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ANALYSISOFRATEOFRETURN:回报率分析.doc
BEFORE THE
PUBLIC SERVICE COMMISSION OF MARYLAND
IN THE MATTER OF THE APPLICATION OF THE BALTIMORE GAS AND ELECTRIC COMPANY FOR REVISIONS IN ITS GAS BASE RATES
)
)
)
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CASE NO. 9036
REBUTTAL TESTIMONY
OF
WILLIAM E. AVERA
ON BEHALF OF
BALTIMORE GAS AND ELECTRIC COMPANY
FINCAP, Inc.
Financial Concepts and Applications, Inc.
3907 Red River
Austin, Texas 78751
512-458-4644
September 7, 2005
TABLE OF CONTENTS
I. INTRODUCTION 1
II. PHILLIP E. VANDERHEYDEN 4
III. CHARLES W. KING 25
IV. MICHAEL GORMAN 44
V. OTHER WITNESSES 54
Schedule WEA-10 – LDC Industry Group Capital Structure at June 30, 2005
Schedule WEA-11 – LDC Industry Group 1984 Market-to-book Ratio
INTRODUCTION SUMMARY
Q. Please state your name and business address.
A. William E. Avera, 3907 Red River, Austin, Texas 78751.
Q. Are you the same William E. Avera that previously submitted direct testimony in this case?
A. Yes, I am.
Q. What is the purpose of your rebuttal testimony?
A. My testimony addresses the testimony of Phillip E. VanderHeyden, submitted on behalf of the Staff of the Public Service Commission of Maryland (MPSC), Charles W. King, on behalf of the Maryland Office of People’s Counsel, Michael Gorman, on behalf of ISG Sparrows Point LLC, and Thomas J. Prisco, on behalf of the Department of Defense and other Federal agencies, concerning a fair overall rate of return (ROR) to apply to the rate base of Baltimore Gas and Electric Company (BGE or the Company). In addition, I also address the testimony of Staff witness Kenneth J. Lee concerning the implications of short-term debt.
Q. Please summarize the principal conclusions of your rebuttal testimony.
A. With respect to Mr. VanderHeyden’s 10.36% rate of return on common equity, I concluded that his recommendation was biased downward because:
Mr. VanderHeyden properly rejected the results of his IRR method, based on his conclusion that the underlying dividend growth rates were skewed and understated. Nevertheless, he continued to include
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