20051028Avera Exhibit 03.pdf

BEFORE TH IDAHO PUBLIC UTiliTIES COMMISSIONCASE NO. IPC-O5-IDAHO POWER COMPANY
EXHIBIT NO.
WilliAM E. AVERA
AUTHORIZED RATES OF RETURN
CU RRENT YI ElD
RI S K PREMIUM APPRO A CH Exhibit WEA-Page 1 of 2AUTHORIZED RATES OF RETURN -- CURRENT YIELD(a)(b)AVERAGEALLOWEDPUBLIC UTILITY RISKYEARROEBOND YIELD PREMIUM197413.100 270 830197513.200 880 320197613.100 170 930197713.300 580 720197813.200 220 980197913.500 10.390 11 %1980 14.230 13.150 1.080198115.220 15.620 0.400198215.780 15.330 0.450198315.360 13.31 %050198415.320 14.030 1.290198515.200 12.290 910198613.930 9.460 4.470198712.990 980 01 %1988 12.790 10.45 %340198912.970 660 31 %1990 12.700 760 940199112.550 210 340199212.090 570 520199311.41 %560 850199411.340 300 040
1995 11.550 910 640
1996 11.390 740 650
1997 11.400 630 770
1998 11.660 000 660
1999 10.770 550 220
2000 11.430 140 290
2001 11.090 720 370
2002 11.160 500 660
2003 10.970 61 %360
2004 10.730 200 530
Average 9.590 170
Current Equity Risk Premium
Avg. Yield over Study Period 59%
Aug. 2005 Avg. Utility Bond Yield (c)51%
Change in Bond Yield 08%
Risk Premium/Interest Rate Relationship 43.08%
Adjustment to Average Risk Premium 1.76%
Average Risk Premium over Study Period 17%
Adjusted Risk Premium 93%
Regression Output
Constant 07299
00557Std Err of Y Est
R Squared 79192
No. of Observations
Degrees of Freedom
X Coefficient(s)
Std Err of Coef.
0.43083
04101
(a)
EXHIBIT NO.
CASE NO. IPC-O5-
W. AVERA , IPC
Page 1 of 2
(b)
Regulatory Research Associates, Major Rate Case Decisions, January 1990 - December 2004
Regulatory Focus (January 2005); Major Rate Case Decisions,Regulatory Focus, (January 16, 1990);
Argus, Utility Scope Re gu la tory Service (January 1986).
Moody's Public Utility Manual (2003); Moody's Credit Perspectives (various editions); Mergent
Bond Record (various editions)
Moody's Credit Perspectives (Oct. 3, 2005).(c)
RISK PREMIUM APPROACH Exhibit WEA-Page 2 of 2AUTHORIZED RATES OF RETURN -- 2006 YIELD(a)(b)AVERAGEALLOWEDPUBLIC UTILITY RISKYEARROEBOND YIELD PREMIUM197413.100/0 9.270/0 830/0197513.200/0 880/0 320/0197613.100/0 170/0 930/0197713.300/0 8.580/0 720/0197813.200/0 9 .22 %980/0197913.500/0 10.390/0 110/0198014.230/0 13.150/0 080/0198115.220/0 15.620/0 0.400/0198215.780/0 15.330/0 0.450/0198315.360/0 13.31 CX)05CX)1984 15.32CX)14.03CX)1.29CX)1985 15.20CX)12.29CX)91 CX)1986 13.93CX)9.46 CX)4.47CX)1987 12.99CX)98CX)01 CX)1988 12.79CX)10.45CX)34 CX)1989 12.97CX)66CX)31 CX)1990 12.70CX)76 CX)94 CX)1991 12.55CX)9.21 CX)34 CX)1992 12.09CX)8.57CX)3.52CX)1993 11.41 CX)7.56 CX)85CX)1994 11.34 CX)30CX)04 CX)1995 11.55CX)91 CX)64 CX)
1996 11.39CX)74 CX)65CX)
1997 11.40CX)63CX)77CX)
1998 11.66CX)00CX)66CX)
1999 10.77CX)7.55CX)3.22CX)
2000 11.43CX)14CX)3.29CX)
2001 11.09CX)7. 72CX) 37CX)
2002 11.16 CX)7.50CX)66CX)
2003 10.97CX)61 CX)36CX)
2004 10.73CX)6.20CX)4.53CX)
Average 9. 59CX)17CX)
Degrees of Freedom
Current Equity Risk Premium
Avg. Yield over Study Period 59%
2006 Avg. Utility Bond Yield (c)80%
Change in Bond Yield 79%
Risk Premium/Interest Rate Relationship 43.08%
Adjustment to Average Risk Premium 1.20%
Average Risk Premium over Study Period 17%
Adjusted Risk Premium 37%
Regression Output
Constant 07299
00557Std Err of Y Est
R Squared
No. of Observations
79192
X Coefficient( s)
Std Err of Coef.
0.43083
04101
(a)Regulatory Research Associates, Major Rate Case Decisions, January 1990 - December 2004
Regulatory Focus (January 2005); Major Rate Case Decisions, Regulatory Focus, (January 16, 1990);
Argus, Utility Scope Regulatory Service (January 1986).
Mergent Public Utility Manual (2003); Moody Credit Perspectives (various editions); Mergent Bond
Record (various editions).
Projected yield on public utility bonds for 2006 based on interest rate forecasts reported by
Gioballnsight The U.S. Economy: The 25- Year Focus (First Quarter 2005), EIA Annual Energy Outlook
(2005), and Blue Chip Financial Forecasts (Sep. 1 2005).
EXHIBIT NO.
CASE NO. IPC-O5-
W. AVERA , IPC
Page 2 of 2
(b)
(c)