et The error in month t.

PRCC, Closing market prices of the firm's common stock at the end of month t fully adjusted for splits and stock dividends. DIVRATE1=The sum of the dividends paid in the fiscal year which contain month t. Vsp.t=The market value of "one share" of the S&P 500 composite index at the end of month t. Dsp.t=The estimated monthly income received from holding "one share" of the S&P 500 in month t.

The regression analysis is done with sixty months of data. The first month (t=1) is sixty months before the month in which the firm's current fiscal year started. The last month (t=60) is the last month of the past fiscal year.

(5) Where the parameters specified above are not obtainable, alternate parameters that closely correspond to those above may be used. This may include substituting a bond yield for nominal cost of preferred stock where the former is not available. Where the capital structure does not consist of any debt, preferred equity, or common equity, an alternate methodology to predict the firm's real after-tax marginal cost of capital may be used.

Examples of using alternate parameters that closely correspond to those above are:

(A) In the case of industrials, which do not typically issue preferred stock, the predicted nominal cost of preferred stock (R,)

can be estimated by determining the current average yield on newly issued industrial bonds which have the same rating as the firm's most recent debt issue.

(B) If necessary, the following assumptions can be made to determine the nominal cost of debt or preferred stock and their flotation costs.

(i) Where a company issued privately 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.

where:

D' The average annual yield on three month U.S. Treasury bills reported in the Survey of Current Business auctioned in month t-which is reported using the bank discount method. N=Number of days to maturity.

PART 505-NEW MAJOR FUEL BURNING INSTALLATIONS

§ 505.27 Cogeneration.

(a) Eligibility. Section 212(c) of the Act provides for a permanent exemption for cogeneration. To qualify you must demonstrate to the satisfaction of ERA at least the following minimum criteria:

(1) The oil or gas to be consumed by the cogeneration facility will be less than that which would otherwise be consumed in the absence of the cogeneration facility where the calculation of savings is in accordance with paragraph (c) of this section;

(2) It would be in the public interest to grant an exemption to the cogeneration facility because of special circumstances such as technical innovation or maintaining industry in urban

areas.

(b) Specifications of the cogeneration facility. (1) A person proposing to construct a cogeneration facility may apply for an exemption under this section if the amount of net electricity that is either sold or exchanged is less than 50 percent. If the amount is 50 percent or more, see § 503.37 (Powerplants). Net electricity excludes sales or exchanges among owners of the cogeneration facility.

(2) Electricity generated by the proposed cogeneration facility must constitute more than 10 percent of the useful energy output of the facility and less than 90 percent of the useful energy output.

(c) Calculation of oil and gas savings. There is an oil and gas savings if the oil or gas to be consumed by the cogeneration facility will be less than that which would otherwise be consumed in the absence of the cogeneration facility. The calculation of the oil and gas which would otherwise be consumed must be in accordance with paragraphs (c) (1) and (2) of this section.

(1) Except for the case described in paragraph (c)(2) of this section, the oil or gas which would otherwise be consumed must be calculated as follows:

(i) You may include the oil or gas that would be consumed by facilities that are or would be too small to be covered by the FUA regulations. In the case of new small industrial units, you must demonstrate that it would be reasonable to construct units of that size.

(ii) You may include the oil or gas that would be consumed by units in place (existing or exempt) covered by FUA if they are less than 40 years old in the case of a field-erected unit or less than 20 years old in the case of a package unit. In the case of existing units, you may not include units that have burned an alternate fuel or are capable of burning an alternate fuel, and, you may only include units described by this paragraph if they will be retired or shut down if this exemption is granted.

(iii) You may include the oil or gas that would be consumed by units not yet constructed that would be covered by the FUA regulations if you can demonstrate that each unit would be entitled to an exemption.

(iv) You may include the oil or gas that would be consumed by powerplants to generate electricity supplied to the grid to the extent that such electricity, if you cogenerate, will no longer be supplied by the grid. The oil or gas portion must be based on a 10 year forecast that includes new construction and retirement of plants within those 10 years.

(2) In the case of a cogeneration facility that would consist of an existing unit or an exempted unit and a new unit, you must calculate the amount of oil or gas that would otherwise be consumed as the sum of:

(i) The five-year annual average oil or gas consumption of the existing or exempted unit; and

(ii) The amount that would be consumed in units described in paragraphs (c)(1)(i)(iv) of this section that would now be satisfied by the new cogeneration facility.

(d) Evidence required in support of a petition. You must include at least the following evidence in order to make

the demonstration required by this section:

(1) An engineering description of the cogeneration system, including proposed output and uses thereof, with sufficient detail to ensure that the facility qualifies as a cogeneration facility;

(2) A detailed oil and natural gas savings calculation identifying the projected oil or natural gas consumption of the cogeneration facility and the oil or natural gas that would otherwise be used;

(3) Identification of the FUA status of the proposed and displaced units with respect to coverage and designation as new, existing, or exempted, age of units, and alternate fuel capability of units;

(4) Identification of all persons and their roles in the proposed cogeneration facility;

(5) Where a demonstration is required that the units would be entitled to an exemption, submission of all evidence required by the regulations with respect to the applicable exemptions, including the alternate site showings; and

(6) In the case of paragraph (a)(2) of this section, an explanation of the public interest factors you believe should be considered by ERA.

(e) Exercise of discretion by ERA. ERA may refuse to grant this exemption to you if it determines that such grant would not be in the public interest or in accordance with the purposes of the Act, notwithstanding the fact that the evidence you have furnished to ERA in your exemption petition substantiates that your facility would otherwise be eligible to receive the exemption.

(Dept. of Energy Organization Act, Pub. L. 95-91, 91 Stat. 565 (42 U.S.C. 7101 et seq.); Powerplant and Industrial Fuel Use Act of 1978, Pub. L. 95-620, 92 Stat. 3289 (42 U.S.C. 8301 et seq.); E.O. 12009, 42 FR 4267) [44 FR 28998, May 17, 1979]

PART 506-EXISTING MAJOR FUEL BURNING INSTALLATIONS

§ 506.35 Cogeneration.

(a) Eligibility. Section 312(c) of the Act provides for a permanent exemp

tion for cogeneration. To qualify you must demonstrate to the satisfaction of ERA at least the following minimum criteria:

(1) The oil or gas to be consumed by the cogeneration facility will be less than that which would otherwise be consumed in the absence of the cogeneration facility where the calculation of savings is in accordance with paragraph (c) of this section;

(2) It would be in the public interest to grant an exemption to the cogeneration facility because of special circumstances such as technical innovation or maintaining industry in urban

areas.

(b) Specifications of the cogeneration facility. (1) A person proposing to operate a cogeneration facility may apply for an exemption under this section if the amount of net electricity that is either sold or exchanged is less than 50 percent. If the amount is 50 percent or more, see § 504.35 (Powerplants). Net electricity excludes sales or exchanges among owners of the cogeneration facility.

(2) Electricity generated by the cogeneration facility must constitute more than 10 percent of the useful energy output of the facility and less than 90 percent of the useful energy output.

(c) Calculation of oil and gas savings. There is an oil and gas savings if the oil or gas to be consumed by the cogeneration facility will be less than that which would otherwise be consumed in the absence of the cogeneration facility. The calculation of the oil and gas which would otherwise be consumed must be in accordance with paragraphs (c) (1) and (2) of this section.

(1) Except for the case described in paragaphs (c)(2) of this section, the oil or gas which would otherwise be consumed must be calculated as follows:

(i) You may include the oil or gas that would be consumed by facilities that are or would be too small to be covered by the FUA regulations. In the case of new small industrial units, you must demonstrate that it would be reasonable to construct units of that size.

(ii) You may include the oil or gas that would be consumed by units in

place (existing or exempt) covered by FUA if they are less than 40 years old in the case of a field-erected unit or less than 20 years old in the case of a package unit. In the case of existing units, you may not include units that have burned an alternate fuel or are capable of burning an alternate fuel, and, you may only include units described by this paragraph if they will be retired or shut down if this exemption is granted.

(iii) You may include the oil or gas that would be consumed by units not yet constructed that would be covered by the FUA regulations if you can demonstrate that each unit would be entitled to an exemption.

(iv) You may include the oil or gas that would be consumed by powerplants to generate electricity supplied to the grid to the extent that such electricity, if you cogenerate, will no longer be supplied by the grid. The oil or gas portion must be based on a 10 year forecast that includes new construction and retirement of plants within those 10 years.

(2) In the case of a cogeneration faIcility that would consist of an existing unit or an exempted unit and a new unit, you must calculate the amount of oil or gas that would otherwise be consumed as the sum of:

(i) The five-year annual average oil or gas consumption of the existing or exempted unit; and

(ii) The amount that would be consumed in units described in paragraphs (c)(1)(i) through (iv) of this section that would now be satisfied by the cogeneration facility.

(d) Evidence required in support of a petition. You must include in your Fuels Decision Report at least the following evidence in order to make the demonstration required by this sec

tion:

(1) An engineering description of the cogeneration system, including output and uses thereof, with sufficient detail to ensure that the facility qualifies as a cogeneration facility;

(2) A detailed oil and natural gas savings calculation identifyng the projected oil or natural gas consumption of the cogeneration facility and the oil or natural gas that would otherwise be used;

(3) Identification of the FUA staus of the units described in paragraph (c)(1)(i) through (iv) of this section with respect to coverage and designation as new, existing, or exempted, age of units, and alternate fuel capability of units;

(4) Identification of all persons and their roles in the cogeneration facility; and

(5) In the case of paragraph (a)(2) of this section, an explanation of the public interest factors you believe should be considered by ERA.

(e) Exercise of discretion by ERA. ERA may refuse to grant this exemption to you if it determines that such grant would not be in the public interest or in accordance with the purposes of the Act, notwithstanding the fact that the evidence you have furnished to ERA in your exemption petition substantiates that your facility would otherwise be eligible to receive this exemption.

(Dept. of Energy Organization Act, Pub. L. 95-91, 91 Stat. 565 (42 U.S.C. 7101 et seq.); Powerplant and Industrial Fuel Use Act of 1978, Pub. L. 95-620, 92 Stat. 3289 (42 U.S.C. 8301 et seq.); E.O. 12009, 42 FR 46267) [44 FR 43208, July 23, 1979]

of FUA and which would otherwise burn middle distillates or residual fuel oils as a primary energy source. ERA's grant of a special temporary exemption under this part would not relieve an existing powerplant from compliance with any pertinent rules or regulations concerning the acquisition or distribution of natural gas that are administered by the Federal Energy Regulatory Commission (FERC) or any pertinent State regulatory agency or from any public utility obligations to pertinent categories of customers. This part pertains exclusively to a special temporary exemption from the provisions of FUA.

§ 508.2 Eligibility.

Section 311(e) of the Act provides for discretionary temporary public interest exemptions. You will be eligible to petition under this special rule for a temporary public interest exemption to burn natural gas if you meet the following criteria:

(a) Your existing powerplant will be: (1) Prohibited on May 8, 1979, from using natural gas as a primary energy source by section 301(a)(2) of the Act,

or

(2) Prohibited from using natural gas in excess of the average base year quantities allowed in section 301(a)(3) of the Act;

(b) Your proposed use of natural gas as a primary energy source, to the extent that such natural gas use would be prohibited by section 301(a) (2) or (3) of the Act,

(1) Will displace consumption of middle distillates or residual fuel oils as defined in § 508.5 of this part; and

(2) Will not displace the use of coal or any other alternate fuel in any facility of your utility system, including the powerplant for which you are petitioning for an exemption.

§ 508.3 Duration.

ERA intends to grant temporary exemptions for an initial period of up to two years, and may extend such exemptions for periods of from one to three additional years. The grant of a temporary public interest exemption under this special rule is subject to termination by ERA upon six months written notice, if ERA deems such ter

mination to be in the public interest. A temporary public interest exemption, including all extensions, may not exceed the maximum five year period authorized by the Act.

§ 508.4 Limitation of applicability.

ERA may determine to limit the applicability of this special rule to certain facilities or to specific geographic areas when such limitation is in the public interest. In making a determination whether to establish any limitations, the Administrator may consider, among other criteria, the impact of the grant or denial of the exemption on air quality, on regional or local energy supply, on refinery output and regional availability of petroleum products in light of refinery capabilities, on facilitating and advancing coal conversion programs, and on system supplies of natural gas.

(a) This subpart defines certain terms which are unique to this Part 508. Other pertinent definitions are contained in § 500.2, which was published in the form of proposed rules in the FEDERAL REGISTER, (43 FR 53974, November 17, 1978).

(b) Throughout this part, "Act" or "FUA" means the Powerplant and Industrial Fuel Use Act of 1978 (Pub. L. 95-620, November 9, 1978).

(c) For purposes of this part:

(1) "Fuel oil" means middle distillates or residual fuel oils including #1 and #2 heating oils, kerosene-base jet fuel, #4, #5, and #6 fuel oils; crude oil burned directly as a fuel, and blends of any of the above.

(2) The term "middle distillate" means any derivatives of petroleum, including kerosene, home heating oil, range oil, stove oil, diesel fuel, and Type A (kerosene-base) aviation turbine fuel which have a fifty percent boiling point in the ASTM D86 standard distillation test falling between 371 and 700° F. Products specifically excluded from this definition are all specialty items which are solvents, lubricants, waxes and process oil;

(3) The term "residual fuel oil" means the fuel oil commonly known as: (i) No. 4, No. 5 and No. 6 fuel oils;