Please provide a copy of BC Hydro s most recent depreciation study.

Transcription

1 British Columbia Utilities Commission Information Request No Dated: 23 January 2004 British Columbia Hydro & Power Authority Response issued 20 February 2004 British Columbia Hydro & Power Authority Revenue Requirements Application 2004/05 and 2005/06 Page Reference: Schedule A-2, p Please provide a copy of BC Hydro s most recent depreciation study. RESPONSE: Since its 1994 rate application, BC Hydro has performed reviews of specific assets only when concerns arose over the existing depreciation rates. These reviews consisted of contacting other utilities to compare rates on like assets. Additional investigation was performed if necessary, including internal reviews by engineers who specialized in the type of asset under review. In 1999, BC Hydro performed a review of depreciation rates consisting of a survey comparison of depreciation rates with other utilities. Approximately 75% of the net book value of BC Hydro s capital assets were reviewed. A copy of the memo summarizing the results of the survey with the average rates of respondents is attached. In 2003 BC Hydro performed a review of Future Removal and Site Restoration (FRSR) balances and amortization rates. Gannett Fleming, Inc. performed the study which included four BC Hydro Distribution function capital asset units. The study focused on a review of FRSR balances and net salvage amortization rates. In performing the study, the useful lives of the assets were assessed. The study recommended revisions to the useful lives of the four asset units. The revised useful lives are reflected in the depreciation forecast and the impact is identified in Chapter 2, Section 3.7.1, Line 18 of the Application. A copy of the Gannett Fleming report is also attached. BC Hydro s last major depreciation study was completed in 1989, and is attached. BC Hydro is planning to undertake a depreciation study prior to its next revenue requirements application.

2 proud of our Service Inter-office memo BC hydro TO: Gary Sherlock 24 September 1999 FROM: SUBJECT: Ted Dagan Review Executive Summary At the recommendation of our externl auditors (KPMG) I have undertaken a review of our depreciation rates. The review consisted of a comparson of depreciation and future removal and site restoration (FRSR) rates applied by five Canadian and two American utility companes for the capital asset unts reviewed. In reviewing and comparng the informtion provided by these other utilties, I have concluded that our depreciation rates are reasonable compared to rates used by other utilities, and that our depreciation assumptions do not require adjusting at this time. The results of the survey of FRSR rates are inconclusive. Three of the six utilities surveyed do not record a FRSR provision, for the assets reviewed over the life of the asset and the rates of the three utilities that record FRSR provisions varied signficantly. Background At the conclusion of the fiscal 1998 audit our then external auditors (KPMG) issued a management letter point recommending " that depreciation and amortization studies be undertaken." KPMG was concerned that our curent "depreciation rates may no longer reflect the economic lives of assets and the charge against revenue eared may be too high or too low and the value of these assets may be inappropriately stated" The most recent statistically based depreciation study was conducted between 1985 and The depreciation studies were performed on transmission and distribution plant totaling approximately $2 bilion or 17% ofbc Hydro s base. The studies recommended depreciation rate increases in two cases and depreciation rate decreases in the remaining eight cases. In conjunction with the development of the Asset Information Management System (AIS), BC Hydro s asset base was re-categorized into new Capital Asset Units (CAUs) in 1991/92. For approximately 80-90% of the asset base, each of these CAUs was reviewed in detail by engineers who specialized in each CAU type within the company. As each CAU was categorized, engineers were asked to review the estimated service lives and recommend any changes to the historical rate based on their actual experiences. Due to limitations associated with data in the AIS, a statistically based depreciation study using AIMS data was not possible. Also statistically based depreciation studies are labour intensive and require specialized knowledge. Due to the limitations on information available from AIS and the lack of resources trained in conducting these studies, a comprehensive statistically based depreciation study was not feasible.

3 The following approach was used. A sample of CAUs consisting of high dollar items in terms of net book value, and items at risk due to technological obsolescence were selected. A surey was prepared requesting other utilities to provide useful life and futue removal and site restoration percentage (FRSR) informtion for the selected CAUs. BC Hydro s rates were then compared to the rates used by the other utilities for reasonableness. Key finance personnel at five Canadian, and four American utilities were identified, and personally contacted by phone to request their help. Subsequently, Hydro Quebec, Manitoba Hydro, New Brunswick Power, Newfoundland and Labrador Hydro, Consumers Energy and Tennessee Valley Authority were able to complete and retur the standard depreciation questionnaire. The form identified 20 large dollar value CAUs representing 74% of the net book value (NV) ofbc Hydro assets and five high dollar value computer CAUs. Utilties were requested to provide the Useful Life of the asset, the Futue Removal and Site Restoration percentage, and the date of the assets most recent depreciation review. Summary of Results The responses were individually and collectively compared to the depreciation rates used by B C Hydro. The results are sumzed in the following appendices: Appendix A - Useful Life Sum Appendix B - Average Useful Life Appendix C - Comparson of BCH depreciation to depreciation using Average Lives Appendix D - Future Removal and Site Restoration (FRSR) Appendix E - Surey Results by Utility For fiscal 1999, the total anual depreciation for BC Hydro was $339 Milion, using the depreciation rates established by BC Hydro. The total, fiscal 1999 depreciation for the assets reviewed, was $192 Milion. The mean and median for asset unts where the BCH useful lives are in excess of 50 years, excluded the Hydro Quebec data because Hydro Quebec asset lives are limited to 50 years by legislation. As the table ilustrates, BC Hydro s actual aggegate depreciation is reasonable compared to depreciation recalculated using the average rate of the other utilities sampled. Applying the mean and median depreciation rates of the utilities sampled, results in the following annual depreciation. Lage Dollar Value item As reported Using Mea of results Using Median of results Charged $192 Milion $191 Milion $198 Milion

4 Although BC Hydro s aggregate depreciation is reasonable, there are individual CAUs within the sample for which the BCH useful life vares from the both the mean and median by more than 5 years. These CAUs are provide in the following table. All CAUs with BCH useful life varing by greater tha 5 years from all avera e measures CAD Description Mean Median High Low Hydro Power Transformers Buildinl! Others Clearinl! - Transmission 100 Tower. Lattce/Asthetic (steel) Conductor OH -c 70 Ductbank Conductor. Servces, Distribution Building - Commercial, concrete steel As shown in the table, the BCH useful life for all but three of the CAUs is within the range of data provided by the sample utilties. The five CAU s - Power Transformers, Tower (Lattice/ Asthetic), Conductors Overhead -c 70 KV, Ductbans, and Conductor (Servces, Distribution) -are all within a reasonable range considerig that useful lives may differ due to varng weather conditions and terrain. Therefore no fuher anlyses is considered necessar for these items. The three CAUs with useful lives outside of the range oflives of the sureyed utilities are: Building Other, Building (Commercial, concrete, steel), and Clearng (Transmission). The BCH useful lives for the two building CAUs are below the range of the lives ofthe surveyed utilities. Therefore, BCH may be depreciating these assets over a shorter period than necessary. This is a conservative treatment as net income may be understated. The potential overstatement of depreciation based on the low of the range from the surey is $2. 1 millon. The lives of these CAUs should be reviewed fuher, however, there is no urgency as the potential overstatement of depreciation is not material. The BCH Useful Life of Clearng (Transmission) assets is 100 years as compared to the high end of the range of the surey of80 years. A Useful Life of 100 years for Clearing is not uneasonable as BCH has no intention of removing lines from the existing right-of-way. The lines wil not be rerouted for the foreseeable future. No fuher analysis is considered necessary for this CAU. Although the review also addressed Future Removal and Site Restoration (FRSR) practices, the results received, were inconclusive as three of the six utilties sureyed do not accrue provisions for the assets sureyed and the rates for the remaining three utilties vared significantly. The treatment of Future Removal and Site Restoration costs for a utilty can be affected by the regulatory environment, mangement prerogative, and type of depreciable asset. Other factors to consider include the diffculty in estimating costs at today s price levels, and predicting the timing of the expenditures, and price levels that wil exist in the futue.

5 Conclusions Overall BC Hydro asset useful lives are reasonable based on the results of the surey. The useful lives ofthe buildings CAUs sureyed require fuher review at a futue date as the useful lives of the asset are outside the range of the lives of the surey respondents. However, there is no urgency to the additional review as the potential overstatement of depreciation is not material. The results of the surey and the data submitted by the respondents should be communcated to Power Supply and T & D along with a request to comment as to whether they feel fuher review by techncal staff is desirable at this time. Additional review offrsr rates is not considered necessar as a result of the survey. Attachment cc. DW Hale D Hardy BD Leavitt LJ Vaksdal

6 Comparison of BCH to Using Survey Averages Appendix C Asset (CAU) Turbine, Hydro C41007 Original Cost Accumulated Net Book Value BC Hydro Useful Life Useful Life - In Years Mean Exclude BCH Median Exclude BCH Life Depn Annual Life Depn Rate Rate Depn Rate BC Hydro Annual % % % 4.2 Annual Depn Generator, Hydro C % % % 4.1 Power Transformers C % % % 7.9 Dam, Embankment/ Concrete C , , % % % 17.3 Powerhouse, Integral with Dam C % % % 7.5 Buildings, Other C % % % 7.6 FILE: J:\CORPBUD\DEPRECIATION\REFINAL.XLS Page

7 Asset (CAU) Buidings - Commercial, Concrete or Steel C22002 Comparison of BCH to Using Survey Averages Original Cost Accumulated Net Book Value BC Hydro Useful Life Appendix C Useful Life - In Years Mean Exclude BCH Median Exclude BCH Life Depn Annual Life Depn Rate Rate Depn Rate BC Hydro Annual % % % 4.3 Annual Depn Clearing - Transmission C % % % 3.4 Spillway, separate from dam C23001 Penstocks, Steel C % % % % % % 3.0 Penstocks, Concrete C % % % 1.3 Tower, Lattice/Asthetic (Steel) C % % % 11.6 Transformer, Distribution C % % % 20.0 Pole Structures <70kV (wood, steel) C % % % 19.9 FILE: J:\CORPBUD\DEPRECIATION\REFINAL.XLS Page

8 Asset (CAU) Conductor, OH > 70kV C55101 Comparison of BCH to Using Survey Averages Original Cost Accumulated Net Book Value BC Hydro Useful Life Appendix C Useful Life - In Years Mean Exclude BCH Median Exclude BCH Life Depn Annual Life Depn Rate Rate Depn Rate BC Hydro Annual % % % 12.0 Annual Depn Cable Submarine>70kV C % % % 12.4 Cable, Underground/ Submarine < 70kV C % % % 14.6 Conductor, Overhead < 70kV C % % % 13.6 Ductbanks < 70kV C % % % 9.0 Conductor, Services, Distribution C % % % 6.5 PC - Computer Hardware C80101/3/4/ % % % 7.1 Mid-Range Computer Hardware C % % % 0.3 FILE: J:\CORPBUD\DEPRECIATION\REFINAL.XLS Page

9 Asset (CAU) Software, Mid-Range Systems C80303 Comparison of BCH to Using Survey Averages Original Cost Accumulated Net Book Value BC Hydro Useful Life Appendix C Useful Life - In Years Mean Exclude BCH Median Exclude BCH Life Depn Annual Life Depn Rate Rate Depn Rate BC Hydro Annual % % % 0.9 Annual Depn Mainframe Computer Hardware C802** Software, Mainframe C % % % % % % 6.5 Total Definitions Mean Measure of central tendency. Sum of all observations divided by total number of items involved. Median Middle value in an ordered sequence of data. Half data will be smaller and half will be larger. - Excludes Hydro Quebec as Hydro Quebec useful life is limited by legislation to 50 years. Note: Calculation of annual depreciation for Mean and Median calculated as BCH Useful Life/Average Useful Life X BCH Annual. The exception to this is for certain individual assets when the BCH actual depreciation rate is in excess of the rate stated in the CAU. FILE: J:\CORPBUD\DEPRECIATION\REFINAL.XLS Page

10 BC HYDRO Vancouver, British Columbia FUTURE REMOVAL AND SITE RESTORATION REVIEW February 2003 Harrisburg, Pennsylvania Calgary, Alberta Valley Forge, Pennsylvania -i-

11 March 27,2003 GANNETT FLEMING, INC. Suite Rivercrest Drive S.E. Calgary, Alberta T2C 2X5 Office: (403) Fax: (403) B.C. Hydro. 333 Dunsmuir Street Vancouver, British Columbia V6B 5R3 Attention Mr. Darin Hale Manager, Corporate Planning & Capital Reporting Gentlemen: Pursuant to your request, we have conducted a Future Removal and Site Restoration Review (FRSR) related to four specific BC Hydro mass property accounts. Our report presents a description of the methods used in the study, the statistical analyses of service life and net salvage, and a summary of the results. We gratefully acknowledge the assistance of BC Hydro personnel in the completion of the study. Respectfully submitted, GANNETT FLEMING, INC. Valuation and Rate Division /LEK LARRY E. KENNEDY Manager, Calgary Office i-

12 CONTENTS Scope...1 Findings...1 Figure 1 Summary of Estimated Balance Based on Study vs Actual Balance...1 Procedures...2 CAU Pole Structures...3 CAU Distribution Transformers...4 CAU Conductor < 70kV...5 CAU Distribution Services...6 Recommendations...7 Figure 2 - Calculation of the FRSR Requirement CAU Figure 3 - Calculation of the FRSR Requirement CAU Figure 4 - Calculation of the FRSR Requirement CAU Figure 5 - Calculation of the FRSR Requirement CAU ii-

13 SCOPE This report sets forth the results of the Future Removal and Site Restoration (FRSR) study for BC Hydro as at the end of Fiscal year The restoration and net salvage requirements presented herein are based on generally-accepted net salvage estimating procedures and techniques. The service life and net salvage estimates arising from this study were based on data through December 31, The FRSR requirement as calculated in this study was compared to the actual December 31, 2002 FRSR booked provision to determine adequacy of the booked provision. This report will first summarize the findings of the FRSR study, and will then outline the procedures and processes followed in the determination of the findings. The final section of this report will deal with the recommendations of Gannett Fleming with regard to the findings of this study. FINDINGS Gannett Fleming has estimated the future net salvage requirements and average service lives of each of the accounts studied. Gannett Fleming has found that the current FRSR provision is under-funded in two of the four categories studied. Overall, as indicated in the following Figure 1, the current FRSR provision represents 81% of the required balance at this time. CAU# C25201 C52201 C55102 Figure 1 Summary of Estimated Balance Based on Study vs Actual Balance ($ Millions) Current FRSR Booked Balance CAU Description Current Useful Life Current FRSR Rate Revised Useful Life Revised FRSR Rate Original Cost ($ Million) Required Balance Difference Pole Structures < 70Kv 35-40% 40-40% 759 (95) (73) 22 Distribution Transformers 35-16% 30-10% 724 (32) (27) 6 Overhead Conductor < 70kV 50-30% 45-40% (56) (57) Distribution Conductor C55201 Services 40-40% 45-40% 240 (20) (23) (3) Total 2,253 (145) (179) (33) 1-

14 The results in Figure 1 indicate that Gannett Fleming has made small changes to the average life estimates in each of the four accounts, and has made changes to the future net salvage percentage in two of the four accounts studied. These changes will require a true-up provision to ensure the timing recovery of the required FRSR amounts. Gannett Fleming recommends that the required trueup be amortized over the average remaining life of each account. Procedures As indicated in the Findings section of this report, for each of the four accounts studied, an estimate of the average service was determined in addition to the forecast of future net salvage percentages. In the determination of both estimates, the historic transactions were analyzed through various statistical techniques. Due to the fact that in many circumstances the availability of the actual aged retirement data was limited, Gannett Fleming, relied to a large extent on alternative approaches to the estimation of life and net salvage analysis. These alternative methods included the statistical development and aging of company retirement transactions and the comparison of the results of the statistical analysis to a peer group of electric distribution and transmission companies. In the development of both the average service life and net salvage percentage estimates, an estimate was made of the historic plant retired over the last 10 year period. In each account, the average service was developed as follows: A moving average unit cost was developed for the primarily unit for each year over the last 10 year period; an estimate of the physical units annually retired was developed; the annual estimated number of units retired was multiplied by the average unit cost in each year for the last 10 year period to develop the total annual amount of dollars retired in each year; the annual plant additions were provided to Gannett Fleming in each account; 2-

15 the estimated retirement dollars and annual plant additions were used in a simulated plant balance study to develop the historic indications of the physical life of plant to determine the average service life estimate; and then the historic indications were compared to a peer group of electric transmission. The future net salvage percentages were calculated after an analysis of the annual historic net salvage indications were determined. The historic net salvage indications were developed for each of the last 10 years by dividing the net costs of removal (costs of removal gross salvage proceeds realized on the sale of assets) by the estimated original costs retired each year as determined in the average service life indications as developed above. In addition to the annual indications, a 5 year rolling average, and an overall 10 year average were both developed. In this manner, the overall historic indication could be compared to the annual trends developed both from the annual analysis and the 5 year averages. The 5 year rolling averages were developed in order to eliminate the spikes and valleys that often occur in a year over year analysis. A brief review of the specific analysis for each of the four accounts reviewed follows. CAU C25201 Pole Structures The annual numbers of Poles retired were determined from the summary of pole additions and retirements as extracted from the Poles Management System of BC Hydro. The total retirement dollars from 1992 through 2001 was determined by multiplying the annual number of poles retired by the moving average unit costs of poles. The moving average unit cost of poles was determined from the annual vintaged plant additions determined from the BC Hydro Asset Information Management System (AIMS) and the total poles in service each year as determined from the poles management system. The annual addition and retirement dollars were analyzed by the simulated plant balance method of life analysis and an average service life of 40 years was indicated. The historic life indications were compared to a peer industry group, 3-

16 which varied from 28 years to 60 years, with an average of approximately 40 years for similar asset accounts. Gannett Fleming views the historic indication of a 40 year life to be appropriate for this account. The average life estimate of 40 years represents a short extension to the 35 year estimate that is currently used by BC Hydro. The estimated annual retirements were compared to the annual cost of retirement and gross salvage proceeds for each year from 1992 through The resultant net salvage indications were 36%. However, the rate had been trending higher each year up to 2000, with a smaller net cost of removal indication in 2001, which has reduced the overall rate. As such, Gannett Fleming views that the contunied use of the 40% net salvage requirement continue to remain appropriate. CAU Distribution Transformers Only limited information was available regarding the numbers of Transformers physically retired. As such the life analysis in this account incorporated both the number and value of physical retirements as estimated from the Operations and Accounting information provided by BC Hydro, and alternative life estimation techniques. The total retirement dollars from 1993 through 2001 was determined by multiplying the annual number of transformers retired by the moving average unit costs of transformers. The moving average unit cost of transformers was determined from the annual vintaged plant additions determined from the BC Hydro AIMS system and the total transformers in service each year as determined from the operating information provided by the company. The annual additions and retirement dollars were then analyzed by the simulated plant balance method of life analysis. As an alternative method of estimating the appropriate average service life for this account, Gannett Fleming reviewed the historic life indications of a peer industry group, which varied from 33 to 45 years, with an average of approximately 40 years for similar asset accounts. Based on the review of both 4-

17 the historic life indications of the company as determined from the simulated plant analysis, the review of peer companies for similar asset accounts, and on the broad industry experience of Gannett Fleming, a selection of a 30 year life was considered appropriate by Gannett Fleming at this time. The estimated annual retirements were compared to the annual cost of retirement and gross salvage proceeds for each year from 1992 through The resultant net salvage indications were 7%, with the rate trending higher each year up to 2001, with the 2001 indicating a 15% cost of retirement. In a review of the net salvage indications for similar accounts amoung a peer group of companies, it was noted that net salvage rates ranging from +9% to 45% are currently estimated. Given this wide discrepancy in rates, Gannett Fleming views that the industry comparisons do not provide a meaningful band. Given the recent trends to more negative net salvage requirements, Gannett Fleming views that a percentage of 10% is appropriate for this account. This compares to the 16% that is currently estimated. CAU Conductor < 70kV The amount of conductor physically retired for each year from 1992 through 2002 was estimated based on the Operations information provided by BC Hydro that annual removals approximate 10% of the annual additions, and on the per kilometer cost of installation of single phase and 3 phase conductor. The current cost of this conductor retired was developed by deflating the current costs using a price index for each year back to 1992, which provided an estimate of the annual retirement dollars for each year form 1992 to The annual addition and retirement dollars were analyzed by the simulated plant balance method of life analysis In order to test the results of the simulated plant analysis, the historic life indications were compared to a peer industry group, which varied from 43 years to 55 years, with an average of 48 years for similar asset accounts. In view of the significant amount of estimating procedures used in the determination of the physical conductor retired, the historic life indications were modified slightly to be 5-

18 more in line with the peer industry group, and to provide a smaller decrease from the current life estimate, a selection of a 45 year life was considered appropriate by Gannett Fleming at this time. The estimated annual retirements were compared to the annual cost of retirement and gross salvage proceeds for each year from 1992 through In a review of the net salvage indications for similar accounts amoung a peer group of companies, it was noted that net salvage rates ranging from -25% to 60% are currently estimated. It was also noted that the current BC Hydro estimate for this account is 30%. Gannett Fleming considers that an increase in the net negative salvage percentage from 30% to 40% is appropriate at this time and is within the band of rates used by industry peers for this account. CAU Distribution Services The amount of plant physically retired was estimated from the operating information provided by BC Hydro. The number of services retired for the years as provided by BC Hydro was multiplied by the moving average unit cost for units in service for each of the three years to estimate the total retirement dollars from 2000 through The moving average unit cost of services was determined from the annual vintaged plant additions determined from the BC Hydro Plant Accounting system and the total services in service each year as determined from the operating information provided by the company. The annual addition and retirement dollars were analyzed by the simulated plant balance method of life analysis and an average service life increase to 45 years was indicated. The historic life indications compared favorably to a peer industry group, which varied from 35 years to 41 years. Gannett Fleming views the historic indication of a 45 year life to be a reasonable estimate of the average service life of this account. The estimated annual retirements were compared to the annual cost of retirement and gross salvage proceeds for each year from 2000 through In a review of the net salvage indications for similar accounts amoung a peer 6-

19 group of companies, it was noted that net salvage rates ranging from -35% to 60% are currently estimated. It was also noted that the current BC Hydro estimate for this account is 40%. Given the recent trends to reducing amounts of net costs of retirement, Gannett Fleming views that a net salvage percentage of 45% is appropriate at this time and is within the band of rates used by industry peers for this account, and represents only a small change form the rate currently used. RECOMMENDATIONS Gannett Fleming recommends that the average service life estimates and net salvage percentages as discussed above and summarized in Figure 1 of this report be used to be applied to the surviving investment in each of the four accounts to determine the FRSR requirement as at December 31, Gannett Fleming has reviewed the procedure and spreadsheets used by BC Hydro for the development of the FRSR requirement. Based on this review, Gannett Fleming views the procedures and spreadsheets to be reasonable and appropriate. As such, the calculation as provided by BC Hydro of the resultant FRSR requirement for each account is attached as Figures 2 through 5 to this report. The results from these calculations have been provided previously in this report in Figure 1. 7-

20 Vintage Year FIGURE 2 Calculation of the FRSR Requirement CAU Pole Structures < 70 kv Less: Stubb & Refurbis Less: Jnt Pole Recov. (CAU 99403) Adjust for Joint Pole Correction Age Original Cost Cost Pole Adds FRSR Estimate ,752,527 (1,205,272.04) 6,547,255 1,800, , ,034,875 (627,295.05) 3,407, ,962 80, ,381, ,181.35) 3,700, ,518 82, ,865,048 (1,533,701.97) 8,331,346 1,929, , ,565,188 (1,176,146.80) 6,389,042 1,405, , ,768,016 (2,295,958.06) 12,472,058 2,613, , ,950,950 (1,857,993.60) 10,092,956 2,018, , ,976,792 (2,794,820.91) 15,181,971 2,904, , ,062,829 (1,253,514.11) 6,809,315 1,248, , ,945,180 (2,789,906.21) 15,155,274 2,667, , ,379,981 (3,012,972.27) 16,367,009 2,769, , ,430,788 (3,176,339.31) 17,254,448 2,811, , ,723,830 (2,910,961.51) 15,812,868 2,484, , ,227,050 (3,300,132.94) 17,926,917 2,719, , ,143,529 (2,820,743.23) 15,322,786 2,247, , ,034,987 (2,337,463.45) 12,697,523 1,802, , ,462,073 (2,403,861.78) 13,058,211 1,795, , ,017,976 (2,956,691.87) 16,061,284 2,141, , ,061,805 (2,341,632.85) 12,720,172 1,646, , ,857,142 (2,931,687.32) 15,925,454 2,002, , ,689,559 (3,372,038.28) 18,317,520 2,238, , ,078,855 (1,100,537.31) 5,978, ,935 64, ,343,627 (2,696,383.72) 14,647,243 1,695, , ,431,364 (3,642,833.69) 19,788,530 2,232, , ,816,395 (6,812,059.36) 37,004,335 4,070, , ,540,915 (6,458,294.47) 35,082,621 3,508, , ,294,630 (9,684,838.76) 52,609,791 4,734, , ,599,599 (1,800) (7,866,632.37) 42,731,166 3,418, , ,094,147 (1,800) (7,632,582.46) 41,459,765 2,902, , ,897,602 (1,846) (6,513,747.95) 35,382,008 2,122, , (62,528,496) (1,581) (3,442,758) 100,188,225 34,215,390 1,710, , ,886,218 (1,179) (4,687,116) 30,197,923 1,207, , ,693,046 (1,882) (5,301,683) 26,389, , , ,133,107 (1,756) (5,689,123) 36,442, , , ,245,532 (1,067) (5,039,658) 31,204, , , ,414,670 32,414, ,272,815 (12,911) (24,160,338) - Est Annual Amortization 735,099,566 73,181,805 8,361,134 8-

21 FIGURE 3 Calculation of the FRSR Requirement CAU Distribution Transformers Vintage Year Age Original Cost FRSR 10% Est Annual Amortization ,804, , ,939, , ,865, , ,396, , ,803, , ,350, ,826 61, ,694, ,315 74, ,471, ,302 81, ,866,988 1,090,246 99, ,979, ,098 87, ,586,051 1,008,509 91, ,831,678 1,028,603 93, ,521,298 1,245, , ,552,382 1,240, , ,850, ,285 75, ,928, ,402 90, ,295, ,362 70, ,697, ,136 73, ,692, ,467 54, ,622, ,475 79, ,655, ,148 24, ,820, ,675 70, ,834, ,944 89, ,901,543 1,316, , ,247,060 1,174, , ,102,508 1,143, , ,588,081 1,295, , ,263,616 1,102, , ,028, , , ,809, , , ,833, , , ,435, ,351 91, ,793, , , ,458,282 88,194 88, ,719, ,243,722 26,562,401 2,752,946 9-

22 FIGURE 4 Calculation of the FRSR Requirement CAU Conductor < 70kV Vintage Year Life Original Cost FRSR 40% Est Annual Amortization ,931,822 7,606, , ,244,021 1,992, , ,300, ,707 30, ,214,941 1,519, , ,050, ,059 85, ,217, ,902 24, ,084,864 1,274, , ,690, ,120 48, ,703, ,229 47, ,513,366 1,194, , ,270, ,662 84, ,496,688 1,099,440 99, ,031, ,972 74, ,626,389 1,355, , ,818,316 1,186, , ,257,350 1,211, , ,436,041 1,339, , ,922,666 1,501, , ,163,177 1,488, , ,679,349 1,899, , ,943,759 1,752, , ,039,234 1,593, , ,016,070 1,547, , ,332,525 1,427, , ,037,980 1,245, , ,212,957 1,013,425 92, ,255,277 1,207, , ,807, ,162 26, ,717, ,734 71, ,519,930 1,151, , ,070,593 2,158, , ,618,145 1,921, , ,677,343 2,774, , ,684,343 1,826, , ,427,928 2,017, , ,407,189 1,408, , ,513, , , ,656, , , ,786, , , ,682, , , ,713, , , ,707, ,485,494 55,657,922 6,026,

23 FIGURE 5 Calculation of the FRSR Requirement CAU Distribution Services Vintage Original FRSR Est Est Annual Year Life Cost Amortization ,543, ,419 88, , ,683 13, ,303, ,718 28, , ,729 17, , ,636 17, ,378, ,889 26, ,117, ,583 20, ,122, ,739 19, ,836, ,657 30, ,513, ,388 24, ,090, ,852 32, ,945, ,009 43, ,855, ,862 55, ,110, ,635 56, ,524, ,938 86, ,295, ,622 81, ,067, ,814 63, ,743, ,863 69, ,355, ,496 74, ,113,020 1,019,923 92, ,758, ,237 86, ,401, ,081 90, ,177, ,296 65, ,024, ,310 82, ,247, ,278 42, ,476,410 1,338, , ,291, ,545 40, ,897, ,447 82, ,832,280 1,183, , ,801,625 1,056,159 96, ,250, ,467 64, ,399, ,930 65, ,427, ,039 57, ,363, ,949 56, ,435, ,231 57, ,623, ,391 58, ,764, , , ,587, ,000 76, ,231, ,342 73, ,687,152 59,441 59, ,061, ,902,520 23,276,609 2,520,