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Providing cost of capital expert testimony for a joint action agency


“MCR created an innovative analysis based on our historical debt service coverage that compared to a traditional IOU ROE analysis, which allowed us to make a reasonable filing at FERC that was ultimately accepted.”

—Transmission Planning Manager, joint action agency


Background

A joint action agency was joining an RTO and anticipated making a Section 205 rate filing at FERC, which required an expert witness to support the requested return on equity (“ROE”) to be used in its formula rate. The joint action agency requested MCR to provide an analysis to determine the recommended ROE and support the recommended ROE with related expert testimony.

Solution

Prior to the Section 205 filing, MCR provided an innovative analysis that translated the client’s debt service coverage ratio into a requested ROE level. MCR shared the results with the client and assisted in the development of an overall filing strategy. As part of the Section 205 filing, MCR refined the analysis using updated data and provided the associated testimony to justify the recommended ROE.

Results

After settlement discussions, the client came to an agreement with multiple interveners regarding a number of issues, including the proper level of return. Ultimately, the parties agreed to the client’s desired level of debt service coverage, thus achieving a reasonable level of return. The client obtained FERC approval of the settlement.