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Fortis Inc
Symbol FTS
Shares Issued 213,200,752
Close 2014-03-25 C$ 31.19
Market Cap C$ 6,649,731,455
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Fortis unit FortisBC's ROE set at 9.15% by BCUC

2014-03-26 13:24 ET - News Release

An anonymous director reports

FORTISBC RECEIVES SECOND STAGE OF GENERIC COST OF CAPITAL DECISION

The British Columbia Utilities Commission (BCUC) has issued its decision on the second stage of the generic cost of capital (GCOC) review for B.C. utilities, affecting Fortis Inc.'s FortisBC Inc., FortisBC Energy (Vancouver Island) Inc. (FEVI) and FortisBC Energy (Whistler) Inc. (FEW). These utilities, along with FortisBC Energy Inc. (FEI), do business collectively as FortisBC, and are all indirect and wholly owned regulated utility subsidiaries of Fortis Inc.

Pursuant to the decision on the first stage of the GCOC, which was received in May, 2013, the return on equity (ROE) for the B.C. benchmark utility, FEI, was set at 8.75 per cent, and the common equity component in capital structure for rate-making purposes was set at 38.5 per cent effective Jan. 1, 2013. As part of the first stage of the GCOC, the BCUC introduced an automatic adjustment mechanism (AAM) effective January, 2014, to set the ROE on an annual basis for the benchmark utility. The AAM will take effect when the actual long-term government of Canada bond yield exceeds 3.8 per cent. The AAM will be in effect until Dec. 31, 2015. In January, 2014, the BCUC confirmed that the necessary conditions for the AAM to be triggered for the 2014 ROE had not been met, therefore the benchmark ROE remains at 8.75 per cent for 2014. The BCUC has directed FEI to file an application for the review of the common equity component and the ROE approved in the first stage of the GCOC by no later than Nov. 30, 2015.

As part of the decision on the second stage of the GCOC, effective Jan. 1, 2013, the following has been approved:

  • The ROE for FortisBC Inc. has been set at 9.15 per cent, recognizing a risk premium over the benchmark utility of 0.40 per cent, and the common equity in capital structure has been set at 40 per cent, both effective Jan. 1, 2013. The ROE and common equity component in capital structure will remain in effect through Dec. 31, 2015.
  • The ROEs for FEVI and FEW have been set at 9.25 per cent and 9.5 per cent, respectively, recognizing risk premiums over the benchmark utility of 0.5 per cent and 0.75 per cent, respectively, and the common equity in capital structure for both companies has been set at 41.5 per cent, all effective Jan. 1, 2013.

In February, 2014, the BCUC approved the amalgamation of FEI, FEVI, FEW and Terasen Gas Holdings Inc., which is subject to the consent of the lieutenant governor in council, and is expected to be effective on or about Jan. 1, 2015. Once the amalgamation has been effected, the ROE and capital structure will be the same for the amalgamated entity as the benchmark utility, FEI, until Dec. 31, 2015.

The decision and orders are available on the BCUC website.

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