20040206Avera Exhibits.pdf

DAVID J. MEYER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
A VISTA CORPORATION
O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC AND
NATURAL GAS CUSTOMERS IN THE STATEOF IDAHO
CASE NO. A VU-04-
CASE NO. A VU-04-
EXHffiIT NO.
WILLIAM E. AVERA
FOR A VISTA CORPORTATION
(ELECTRIC AND NATURAL GAS)
DISCOUNTED CASH FLOW MODEL Schedule WEA-
Page 1 of 1EXPECTED DIVIDEND YIELD
(a)(a)
Estimated
Stock Dividends ImpliedSvmComPriceNext 12 Mos.Dividend Yield
BKH Black Hills Corp.$ 28.$1.4.4%
Hawaiian Electric $46.$ 2.48
MDU MDU Resources Group $ 23.$0.
PNM PNM Resources Group $ 27.$0.3.4%PNW Pinnacle West Capital $ 38.$1.
PSD Puget Energy, Inc.$ 23.$1.SRE Sempra Energy $ 28.$1.
XEL Xcel Energy $ 16.$0.
Average
(a)Summary and Index The Value Line Investment Survey (December 26, 2003).
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RISK PREMIUM APPROACH Schedule WEA-4
Page 1 of 1
ANALYSIS OF AUTHORIZED RATES OF RETURN ON EQUITY
FOR ELECTRIC UTILITIES
(a)
ALLOWED
YEAR ROE
1974 13.10%
1975 13.20%
1976 13.10%
1977 13.30%
1978 13.20%
1979 13.50%
1980 14.23%
1981 15.22%
1982 15.78%
1983 15.36%
1984 15.32%
1985 15.20%
1986 13.93%
1987 12.99%
1988 12.79%
1989 12.97%
1990 12.70%
1991 12.55%
1992 12.09%
1993 11.41%
1994 11.34%
1995 11.55%
1996 11.39%
1997 11.40%
1998 11.66%
1999 10.77%
2000 11.43%
2001 11.08%
2002 11.16%
Average
Regression Output
Constant 07343
Std Err of Y Est 00576
R Squared 77401
No. of Observations
Degrees of Freedom
(b)
AVERAGE
PUBLIC UTILITY
ND YIELD
27%
88%
17%
58%
22%
10.39%
13.15%
15.62%
15.33%
13.31%
14,03%
12.29%
9.46%
98%
10.45%
66%
76%
21%
57%
56%
30%
91%
74%
63%
00%
55%
09%
72%
53%
81%
RISK
REMIUM
83%
32%
93%
72%
98%
11%
08%
0.40%
45%
05%
29%
91%
47%
01%
34%
31%
94%
34%
52%
85%
04%
64%
65%
77%
66%
22%
34%
36%
63%
08%
X Coefficient(s)
Std Err of Coef.
-0.43462
04520
Current Equity Risk Premium
Avg. Yield over Study Period 81%
Dec. 2003 Avg. Utility Bond Yield 36%
Change in Bond Yield 3.45%
Risk Premium/Interest Rate Relationship -43.46%
Adjustment to Average Risk Premium 50%
Average Risk Premium over Study Period 08%
Adjusted Risk Premium 58%
(a) Major Rate Case Decisions, Regulatory Focus, Regulatory Research Associates (January 22
2003, January 24 2001 & January 16, 1990); UtilityScope Reaulatorv Service, Argus (January1986).
(b) Moody Public Utility Manual (2001); Moody Credit Perspectives (various editions).
RISK PREMIUM METHOD Schedule WEA-6
Page 1 of 1
CAPITAL ASSET PRICING MODEL
Market Rate of Return
Dividend Yield (a)
Growth Rate (b)12.
Market Return 13.
Less: Risk-Free Rate (c)
Long-term Treasury Bond Yield
Market Risk Premium (d)
Electric Utility Proxy GrouD Beta (e)
Black Hills Corp.
Hawaiian Electric
MDU Resources Group
PNM Resources Group
Pinnacle West Capital
puget Energy, Inc.
Sempra Energy
Xcel Energy
Electric Utility Proxy GrouD Risk Premium (f)
Plus: Risk-free Rate (c)
Long-term Treasury Bond Yield
Implied Cost of Equity (g)11.
(a) Average dividend yield for the S&P 500 at month-end December 2003 from
www,standardandpoors.com
(b) Average IBES growth rate for the firms in the S&P 500 based on data from Standard & Poor
Earninas Guide (December 2003).
(c) Average of the daily yields on long-term government bonds for December 2003 reported by the
S. Department of the Treasury at www,treas.gov.
(d) (a) - (b).
(e) Summary and Index The Value Line Investment Survey (December 26, 2003).(f) (c) x (d).
(g)
(b) + (e).
RISK PREMIUM APPROACH Schedule WEA.5
Page1of1
ANAlYSIS OF REAliZED RATES OF RETURN ON EQUITY
FOR THE S&P ELECTRIC POWER COMPANIES
S&P ELECTRIC COMPANIES S&P SINGLE.A PUBLIC UTILITY BONDS Ibl
CLOSE ANNUAl CLOSE ANNUAlPRICEDIVREALIZED RETURN YIELD PRICE REALIZED RETURN1945$16.(c)73%(d)1946 $15.$0.-0.49%72%$100.91%1947 $12.$0.12.17%04%$94.2.41%1948 $12.$0.47%05%$99.86%1949 $14.$0.24.49%70%$105.93%1950 $14.$0.27%81%$98.75%1951 $16.$0.17.25%31%$92.03%1952 $18.$0.19.66%25%$101.37%1953 $18.$0.19%33%$98.93%1954 $22.$1.23.46%15%$102.18%1955 $24.$1.12.33%39%$96.61%1956 $23.$1.83%19%$88.01%1957 $24.$1.10.29%97%$103.39%1958 $33.$1.38.35%51%$92.61%1959 $33.$1.77%80%$96.60%1960 $39.$1.21.84%64%$102.06%1961 $49.$1.28.89%66%$99.25%1962 $48.$1.70%33%$104.39%1963 $51.$1.10.29%51%$97.49 82%1964 $58.$1.15.36%47%$100.10%1965 $58.$1.99%86%$94.82%1966 $53.$2.-4.34%61%$90.-4.55%1967 $49.$2.67%50%$89.-4.78%1968 $51.$2.66%01%$94.75%1969 $42.$2.13.42%8.43%$85.11%1970 $45.$2.40 12.59%44%$99.34%1971 $44.$2.47 26%70%$107.16.22%1972 $43.$2.19%74%$99.37%1973 $32.$2.18.71%10%$96.98%1974 $22.$2.25.36%25%$89.63%1975 $30.$2.50.39%63%$96.89%1976 $35.$2.23.53%37%$112.22.21%1977 $35.$2.21%81%$95.08%1978 $31.$2.78%75%$91.36%1979 $28.$3.51%11.47%$86.94%1980 $27.$3.86%13.39%$86.48 05%1981 $29.$3.20.45%15.66%$86.-0.54%1982 $36.$3.35.59%12.21%$126.41.86%1983 $37.$3.13.36%12.95%$94.83%1984 $42.$4.24.72%12.39%$104.17.11%1985 $48.$4.25.34%10.54%$115.28.16%1986 $58.$4.28.06%12%$113.23.90%1987 $49.$4.31%10.09%$91.61%1988 $53.$4.17.16%10.02%$100.10.71%1989 $66.$4.31.48%36%$106.16.13%1990 $63.47 $4.45 06%60%$97.18%1991 $77.25 $4.28.91%93%$106.41 16.01%1992 $76.$4.45%64%$102.11.77%1993 $81.$4.12.56%74%$99.67%1994 $66.$4.13.17%68%$100.33%1995 $81.$4.30.15%97%$107.16.00%1996 $76.$4.32%57%$104.12.23%1997 $91.49 $4.47 25.03%07%$105.13.12%1998 $100.$4.15.04%00%$100.85%1999 $77.42 $4.18.93%25%$87.61%2000 $113.$4.51.67%40%$98.76%2001 $92.$3.14.78%8.46%$99.40 80%2002 $75.$4.14.41%82%$106.15.16%AVERAGE 1946.2002 10.28%27%
REALIZED RATE OF RETURN
S&P ELECTRIC COMPANIES 10.28%
SINGLE-A PUBLIC UTILITY BONDS 27%
EQUITY RISK PREMIUM 01%
(a) S&P'Security Price Index Record (1992), The Analvsts' Handbook (1967, 1999 2001, Monthly Supplement March 2002).(b) S&P'Security Price Index Record (1996), Current Statistics (Jan. 1997, Mar. 1998 . Dec. 1999, Feb. 2001, Jan. 2002, & Jan. 2003).(c) Computed by adding gain or loss (ending stock price - beginning stock price) to annual dividends and dividing by beginning stock price.
(d) Computed as sum of capital gain or loss plus interest income, divided by beginning price.
Note: Dividend data not available prior to 1946.
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Schedule WEA-
Page 1 of 1
STANDARD & POOR'
S. UTILITIES
Funds from OperationsfTotal Debt Guidelines
(%)
Rating category-
Company business
risk profile BBB
Well-above-average
business osition
Above average
Average
Below average
W~II below average
Total Debt/Capitalization
(%)
Rating category-
Company business
risk profile BBB
Well-above-average
business osition
Above average
Average
Below average
Well below average
RATlNGSANDRATlOS .~Corporate Ratings Criteria
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