Staff Proxy Group Merril Lynch Cost of Market September October
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Page 1 of 2 CASES 09-E-0715 et al. Staff Finance Panel Exhibit___(FP-9) Summary:Calculation of Cost of Equity for RG&E - Staff Proxy Group Merril Lynch Cost of Market Required Implied September 12.00% 11.90% October 11.90% 11.80% November 12.00% 11.90% Merril Lynch Cost of Markee 11.92% (Avg.09/09-11/09) Market Risk Premium 8.10% Treasury Rates2 10 year 30 year Sep-09 3.40% 4.19% Oct-09 3.39% 4.19% Nov-09 3.40% 4.31% Average 3.40% 4.23% Risk Free Rate (9/09 - 11/09) 3.81% Proxy Group Beta(Median) 0.70 Proxy Group OCF ROE 9.63% Traditional CAPM ROE 9.49% Zero Beta CAPM ROE 10.09% Generic (Average) CAPM ROE 9.79% 2/3 OCF & 1/3 CAPM Weighting 9.68% Credit Quality Adjustment 0.18% Issuance Cost Adjustment 0.00% ROM Adjustment 0.10% Recommended ROE 9.76% Page 2 of 2 CASES 09-E-0715 et al. Staff Finance Panel Exhibit___(FP-9) Summary: Calculation of Cost of Equity for NYSEG- Staff Proxy Group Merril Lynch Cost of Market Required Implied September 12.00% 11.90% October 11.90% 11.80% November 12.00% 11.90% Men"i1 Lynch Cost of Market1 11.92% (Avg. 09/09-11/09) Market Risk Premium 8.10% Treasury Rates2 10 year 30 year Sep-09 3.40% 4.19% Oct-09 3.39% 4.19% Nov-09 3.40% 4.31% Average 3.40% 4.23% Risk Free Rate (9/09 - 11/09) 3.81% Proxy Group Beta(Median) 0.70 Proxy Group OCF ROE 9.63% Traditional CAPM ROE 9.49% Zero Beta CAPM ROE 10.09% Generic (Average) CAPM ROE 9.79% 2/3 DCF & 1/3 CAPM Weighting 9.68% Credit Quality Adjustment 0.02% Issuance Cost Adjustment 0.00% ROM Adjustment 0.10% Recommended ROE 9.61~ 1Merrill Lynch cost of market figure is average of Implied and Required Returns for the 3 months ending November 2009 2Federal Reserve Statistical Release, FRS: Federal Reserve Statistical Release H.15 - Historical Data Website: 'http://federalreserve.gov/releases/h15/ Page 1 of 3 CASES 09-E-0715 et al. Staff Finance Panel Exhibit___(FP-10) VALUE LINE UNIVERSE OF ELECTRIC AND INTEGRATED ELECTRIC UTILITIES (CENTRAL USA) sap Numerical sap 2008 % of Company Moody's Rating sap Rating sap Numerical sap Numerical Utility Revenue Business Business Risk Financial Financial Risk Profile Weighting Profile Weighting 1 ALLETE Baa1 BBB+ Strong 2 Significant 4 89 1 2 Alliant Energy Corp • Baa1 BBB+ Excellent 1 Significant 4 88 3 Ameren Corp. Baa3 BBB- Satisfactory 3 Significant 4 81 4 American Electric Power Baa2 BBB Excellent 1 Aggressive 5 92 5 CMS Energy Corp. Ba1 BBB- Excellent 1 Aggressive 5 94 6 CenterPoint Energy Inc. Ba1 BBB Excellent 1 Aggressive 5 72 7 Cleco Corp. Baa3 BBB Strong 2 Significant 4 96 8 DPL Inc. Baa1 A- Excellent 1 Intermediate 3 76 9 DTE Energy Co. Baa2 BBB Excellent 1 Significant 4 75 10 Empire District Electric Co. Baa2 BBB- Strong 2 Aggressive 5 99 11 Entergy Corporation Baa3 BBB Strong 2 Significant 4 79 12 Great Plains Energy Inc. Baa3 BBB Excellent 1 Aggressive 5 71 13 ITC Holdings Corp. Baa3 BBB Excellent 1 Aggressive 5 100 14 Integrys Energy Group Inc. Baa1 BBB+ Excellent 1 Aggressive 5 31 15 M(3&E Company Aa3 AA- Excellent 1 Intermediate 3 99 16 OGE Energy Corp. Baa1 BBB+ Strong 2 Significant 4 48 17 Otter Tail Corp. Ba1 BBB- Satisfactory 3 Significant 4 26 18 Vectren Corporation2 Baa1 A- Excellent 1 Significant 4 79 19 Westar Energy Inc Baa3 BBB- Excellent 1 Aggressive 5 70 20 Wisconsin Energy Corp. A3 BBB+ Excellent 1 Aggressive 5 100 Page 2 of 3 CASES 09-E-0715 et al. Staff Finance Panel Exhibit___(FP-10) VALUE LINE UNIVERSE OF ELECTRIC AND INTEGRATED ELECTRIC UTILITIES (EAST USA) 2008 % of Company Moody's Rating S&P Rating S&P Numerical S&P Numerical Utility Revenue Business Business Risk Financial Financial Risk Profile Weighting Profile Weighting 1 Allegheny Energy Inc. Ba1 BBB- Strong 2 Aggressive 5 84 2 CH Energy Group Inc 1 A3 A Excellent 1 Intermediate 3 60 3 Central Vermont Public Service Corp. Baa3 BB+ Excellent 1 Highly leveraged 6 97 4 Consolidated Edison Inc. Baa1 A- Excellent 1 Significant 4 84 5 Constellation Energy Group Inc. Baa3 BBB- Satisfactory 3 Significant 4 19 6 Dominion Resources Inc. Baa2 A- Excellent 1 Significant 4 50 7 Duke Energy Corp Baa2 A- Excellent 1 Significant 4 77 8 Exelon Corp. Baa1 BBB Strong 2 Significant 4 62 9 FPL Group, Inc. A2 A Excellent 1 Intermediate 3 71 10 FirstEnergy Baa3 BBB Excellent 1 Significant 4 89 11 Northeast Utilities Baa2 BBB Excellent 1 Aggressive 5 99 12 NStar A2 A+ Excellent 1 Intermediate 3 96 13 PPL Corp. Baa2 BBB Satisfactory 3 Significant 4 51 14 Pepco Holdings Inc. Baa3 BBB Strong 2 Significant 4 51 15 Progress Energy Baa2 BBB+ Excellent 1 Aggressive 5 83 16 Public Service Enterprise Group Inc. Baa2 BBB Strong 2 Significant 4 68 17 SCANACorp. Baa2 BBB+ Excellent 1 Aggressive 5 65 18 Southern Co. (The) A3 A Excellent 1 Intermediate 3 99 19 TECO Energy Inc. Baa3 BBB Strong 2 Aggressive 5 82 20 UIL Holdings Corp Baa3 NR NR NR NR NR 100 1Used Central Hudson ratings as proxy for CH Energy Page 3 of 3 CASES 09-E-0715 et al. Staff Finance Panel Exhibit___(FP-10) VALUE LINE UNIVERSE OF ELECTRIC AND INTEGRATED ELECTRIC UTILITIES (WEST USA) S&P Numerical S&P 2008 % of Company Moody's Rating S&P Rating S&P Numerical S&P Numerical Utility Revenue Business Business Risk Financial Financial Risk Profile Weighting Profile Weighting 1 Avista Corp Baa3 BBB- Excellent 1 Aggressive 5 95 2 Black HillsCorp Baa3 BBB- Satisfactory 3 Significant 4 75 3 Edison International Baa2 BBB- Strong 2 Aggressive 5 80 4 EI Paso Electric Baa2 BBB Excellent 1 Aggressive 5 45 5 Hawaiian Electric Baa2 BBB Strong 2 Significant 4 89 6 IDACORP Inc Baa2 BBB Excellent 1 Aggressive 5 94 7 NV Energy Inc Ba3 BB Excellent 1 Highly leveraged 6 100 8 PG&E Corp Baa1 BBB+ Excellent 1 Significant 4 100 9 Pinnacle West Capital Baa3 BBB- Strong 2 Significant 4 93 10 PNM Resources Ba2 BB- Satisfactory 3 Highly leveraged 6 99 11 Portland General Electric Baa2 BBB+ Strong 2 Significant 4 87 12 Sempra Energy Baa1 BBB+ Strong 2 Significant 4 74 13 UniSource Energy Ba1 NR NR NR NR NR 78 14 Xcel Energy Inc Baa1 BBB+ Excellent 1 Significant 4 99 TOTAL 54 Page 1 of 1 CASES 09-E-0715 et al. Staff Finance Panel Exhibit___(FP-11) Staff Proxy Group 3 Month Average Price Data Three-month Sep-09 Oct-09 Nov-09 Comnanv Price High Low High Low High Low ALLETE $33.60 34.57, 32.91 35.19 32.57 34.11 32.23 1 Alliant Energy Corp. $27.23 28.78 25.67 28.40 26.40 28.07 26.08 2 Amaren Corp $25.41 27.27 25.02 26.08 24.22 26.06 23.78 3 American Electric Power $31.10 32.13 30.47 31.87 29.59 32.31 30.23 4 Avista Corp $19.85 20.83 18.86 21.11 18.88 20.95 18.48 5 Black Hills Corp $24.67 26.20 23.85 26.00 24.10 24.69 23.16 6 Cleco Corp. '$24.89 25.43 23.74 25.85 24,02 26.26 24.03 7 Con Edison Inc $41.18 41.77 39.29 42.25 40.15 42.99 40.61 8 DPL Inc. $25.99 26.62 24.61 26.38 25.10 27.86 25.35 9 DTE Energy $36.77 36.46 33.97 39.07 33.75 40.73 36.65 10 Duke Energy Corp $15.87 16.02 15.04 16.31 15.33 16.83 15.68 11 Edison International $33.20 35.20 32.58 34.02 31.54 34.44 31.42 12 Empire District Electric $18.25 18.56 17.83 18.66 17.91 18.77 17.78 13 Entergy Corporation $78.97 81.72 77.33 81.82 76.56 80.30 76.10 14 FirstEnergy $44.65 47.82 44.46 47.69 42.91 43.45 41.57 15 FPL Group, Inc. $52.49 56.54 53.13 55.28 48.78 52.65 48.55 16 Great Plains Energy $17.72 18.37 17.38 18.64 16.80 18.27 16.84 17 Hawaiian Electric $18.35 18.60 16.70 19.07 17.64 20.20 17.90 18 IDACORP, Inc. $28.81 29.37 27.83 29.65 28.00 30.28 27.71 19 MGE Energy Inc. $35.83 38.23 34.93 36.97 34.82 36.60 33.41 20 Northeast Utilities $23.61 24.78 23.41 24.01 22.64 24.60 22.20 21 NStar $31.89 32.91 31.20 32.25 30.80 33.40 30.76 22 PG&E Corp $41.31 41.97 39.53 43.21 39.74 43.00 40.40 23 Pinnacle West Capital $33.02 33.60 31.94 34.71 31.31 35.48 31.08 24 Portland General Electric Company $19.57 20.95 19.38 20.49 18.51 19.85 18.25 25 Progress Energy $38.44 39.94 38.61 39.13 36.67 39.38 36.91 26 Sempra Energy $50.98 51.77 48.10 53.75 49.38 54.00 48.90 27 Southern Co.