BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA
IN THE MATTER OF THE APPLICATION | ) | |
OF OKLAHOMA GAS AND ELECTRIC | ) | |
COMPANY FOR AN ORDER OF THE | ) | CAUSE NO. PUD 202100164 |
COMMISSION AUTHORIZING APPLICANT | ) | |
TO MODIFY ITS RATES, CHARGES, AND | ) | |
TARIFFS FOR RETAIL ELECTRIC | ) | |
SERVICE IN OKLAHOMA | ) |
Direct Testimony
of
Ann E. Bulkley
on behalf of
Oklahoma Gas and Electric Company
December 30, 2021
Direct Testimony of Ann E. Bulkley | Page 1 of 91 |
Cause No. PUD 202100164 |
TABLE OF CONTENTS
PAGE
A. | Economic Recovery and Performance of the Utility Sector.......................... | 17 |
B. | Effect of Tax Reform on the ROE and Capital Structure.............................. | 29 |
C. | Conclusion..................................................................................................... | 33 |
A. | Importance of Multiple Analytical Approaches ............................................ | 38 | |
B. | Constant Growth DCF Model ....................................................................... | 42 | |
C. | CAPM Analysis............................................................................................. | 47 | |
D. | Bond Yield Plus Risk Premium Analysis...................................................... | 53 | |
A. | February 2021 Winter Storm and Fuel Cost Recovery RiskError! Bookmark not defined. | ||
B. | Capital Expenditures ..................................................................................... | 57 | |
C. | Regulatory Risk............................................................................................. | 62 | |
1. | Cost Recovery Mechanisms ............................................................... | 65 | |
2. | Authorized ROEs................................................................................ | 68 | |
D. | Flotation Cost ................................................................................................ | 75 |
Direct Testimony of Ann E. Bulkley | Page 2 of 91 |
Cause No. PUD 202100164 |
DRAFT- PRIVILEGED AND CONFIDENTIAL
PREPARED AT THE REQUEST OF COUNSEL
EXHIBITS | |
Exhibit | Description |
Exhibit AEB-1 | Resume and Testimony Listing of Ann E. Bulkley |
Exhibit AEB-2 | Summary of Results |
Exhibit AEB-3 | Proxy Group Selection |
Exhibit AEB-4 | Constant Growth DCF Model |
Exhibit AEB-5 | Capital Asset Pricing Model / Empirical Capital Asset |
Pricing Model | |
Exhibit AEB-6 | Long-term Average Beta |
Exhibit AEB-7 | Market Return |
Exhibit AEB-8 | Bond Yield Plus Risk Premium Approach |
Exhibit AEB-9 | Flotation Cost |
Exhibit AEB-10 | Capital Expenditures Analysis |
Exhibit AEB-11 | Regulatory Risk Analysis |
Exhibit AEB-12 | RRA Regulatory Ranking Analysis |
Exhibit AEB-13 | S&P Credit Supportive Analysis |
Exhibit AEB-14 | Capital Structure Analysis |
Direct Testimony of Ann E. Bulkley | Page 3 of 91 |
Cause No. PUD 202100164 |
INTRODUCTION
- Q. Please state your name and business address.
- A. My name is Ann E. Bulkley. My business address is 293 Boston Post Road West, Suite
- 500, Marlborough, Massachusetts 01752. I am employed by Concentric Energy Advisors,
- Inc. ("Concentric") as a Senior Vice President.
- Q. On whose behalf are you submitting this Prepared Direct Testimony?
6 A. I am submitting this testimony before the Oklahoma Corporation Commission
- ("Commission") on behalf of Oklahoma Gas and Electric Company ("OG&E" or the
- "Company") which is a wholly-owned subsidiary of OGE Energy Corp.
- Q. Please describe your education and experience.
- A. I hold a Bachelor's degree in Economics and Finance from Simmons College and a
- Master's degree in Economics from Boston University, with more than 20 years of
- experience consulting to the energy industry. I have advised numerous energy and utility
- clients on a wide range of financial and economic issues with primary concentrations in
- valuation and utility rate matters. Many of these assignments have included the
- determination of the cost of capital for valuation and ratemaking purposes. I have included
- my resume and a summary of testimony that I have filed in other proceedings as Exhibit
- AEB-1.
- Q. Please describe Concentric's activities in energy and utility engagements.
- A. Concentric provides financial and economic advisory services to many and various energy
- and utility clients across North America. Our regulatory, economic, and market analysis
- services include utility ratemaking and regulatory advisory services; energy market
Direct Testimony of Ann E. Bulkley | Page 4 of 91 |
Cause No. PUD 202100164 |
1 | assessments; market entry and exit analysis; corporate and business unit strategy |
2 | development; demand forecasting; resource planning; and energy contract negotiations. |
3 | Our financial advisory activities include buy- and sell-side merger, acquisition, and |
- divestiture assignments; due diligence and valuation assignments; project and corporate
- finance services; and transaction support services. In addition, we provide litigation support
- services on a wide range of financial and economic issues on behalf of clients throughout
- North America.
- Q. Please describe the purpose of your testimony.
- A. The purpose of my testimony is to present evidence and provide a recommendation
- regarding the appropriate Return on Equity ("ROE")1 in this proceeding and to provide an
- assessment of the capital structure to be used for ratemaking purposes.
- Q. Was your testimony, including associated exhibits, prepared by you or under your
- control and direction?
- A. Yes. My analyses and recommendations are supported by the data presented in Exhibit
- AEB-2through Exhibit AEB-14, which were prepared by me or under my direction.
- Q. How is the remainder of your testimony organized?
- A. Section II provides a summary of my analyses and conclusions. Section III reviews the
- regulatory guidelines pertinent to the development of the cost of capital. Section IV
- discusses current and projected capital market conditions and the effect of those conditions
- on OG&E's cost of equity. Section V explains my selection of a proxy group of electric
1 Throughout my Prepared Direct Testimony, I interchangeably use the terms "ROE" and "cost of equity".
Direct Testimony of Ann E. Bulkley | Page 5 of 91 |
Cause No. PUD 202100164 |
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