Topic:"Forecasting Methodology" in M11990

1 4.0 CONCLUSION 2 - 3 NS Power respectfully requests approval of a single WACC/AFUDC rate of 6.66 percent for both - 4 capital and non‐capital matters to be effective the latter of January 1, 2025 or the first day of the - 5 month in whic...

AI summary NS Power requests approval for a 6.66% WACC/AFUDC rate for capital and non-capital matters, effective January 1, 2025, or upon Board approval. They also seek approval to use Bloomberg's forecast methodology for short-term debt rate forecasting, supported by Appendix A.

A bumpy landing is still more likely than a soft one in the U.S. In the U.S., broadly easing inflation pressures are playing out against a resilient consumer and labour market backdrop. This has increased talk of a possible "soft-landing"...

AI summary The text discusses the likelihood of a soft landing for the U.S. economy, arguing that while inflation is easing, the Federal Reserve is unlikely to consider it sustainable without significant changes in consumer demand and labor markets. Well-anchored inflation expectations are seen as a key factor in the initial moderation of CPI.

Assumptions - Implementation of the multi-year rate increases at TEC. - No adverse weather beyond our base-case expectations. We assume deferred costs incurred in 2024 related to Hurricane Milton and Hurricane Helene will be recovered by t...

AI summary The assumptions section outlines key factors including multi-year rate increases at TEC, no unexpected adverse weather impacts, C$3.5-4.0B annual capital spending (2025-2026), C$600M annual dividends, negative discretionary cash flow, and assumed sale proceeds from New Mexico gas in 2025.

3 Forecasting Methodology 4 - 5 While acknowledging NS Power's position that the changes to forecast methodology are in - 6 alignment with the Board approved methodology from the 2016 WACC Decision, the CA opines - 7 that the adjustments (...

AI summary The CA acknowledges NSP's alignment with the 2016 WACC Decision but raises concerns about adjustments (Bloomberg and CORRA), suggesting a potential review of the methodology in future proceedings.

1 5.0 CONCLUSION 2 3 NS Power has calculated the annual WACC and AFUDC rate in accordance with the Board 4 approved methodology. The Company has estimated the cost of short-term and new long-term 5 debt using the forecasts of major financi...

AI summary NS Power calculated its annual WACC and AFUDC using the Board's methodology, leveraging Bloomberg for Treasury Bill data per the 2016 decision. It transitioned from CDOR to Term CORRA for interest rate forecasts, aligning with industry standards, and seeks approval for its 6.66% rate.

Bloomberg's Short-term Interest Rate In matter M11563, NS Power requested to apply Bloomberg's Outlook 3-month interest rate to estimate short term debt rates in future debt rates in place of the approved methodology that uses forecasts of...

AI summary NS Power requested to use Bloomberg's 3-month interest rate forecasts instead of T-Bill forecasts for short-term debt rates. The Board required NS Power to prove Bloomberg's method's accuracy, but past data (2022-2025) showed neither method was accurate. NS Power argues Bloomberg's method is better due to larger sample size and minimal WACC/AFUDC impact. The CA criticized outdated August data, while the IG noted little difference between forecast methods.

Findings The Board previously noted in matter M11563 that the difference between using the Bloomberg forecast and the approved forecasting method for short-term interest rates was negligible. Using external data could increase efficiency a...

AI summary The Board evaluates NS Power's use of Bloomberg forecasts for short-term interest rates, finding no significant accuracy advantage over other methods. It directs NS Power to use a 4.86% rate for WACC/AFUDC calculations and mandates a methodology review by 2026. The Board also requires compliance filings and ongoing updates on credit rating changes affecting borrowing costs.

Request IR-3: - How has the transition from Canadian Dollar Offered Rate (CDOR) to Canadian Overnight Repo - Rate Average (CORRA) affected NS Power's financial position and forecasting processes, - specifically in terms of: - a) The impact...

AI summary Request IR-3 seeks information on how NS Power's transition from CDOR to CORRA has impacted its financial position, forecasting processes, risk management, and compliance with regulatory requirements.

Request IR-5: - In reference to Figure 1 on page 8: - a) In 2022 and 2023, the actual short-term interest rate was significantly higher than both the Bloomberg and T-Bill forecasts. Is there any insight into why the forecasts were so far o...

AI summary Request IR-5 questions discrepancies between actual and forecasted short-term interest rates (2022-2023), requests data sources for bank forecasts, demands figure revision with bank-specific data, seeks utilities using Bloomberg for WACC/AFUDC, and inquires if Bloomberg incorporates specific bank forecasts.

Request IR-7: - Page 8 of the application states that the Bloomberg data uses a larger sample size of short-term - interest rates from a more diverse group of financial institutions. - a) Please specify which Bloomberg short term interest...

AI summary The regulator is requesting NS Power to clarify details about Bloomberg's short-term interest rate data, including the specific rate used, sample size, Canadian financial institutions involved, the definition of 'diverse' institutions, and how Bloomberg's methodology improves forecast accuracy compared to the current approach.

Change in Methodology NSPI stated that the methodology employed to calculate WACC/AFUDC is consistent with that used in prior GRAs and WACC Applications.[1](#page-0-0) At the same time, NSPI acknowledged that it "updated" its short-term in...

AI summary NSPI updated its methodology for calculating WACC/AFUDC by switching from T-Bill data from five Canadian banks to Bloomberg rates and adopting CORRA as the benchmark. NSPI argues this doesn't alter the core methodology, but the Board previously confirmed a methodology change in M11563. The Board now considers these updates for approval.

1. Forecasting Methodology NS Power indicates in its Application that its forecasting methodology is consistent with the methodology "used in the past General Rate Application (GRA) and WACC/AFUDC Application.["](#page-1-0) 3 However, in t...

AI summary NS Power's forecasting methodology for short-term debt rates uses Bloomberg and CORRA, differing from prior approaches that relied on Canadian Banks and CDOR. The Consumer Advocate questions whether the 2016 WACC Decision's methodology remains applicable, citing discrepancies in calculated debt rates (5.19% vs. quarterly rates of 3.88%-4.47%). NS Power defends its approach as consistent with prior approvals but acknowledges methodological changes.

CDOR vs CORRA Refinitiv Benchmark Services Limited stopped publishing the Canadian Dollar Offer Rate (CDOR) at the end of June 2024. The CDOR was used by NS Power as part of its short-term interest rate methodology. NS Power has adopted th...

AI summary NS Power transitioned from CDOR to Term CORRA for interest rate forecasting, but the Consumer Advocate (CA) argues this deviates from the 2016 Decision M07215 due to methodology discrepancies and higher calculated rates. The Industrial Group (IG) supports the CORRA transition but requests more transparency. NS Power defends its approach, citing industry alignment and the Canadian Alternative Reference Rate Working Group's recommendation.

Bloomberg's Short-term Interest Rate In matter M11563, NS Power requested to apply Bloomberg's Outlook 3-month interest rate to estimate short term debt rates in future debt rates in place of the approved methodology that uses forecasts of...

AI summary NSP requested using Bloomberg's short-term interest rate forecasts instead of the current method involving 3-month T-Bill forecasts. The Board directed NSP to prove Bloomberg's method's accuracy. NSP provided data showing neither method was accurate, but argued Bloomberg's approach is better due to larger sample size and minimal WACC impact. The CA criticized outdated data, while the IG noted minimal differences between forecast methods.

Findings The Board previously noted in matter M11563 that the difference between using the Bloomberg forecast and the approved forecasting method for short-term interest rates was negligible. Using external data could increase efficiency a...

AI summary The Board acknowledges the negligible difference between Bloomberg and approved forecasting methods for short-term interest rates but directs NSP to use 4.86% for WACC/AFUDC calculations. NSP must continue submitting forecasts via the Board-approved method and file a compliance filing by March 2025. A broader methodology review is required for the 2026 application, with potential discussions on forecasting alternatives and calculation approaches.