.18% to 10.25% based on the following company adjustments to actual results of operations$29,302,000Rate Base Increase in Plant$37,739,000Rate Base Cash Working Capital Increase$ 10,111,000Decrease in Operating Revenue Attachment CALLOWED RATES OF RETURN ON COMMON EQUITY This is a historical chart that shows the most recent fully litigated rate cases for select companies in electric, gas, and water. A docket number followed by their final return on equity and year is also given. ELECTRICDocket NumberROE (%)Year Recent PA PUC AllowedPPL Electric Utilities Corp.R-2012-229059710.402012PECO Energy CompanyR-2010-2161575Settled2010West Penn Power CompanyR-00942986 11.501995UGI - ElectricR-00932862 10.581996Pennsylvania Electric CompanyR-0006136710.102007Metropolitan Edison CompanyR-0006136610.102007 Current Market Indicated ROE as calculated by the 8.06-10.97Bureau of Technical Utility Services.GASRecent PA PUC AllowedColumbia Gas of Pa.R-2012-2321748Settled2013UGI Utilities, Inc. – GasR-00953297 Settled1995Peoples Natural Gas Co.R-2012-2285985 Settled2012UGI Central Penn GasR-00061398 10.402007PECO EnergyR-2010-2161592 Settled 2010Current Market Indicated ROE as calculated by the 7.89-9.04Bureau of Technical Utility Services.WATERRecent PA PUC AllowedAqua Pennsylvania R-2011-2267958Settled2012Penna American Water Co. R-2011-2232243Settled2011 Current Market Indicated ROE as calculated by the 8.73-11.20Bureau of Technical Utility Services.The market indicated common equity cost rate range consists of data used from the barometer groups and is based on a series of calculations to average the DCF methods.Barometer water companies are used to calculate a current DCF in the first chart. The second chart demonstrates the companies 52 week average DCF. A final average of the two calculations is also shown at the bottom.Multiple sources of the Barometer companies projected 5 year Earnings Per Share are used to calculate the Group Average Dividend Growth Estimate.The Common Equity Ratios of Electric Utility Barometer Companies table depicts each company’s quarterly common equity ratio. The range of Reasonable Equity Ratios consists of the lowest and highest common equity ratio for the barometer group panyConsolidated EdisonDominion ResourcesPPL CorporationPublic Service Enterprise GroupPEPCO Holdings, Inc.UIL HoldingsAverageRange of Reasonable Equity Ratios50.00%44.50%57.50%Common Equity Ratios of Electric Utility Barometer Groups (2)2013 Common Equity Ratio (1)53.00%41.50%(1) Source: Value Line Investment Survey October 7, 2013(2) The common equity ratios reported by Value Line exclude short-term debt and current maturities of long-term debt.45.50%48.67%41.50-57.50%The Capital Structure and Cost of Debt and Preferred Stock table shows the Schedule E and Schedule F of each company’s quarterly earnings report. The market indicated common equity cost rate range consists of data used from the barometer groups and is based on a series of calculations to average the DCF methods.Barometer water companies are used to calculate a current DCF in the first chart. The second chart demonstrates the companies 52 week average DCF. A final average of the two calculations is also shown at the bottom.Multiple sources of the Barometer companies projected 5 year Earnings Per Share are used to calculate the Group Average Dividend Growth Estimate.The market indicated common equity cost rate range consists of data used from the barometer groups and is based on a series of calculations to average the DCF methods.Barometer water companies are used to calculate a current DCF in the first chart. The second chart demonstrates the companies 52 week average DCF. A final average of the two calculations is also shown at the bottom.Multiple sources of the Barometer companies projected 5 year Earnings Per Share are used to calculate the Group Average Dividend Growth Estimate. ................
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