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Vsp.- V sp.t-1 +Dsp1
The terms in equation 1 are defined as fol- (B) The “beta” coefficient is computed lows:
with regression analysis techniques. The reWo=Fraction of existing capital structure gression equation is Equation 3.
which is debt. Wp=Fraction of existing capital structure
(Ret-Ręt)= A+B(Rmt - Rpt)+et which is preferred equity.
Eq.3 We=Fraction of existing capital structure
which is common equity and retained where
earnings. R =Predicted nominal cost of long term debt
PRCC, - PRCC-1 +(DIVRATE/12) expressed as a fraction. Ro=Predicted nominal cost of preferred stock expressed as a fraction.
Rp t = The risk free interest rate in month Re=Predicted nominal cost of common stock t-the average of the yields on 13-week expressed as a fraction.
treasury bills auctioned in month t.(2) INF=Percentage change in the GNP implicitA=A constant which should not be signifi
price deflator over the past 12 months ex- cantly different than zero.
pressed as a fraction. [a=Flotation cost of debt expressed as a frac
Spı, and tion. (=Flotation cost of preferred stock ex
Vsp,1-1 pressed as a fraction.
et=The error in month t. fe=Flotation cost of common stock expressed PRCC=Closing market prices of the firm's as a fraction.
common stock at the end of month t t=Marginal federal income tax rate for the fully adjusted for splits and stock divicurrent year.
dends. (b) Information on parameters used in Equa- DIVRATEĽ=The sum of the dividends paid in tion 1. (1) The parameters used in equation 1 the fiscal year which contain month t. will be the best practicable estimates. They Vop.t=The market value of “one share'' of the will be obtained from the firm, accepted rat
S&P 500 composite index at the end of ing services (e.g., Standard & Poors, month t. Moody's), government publications, accepted Dsp.t=The estimated monthly income refinancial publications, annual financial re
ceived from holding "one share" of the ports and statements of firms, and invest
S&P 500 in month t. ment bankers.
The regression analysis is done with sixty (2) The predicted nominal cost of debt (Rd)
months of data. The first month (t=1) is may be estimated by determining the cur sixty months before the month in which the rent average yield on newly issued bonds firm's current fiscal year started. The last industrial or utility as appropriate-which month (t=60) is the last month of the past have the same rating as the firm's most re fiscal year. cent debt issue.
(5) Where the parameters specified above (3) The predicted nominal cost of preferred are not obtainable, alternate parameters stock (Rp) may be estimated by determining that closely correspond to those above may the current average yield on newly issued be used. This may include substituting a preferred stock-industrial or utility as ap bond yield for nominal cost of preferred propriate-which has the same rating as the stock where the former is not available. firm's most recent preferred stock issue.
Where the capital structure does not consist (4)(A) The predicted nominal cost of com of any debt, preferred equity, or common eqmon stock (R) is computed with equation 2. uity, an alternate methodology to predict Eq 2 Re=Rs+BxŘm
the firm's real after-tax marginal cost of
capital may be used. where:
Example of using alternate parameters Rr=The risk free interest rate the average that closely correspond to those above are: of the most recent auction rates of U.S.
(A) In the case of industrials, who do not Government 13-week Treasury Bills,
typically issue preferred stock, the predicted B=The "beta" coefficient-the relationship nominal cost of preferred stock (Rp) can be between the excess return on common estimated by determining the current averstock and the excess return on the S&P age yield on newly issued industrial bonds 500 composite index, and
which have the same rating as the firm's Rm=The mean excess return on the S&P 500 most recent debt issue.
composite index-the mean of the dif (B) If necessary, the following assumptions ference between the return on the S&P can be made to determine the nominal cost 500 composite index and the risk free in of debt or preferred stock and their flotation terest rate for the years 1926–1976 as com costs. puted by Ibbotson and Sinquefield(1) (i) Where a company issued privately 9.2%
placed debt that was not rated, the rating,
applied to preferred stock could be used to determine the cost of debt and its flotation cost.
(ii) Where a company issued privately placed preferred stock that was not rated, the rating applied to debt could be used to determine the cost of preferred stock and its flotation costs.
(iii) In the case where all issues were privately placed, the current average yield on all newly issued debt or preferred could be used to determine the cost of debt or preferred respectively, and an average flotation cost, for debt or preferred, could be used.
(C) Evidence Requirements. Copies of this calculation with notations as to the source of the data must be submitted.
(b)) contains example fuel price and inflation indices based on the latest data appearing in the Energy Information Administration's (EIA) Annual Energy Outlook (AEO).
The fuel price and inflation indices will change yearly with the publication of the AEO. Revisions shall become effective after final publication. However, the relevant set of parameters for a specific petition for exemption will be the set in effect at the time the petition is submitted or the set in effect at the time a decision is rendered, whichever is more favorable to the petitioner.
(b) Computation of Fuel Price and Inflation Indices.
(1) the Petitioner is responsible for computing the annual fuel price and inflation indices by using Equation II-1 and Equation II2, respectively. The petitioner may compute the fuel price index specified in Equation II1 or use his own price index. However, if he uses his own price index, the source or the derivation of the index must be fully documented and be contained in the evidential summary.
EQ 1-2 18:
FOOTNOTES (1) Ibbotson, R.E. and R.A. Sinquefield, Stocks, Bonds, Bills, and Inflation, Charlottesville, Va.: The Financial Analysts Research Foundation, 1977, cited by Ernst & Whinney, Costs of Capital and Rates of Return for Industrial Firms and Class A&B Electric Utility Firms, June 1979, p. 3-8.
(2) As an option, Rit can be developed with the following equation:
where: PX;=The fuel price index for each fuel in
year i. Pi-Price of fuel in year i. Po=Price of fuel in base year. EQ II-2 is:
GX; IX; =
APPENDIX II TO PART 504-FUEL PRICE
IX;=The inflation index in year i.
(a) Introduction. This appendix provides the equations and parameters needed to specify the price of the delivered fuels to be used in the cost calculations associated with parts 503 and 504 of these regulations. The delivered price of the fuel to be used to calculate delivered fuel expenses must reflect (1) the price of each fuel at the time of the petition, and (2) the effects of future real price in creases for each fuel. The delivered price of an alternate fuel used to calculate delivered fuel expenses must reflect the petitioner's delivered price of the alternate fuel and the effects of real increases in the price of that alternate fuel. Paragraphs (b), (c) and (d) below provide the procedure to: (1) Calculate fuel price and inflation indices; (2) account for projected real increases in fuel prices when planning to burn one or more than one fuel; and (3) account for projected real in. creases in the price of the alternate fuel. Table II-1 of this appendix (See paragraph
GX=The NIPA GNP price deflator for the
base year. (2) The parameters to be used in EQ II-1 are the Base Case fuel price projections found in EIA's current AEO.
(3) When computing annual inflation indices, the petitioner is to use the Base Case National Macroeconomic Indicators (NIPA GNP Price Deflator) contained in EIA's current AEO. If necessary, the petitioner must rebase the projection to the same year used for the fuel price projections. For example, in 1989 AEO projects the price deflator in 1982 dollars; this must be rebased to the year in which the petition is filed. The methodology used to rebase the inflation indices must follow standard statistical procedures and must be fully documented within the petition. This index will remain frozen at the last year of the AEO's projection for the remainder of the unit'(s) useful life.
(4) Table II-1 is provided as an example of and coal. It also contains annual inflation the application of equations II-1 and 11–2. indices. These values were computed from This table contains annual fuel price indices information contained in Table A3 and Table for distillate oil, residual oil, natural gas, All of EIA'S AEO, 1989.
TABLE Il-1: PRICE AND INFLATION INDICES FOR USE IN THE COST CALCULATIONS
(C) Fuel Price Computation.
(1) The delivered price of the proposed fuel to be burned (FPB) must reflect the real escalation rate of the proposed fuel, and must be computed with Equation EQ II-3. EQ-11-3 is: FPB;=MPB (PX) where: FPB;=Price of the proposed fuel (distillate
oil, residual oil, or natural gas) in year i. MPB=The current delivered market price
of the proposed fuel. PX;=The fuel price index value in year i,
computed with Equation II-1. or:
(2) When planning to use more than one fuel in the proposed unit(s), the petitioner must use Equation II-1 and Equation II-3 to calculate the annual fuel price of each fuel to be used. The petitioner then must estimate the proportion of each fuel to be burned annually over the useful life of the unit(s). With these proportions and the respective annual fuel prices for each fuel, the petitioner must compute an annual weighted average fuel price. The methodology used to calculate the weighted average fuel price must follow standard statistical procedures and be fully documented within the petition.
(d) Fuel Price Computation- Alternate Fuel. The delivered price of alternate fuel (PFA) must reflect the real escalation rate of alternate fuel and must be computed with Equation II 4. Equation II-4 is:
PFA;=APFxapx; where: PFA=The price of the alternate fuel in
year i. APF-i=The current market price of the al
ternate fuel f.o.b. the facility). APX;=The alternate fuel price index value
for year i, computed with Equation II-1. In most cases the alternate fuel will be coal. The petitioner must use Equation II-1 (paragraph (b)) to compute the escalation rate (APX;). If an alternate fuel other than coal is proposed the source or the derivation of the index must be fully documented and be contained in the evidential summary. (54 FR 52896, Dec. 22, 1989)
PART 508 [RESERVED] PART 516 [RESERVED]
PART 580—CURTAILMENT PRIOR
ITIES FOR ESSENTIAL AGRICUL-
Sec. 580.01 Purpose. 580.02 Definitions. 580.03 Curtailment priorities. 580.04 Administrative procedures. [Re
served] AUTHORITY: Secs. 401, 403, Pub. L. 95-621, 92 Stat. 3394-3395, 3396; secs. 301(b), 402(a), Pub. L. 95–91, 91 Stat. 578, 594, (42 U.S.C. 7115(b), 7117(a)); E.O. 12009, 42 FR 46267.
SOURCE: 44 FR 15646, Mar. 15, 1979, unless otherwise noted.
The purpose of this part is to implement the authority granted to the Secretary of Energy in section 401 of the Natural Gas Policy Act of 1978, Public Law 95 621, 92 Stat. 3394-3395 (1978).
(3) Essential agricultural user means any person who uses natural gas for an essential agricultural use as defined in paragraph (b)(2) of this section.
(4) Hospital means a facility whose primary function is delivering medical care to patients who remain at the facility, including nursing and convalescent homes. Outpatient clinics or doctors' offices are not included in this definition.
(5) High-priority use means any use of natural gas by a high-priority user as defined in paragraph (a)(6) of this section.
(6) High-priority user means, in no specific order, any person who uses natural gas:
(i) In a residence, or
(ii) In a commercial establishment in amounts of less than 50 Mcf on a peak day; or
(iii) In any school or hospital; or
(iv) For minimum plant protection when operations are shut down, for police protection, for fire protection, in a sanitation facility, in a correctional facility, or for emergency situations pursuant to 18 CFR 2.78(a)(4).
(7) Interstate pipeline means any person engaged in natural gas transportation subject to the jurisdiction of the Federal Energy Regulatory Commission under the Natural Gas Act.
(8) Residence means a dwelling using natural gas predominately for residential purposes such as space heating, air conditioning, hot water heating, cooking, clothes drying, and other residential uses, and includes apartment buildings and other multi-unit residen
$ 580.02 Definitions.
(a) Terms defined in section 2 of the Natural Gas Policy Act of 1978 shall have the same meaning, as applicable, for purposes of this part, unless further defined in paragraph (b) of this section.
(b) The following definitions are applicable to this part:
(1) Commercial establishment means any establishment, (including institutions and local, state and federal government agencies) engaged primarily in the sale of goods or services, where natural gas is used for purposes other than those involving manufacturing or electric power generation.
(2) Essential agricultural use means any use of natural gas:
(i) For agricultural production, natural fiber production, natural fiber processing, food processing, food quality maintenance, irrigation pumping, crop drying; or
(ii) As a process fuel or feedstock in the production of fertilizer, agricultural chemicals, animal feed, or food which the Secretary of Agriculture determines is necessary for full food and fiber production.
(9) School means a facility, the primary function of which is to deliver instruction to regularly enrolled students in attendance at such facility. Facilities used for both educational and non-educational activities are not included under this definition unless the latter are merely incidental to the delivery of instruction.
$ 580.03 Curtailment priorities.
(a) Notwithstanding any provision of law other than section 401(b) of the Natural Gas Policy Act of 1978, or any other rule, regulation, or order of the Department of Energy, the Federal Energy Regulatory Commission or their predecessor agencies, and to the maximum extent practicable, no curtailment plan of an interstate pipeline may provide for curtailment of deliveries of natural gas for any essential agricultural use, unless:
(1) Such curtailment does not reduce the quantity of natural gas delivered for such use below the use requirement certified by the Secretary of Agriculture under section 401(c) of the Natural Gas Policy Act of 1978 in order to meet the requirements of full food and fiber production; or
(2) Such curtailment is necessary in order to meet the requirements of high-priority users; or
(3) The Federal Energy Regulatory Commission, in consultation with the Secretary of Agriculture, determines, by rule or order issued pursuant to section 401(b) of the Natural Gas Policy Act of 1978, that use of a fuel (other than natural gas) is economically practicable and that the fuel is reasonably available as an alternative for such essential agricultural use.
(b) Any essential agricultural user who also qualifies as a high-priority user shall be a high-priority user for purposes of paragraph (a) of this section.
(c) The specific relative order of priority for all uses and users of natural gas, including high-priority and essential agricultural uses and users, shall remain as reflected in effective curtailment plans of interstate pipelines filed with the Federal Energy Regulatory Commission to the extent that the relative order of priorities does not conflict with paragraph (a) of this section.
(d) Nothing in this rule shall prohibit the injection of natural gas into storage by interstate pipelines or deliveries to its customers for their injection into storage unless it is demonstrated to the Federal Energy Regulatory Commission that these injections or deliveries are not reasonably necessary to meet the requirements of high-priority users or essential agricultural uses.
Subpart B-Applications for Authorization
to Import or Export Natural Gas 590.201 General. 590.202 Contents of applications. 590.203 Deficient applications. 590.204 Amendment or withdrawal of appli
cations. 590.205 Notice of applications. 590.206 Notice of procedures. 590.207 Filing fees. 590.208 Small volume exports. 590.209 Exchanges by displacement.
Subpart C-Procedures 590.301 General 590.302 Motions and answers. 590.303 Interventions and answers. 590.304 Protests and answers. 590.305 Informal discovery. 590.306 Subpoenas. 590.307 Depositions. 590.308 Admissions of facts. 590.309 Settlements. 590.310 Opportunity for additional proce
dures. 590.311 Conferences. 590.312 Oral presentations. 590.313 Trial-type hearings. 590.314 Presiding officials. 590.315 Witnesses. 590.316 Shortened proceedings. 590.317 Complaints.
Subpart D-Opinions and Orders
590.401 Orders to show cause. 590.402 Conditional orders. 590.403 Emergency interim orders. 590.404 Final opinions and orders. 590.405 Transferability. 590.406 Compliance with orders.