6 Add: Accounting Capital Tax on Regulated Assets

Transcription

1 Table 1 Table 1 Return on Equity - Reconcilation to Audited Financial Statements ($M) Regulated Regulated Regulated Line Hydroelectric Nuclear Total Hydroelectric Nuclear Total Hydroelectric Nuclear Total No. Description Note (e) (f) (g) (h) (i) 1 Accounting EBIT (includes rounding) (10.0) (84.0) Accounting Expenses/Revenues not Included in Regulatory EBT 2 3 Add: Fixed Asset Removal and Nuclear Waste Management - Accretion of Liabilities Deduct: Fixed Asset Removal and Nuclear Waste Management - Fund Earnings Differences Between Accounting and Regulatory Treatment (1) PRODUCTION ABOVE 1900 MW/Hr: 4 Deduct: Revenue at Market Price Included in 3 Accounting EBIT Add: Revenue at Current Payment Amount (2) CAPITAL TAXES: 6 Add: Accounting Capital Tax on Regulated Assets Deduct: Regulatory Capital Tax on Regulated Assets 6, Add: Accounting Capital Tax on Bruce Leased Assets Deduct: Regulatory Capital Tax on Bruce Leased 6, 9 Assets (3) UNREALIZED EXCHANGE RATE ADJUSTMENTS: 10 Add Back: Losses Included in Accounting EBIT Regulatory EBIT (line ) (62.6) Interest Expense: 12 Deduct: Bruce Leased Assets Deduct: Regulated Assets 8, Regulatory EBT (line ) (28.1) (165.4) (84.0) (1) INCOME TAXES ON REGULATED ASSETS: 15 Deduct: Income Taxes on Regulated Assets (2) APPROVED ROE FOR BRUCE LEASED ASSETS: 16 Deduct: Bruce ROE After Tax 9, Deduct: Income Tax on Bruce ROE (3) DEFERRAL OF 2007 EXPENSES RELATED TO THE DECEMBER 31, 2006 INCREASE IN ARO: 18 Deduct: 2007 Expenses Recorded in Nuclear Liability Deferral Account - Transition Return on Equity (line ) (52.2) (304.8) (223.3) See Ex. C1-T2-S1 Table 1b for notes

2 Table 1b Table 1b Return on Equity - Reconcilation to Audited Financial Statements ($M) Notes to Ex. C1,, Sch. 1, Table 1 1 Accounting EBIT: Per Audited Financial Statements.Regulated Nuclear Segment and Regulated Hydroelectric Segment details provided in Ex. A2-T1-S1 Appendix A. 2 Fixed Asset Removal and Nuclear Waste Management: Accretion of Liabilities and Fund Earnings provided in the Regulated Nuclear segment information in Ex. A2-T1-S1 Appendix A. 3 Revenue at Market Price: As reflected in management's discussion and analysis accompanying OPG's audited financial statements as provided in Ex. A2-T1-S1 Appendix A. 4 Revenue at Interim Payment Amount: Total hourly production over 1900 MWh x $33/MWh 5 Capital Tax: Accounting EBIT is based on an allocation of capital taxes determined on a corporate basis. 6 Capital Tax: Determined for regulatory purposes in Ex. G2-T2-S1 Table 3 for Bruce Leased Assets, Ex. F3-T2-S1 Table 4 for Regulated Assets (Nuclear), and Ex. F3-T2-S1 Table 1 for Regulated Assets (Hydroelectric). 7 Effective January 1, 2007 OPG is required to include in its accounting income unrealized gains/(losses) associated with certain financial derivatives. OPG is subject to exchange rate gains/(losses) related to some of its purchase obligations. For regulatory purposes, the actual gain/loss will be included in the cost of the purchase as received. 8 Interest Expense: Interest expense is determined by applying the interest rate for OPG s total debt in 2005 and 2006 as summarized in Ex. C1-T2-S1 Table 6 (2005), Table 5 (2006) and Table 4 (2007) to OPG s nuclear and regulated hydroelectric ratebase for 2005, 2006 and 2007 provided in Ex. B1-T1-S1 Table 1 (Regulated Hydroelectric) and Ex. B1-T1-S1 Table 2 (Nuclear). Table to Note 8 - Interest Expense Calculation ($M) Regulated Regulated Regulated Line Hydroelectric Nuclear Hydroelectric Nuclear Hydroelectric Nuclear No. Item (e) (f) Interest Rate (from Ex. C1-2-1 Table 6) 5.71% 5.71% Interest Rate (from Ex. C1-2-1 Table 5) 5.48% 5.48% Interest Rate (from Ex. C1-2-1 Table 4) 5.54% 5.54% 4 Reg. Hydro. Rate Base (from B1-1-1 Table 1) 4, , , Nuclear Rate Base (from B1-1-1 Table 2) 2, , , Debt Ratio (from Ex. C1-2-1 Tables 4, 5 and 6) 55% 55% 55% 55% 55% 55% 7 Interest Expense (Interest Rate x Rate Base x Debt Ratio) 9 December 31, 2006 increase in Asset Retirement Obligation (ARO): A portion of OPG's 2007 expenses as presented in evidence reflect the increase in the ARO (the "ARO Portion"). The ARO Portion is removed for the purpose of determining Regulatory EBT. The following table reflects the 2007 expense presented in evidence and the portion of the expense related to the ARO increase. Table to Note 9 - ARO Adjustment ($M) 2007 Expense 2007 Expense Line Evidence Incl. Increased ARO Portion Excl. Increased No. Reference ARO Portion of 2007 Expense ARO Portion 1 Capital Taxes on Regulated Assets F3-T2-S1 Tbl Capital Taxes on Bruce Leased Assets G2-T2-S1 Tbl Interest Expense on Regulated Assets Note 10, col. (f) Interest Expense on Bruce Leased Assets G2-T2-S1 Tbl Bruce ROE After Tax G2-T2-S1 Tbl Regulatory EBT used for income tax purposes at Ex. F3-T2-S1. OPG's regulated operations did not incur a tax expense in , however in 2005 OPG's regulated operations were subject to Large Corporations Tax (Ex. F3-T2-S1), which is removed in calculating an after-tax rate of return. 11 Income Taxes on Bruce Lease Net Revenues Table to Note 11 - Income Taxes on Bruce Lease Net Revenues ($M) Line No. Cost Item Actual Actual Actual (a) (b) (c) 1 Bruce ROE After Tax* Income Tax on Bruce Lease ROE** 34.12% 34.12% 34.12% 3 Income Tax on Bruce Net Revenue*** * From Ex. G2-T2-S1 Table 3. Adjusted for the removal of the December 31, 2006 increase in ARO as illustrated in Note 6 line 5 col. (f). ** From Ex. F3-T2-S1 Table 8, line 34 and Ex. F3-T2-S1 Table 7, line 32 *** Line 1 / (1-line 2) - line 1 12 Total 2007 Expenses recorded in Nuclear Liability Deferral Account: Per Ex. J1-T1-S ($M) 13 Adding revenues at market prices for Regulated Hydroelectric production (see Notes 3 and 5 above) to Return on Equity (Ex. C1-T1-S1 Table 1, line 18) equals the following: Year $M ROE % % 2007 (172.5) -5.17%

3 Table 2 Table 2 Summary of ($M) Calendar Year Ending December 31, 2009 Capitalization and Return on Capital: 1 1 Short-term Debt % 5.98% Existing/Planned Long-Term Debt 2, % 5.79% Other Long-Term Debt Provision % 6.47% Total Debt 3, % 5.92% Common Equity 4, % 10.50% Rate Base 7, % 8.56% Ex. C1-T2-S2 Table 5 (line 35) 3 Debt required to balance capital structure with proposed rate base. See Ex. C1-T2-S2, Table 5b for interest rate calculation 4 Capital Structure and Return on Equity Proposal per Ex. C1-T2-S1

4 Table 3 Table 3 Summary of ($M) Calendar Year Ending December 31, 2008 Capitalization and Return on Capital: 1 1 Short-term Debt % 5.83% Existing/Planned Long-Term Debt 2, % 5.79% Other Long-Term Debt Provision % 5.65% Total Debt 3, % 5.76% Common Equity 4, % 10.50% Rate Base 7, % 8.48% Ex. C1-T2-S2 Table 4 (line 32) 3 Debt required to balance capital structure with proposed rate base. See Ex. C1-T2-S2, Table 4b Note 11 for interest rate calculation 4 Capital Structure and Return on Equity Proposal per Ex. C1-T2-S1

5 Table 4 Table 4 Summary of ($M) Calendar Year Ending Dec. 31, 2007 Achieved Capitalization and Return on Capital: 1 1 Short-term Debt % 5.30% Existing/Planned Long-Term Debt 1, % 5.90% , 6 Other Long-Term Debt Provision 2, % 5.23% , 7 Total Debt 4, % 5.54% , 7 Common Equity 3, % -6.70% (223.3) 6 5, 7 Rate Base 7, % 0.03% Ex. C1-T2-S2 Table 3 (line 27) 3 Debt required to balance capital structure with proposed rate base. Average unhedged interest rate of 2007 issues. 4 Applied the capital structure reflected in the information OPG supplied to the Province for the purposes of establishing the interim payment amounts. Return in $M determined in Ex. C1-T2-S1 Table 1 6 Other Long Term Debt Provision Rate: Amount ($M) Rate Issue % (See Ex. C1-T2-S2 Table 3--unhedged--actual issue rate on June 22) Issue % (See Ex. C1-T2-S2 Table 7--unhedged - actual issue rate on Sept 24) Issue % (See Ex. C1-T2-S2 Table 3--unhedged - actual issue rate on Dec 21) Niagara % (See Ex. C1-T2-S2 Table 6--underlying bond--line 10) Niagara % (See Ex. C1-T2-S2 Table 6--underlying bond--line 14) Total 26.16% Average Rate (unweighted average of 4 issues) 5.23% 7 The cost of capital for 2007 is calculated using a rate base amount that includes the increase in the Nuclear Liabilities recorded on Dec. 31, The component of the cost of capital related to this increase has been deferred in the Nuclear Liability Deferral Account discussed in Ex. J1-T1-S1.

6 Table 5 Table 5 Summary of ($M) Calendar Year Ending Dec. 31, 2006 Achieved Capitalization and Return on Capital: 1 1 Short-term Debt % 4.80% Existing Long-Term Debt 1, % 5.96% Other Long-Term Debt Provision 1, % 4.99% Total Debt 3, % 5.48% Common Equity 3, % 5.70% Rate Base 6, % 5.58% Ex. C1-T2-S2 Table 2 (line 27) 3 Debt req'd to balance capital structure with proposed rate base. Rate is unhedged cost of 2006 Niagara Tunnel issue. See Ex. C1-T2-S2 Table 6, Column h. 4 Applied the capital structure reflected in the information OPG supplied to the Province for the purposes of establishing the interim payment amounts. Return in $M determined in Ex. C1-T2-S1 Table 1

7 Table 6 Table 6 Summary of ($M) Calendar Year Ending Dec. 31, 2005 Achieved Capitalization and Return on Capital: 1 1 Short-term Debt % 3.44% Existing Long-Term Debt 2, % 5.95% Other Long-Term Debt Provision 1, % 5.62% Total Debt 3, % 5.71% Common Equity 3, % 2.43% Rate Base 6, % 4.23% Short Term Financing allocated at: 55.5% 2 Ex. C1-T2-S2 Table 1 (line 30) 3 Debt required to balance capital structure with proposed rate base. Average unhedged interest rate of 2005 issues. See Ex. C1-T2-S2 Table 5b, Note 9. 4 Applied the capital structure reflected in the information OPG supplied to the Province for the purposes of establishing the interim payment amounts. Return in $millions determined in Ex. C1-T2-S1 Table 1.