Topic:"Reasonableness Review" in M12394

6 Q. What are your key conclusions and recommendations? - 7 A. We disagree with a number of the assumptions, assertions, and analytical approaches that 8 underlie Dr. Cleary's ROE recommendation, as well as the overall reasonableness of hi...

AI summary The response disagrees with Dr. Cleary's ROE recommendation, arguing it fails to account for the unique risks of subsea transmission companies like NSPML and does not meet the Fair Return Standard. The response highlights the need for risk analysis specific to NSPML and its comparison to proxy groups.

d Review Board, 2023 NSUARB 12, M10431, Decision issued February 2, 2023, at para. 228. 1 Q. How should the Board evaluate the reasonableness of Dr. Cleary's ROE 2 recommendation for NSPML? 3 A. The authorized ROE for NSPML should be set r...

AI summary The Board is evaluating the reasonableness of Dr. Cleary's recommended return on equity (ROE) for NSPML. It emphasizes the need for a comparative risk analysis against a proxy group of utilities and questions why investors would choose NSPML if it offers lower returns compared to other jurisdictions.

03. 20 TransCanada Pipelines Limited v Canada (National Energy Board) , 2004 FCA 149 ( TransCanada Pipelines ), paragraph 34. 21 Decision 22570-D01-2018, paragraph 37. - 26. The Commission has significant discretion in addressing this comp...

AI summary The Commission has broad discretion in determining fair return standards, as emphasized by judicial references to the complexity of the task. The court acknowledged that fair return depends on multiple factors and must be determined through informed judgment. The proceeding involved extensive evidence and expert testimony, with the Commission expected to weigh this information to establish just and reasonable rates.

- 82. The Commission solicited input on the process to assess whether the formulaic approach continues to generate a reasonable ROE. The Commission also sought parties' views, should questions arise as to the continued reasonableness of th...

AI summary The Commission is considering periodic reviews of the formulaic approach to ensure it continues to generate a reasonable rate of return (ROE). Two main approaches were proposed: predetermined periodic reviews every three to five years, and mid-term reopeners initiated by the Commission or interested parties. Some parties suggested using deadbands, ceilings, and floors for ROE to trigger automatic reviews, while others recommended retaining discretion to review as needed.

jurisprudence, of a legal right to a reasonable opportunity to earn a fair return on their prudently invested capital. As leading credit rating agencies have noted on more than one occasion, utilities under the Commission's jurisdiction fa...

AI summary The text discusses how Alberta utilities benefit from a favorable regulatory environment that reduces risks and allows for cost flow-through to customers. It highlights their robust financial performance despite pandemic-related disruptions and notes the absence of evidence for difficulties in raising capital since the 2018 GCOC proceeding.

energy transition, climate change, and cybersecurity have not increased the business risk of Ontario utilities, nor have financing concerns, to justify a large increase in the deemed cost of capital. SEC submitted that the arguments and re...

AI summary The SEC argues that the current return on equity and equity ratio are too high and unfairly burden ratepayers, contradicting the FRS which requires utilities to earn only their cost of capital. The SEC claims that the evidence shows the current ROE is too generous to utilities and not fair to customers.

ect" ROE and in one way or another judgement and common sense need to be applied when considering the reasonableness of both the input assumptions to each model and the reasonableness of the results. CCC submitted that for the OEB to apply...

AI summary The CCC and SEC argue that averaging expert estimates for ROE undermines the proceeding's purpose, as it fails to account for the differing assumptions and flaws in the models. They emphasize that the OEB should make informed decisions based on the analysis of these models rather than simply averaging results.

ROE with the five-year term of the new Cost of Capital Framework that would meet the FRS and the OEB's statutory objectives. The current ROE does not generate economic rent from utility customers. There is evidentiary support for a signifi...

AI summary The document discusses the proposed reduction in ROE under the new Cost of Capital Framework, emphasizing the need to align with the FRS and avoid generating economic rent from customers. Dr. Cleary's evidence supports a significant reduction, but his model uses fewer comparators due to skepticism about the comparability of Canadian and U.S. utilities.

[147] In its evidence, Concentric noted: No financial model can exactly pinpoint the correct [return on equity]; rather, each test brings its own perspective and set of inputs that inform the estimate of the [return on equity]. Consistent...

AI summary Concentric argues that no single financial model can accurately determine the correct return on equity, emphasizing the need for multiple methodologies and expert judgment. The Board finds that both Dr. Cleary's and Concentric's estimates are outside the fair return standard, suggesting an appropriate return lies between their estimates.

ler number of comparators. As noted earlier, the OEB also has concerns about the ability to find true comparators from the U.S., which limits the number of comparators that might be definitively used. However, a significant recommended cha...

AI summary The OEB is cautious about reducing return on equity due to potential negative impacts on credit ratings and financial stability. The OEA and EDA raised concerns about the risks of setting return on equity too low, which could affect growth and increase costs for ratepayers. The Board concludes that a return on equity within the range of similar utilities is appropriate, but evidence for a specific point within that range is limited.

[147] In its evidence, Concentric noted: No financial model can exactly pinpoint the correct [return on equity]; rather, each test brings its own perspective and set of inputs that inform the estimate of the [return on equity]. Consistent...

AI summary Concentric argues that no single financial model can precisely determine the correct return on equity, emphasizing the need for multiple methodologies and informed judgment. The Board notes that while Dr. Cleary's and Concentric's estimates differ, both fall short of the fair return standard, suggesting a return on equity between their estimates is appropriate.

ler number of comparators. As noted earlier, the OEB also has concerns about the ability to find true comparators from the U.S., which limits the number of comparators that might be definitively used. However, a significant recommended cha...

AI summary The OEB has concerns about finding true comparators from the U.S. for return on equity calculations. The EDA and OEA raised concerns about reducing return on equity, citing potential negative impacts on credit ratings, cost of debt financing, and utility growth. The Board finds that a return on equity outside the fair return standard and range of similar utilities is not in the public interest.