El Paso Electric Company

Transcription

1 El Paso Electric Company Analyst Day - New York Texas Rate Case December 9, 2009

2 Safe Harbor Statement Statements in this presentation, other than statements of historical information, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the act ). Such statements are intended to be made as of the date of this presentation, and the company does not undertake to update any such forward-looking statement. Forward-looking statements involve known and unknown risks and other factors that may cause actual results to differ materially from those expressed in this presentation. In connection with the safe-harbor provisions of the act, the company has set forth below a number of important risks and factors that could cause actual results to differ materially from forward-looking information. Factors that could cause or contribute to such differences include, but are not limited to: Increased prices for fuel and purchased power and the possibility that regulators may not permit EE to pass through all such increased costs to customers or to recover previously incurred fuel costs in rates Fluctuations in off-system sales margins due to uncertainty in the economy power market and the availability of generating units Rates in Texas following the five-year moratorium on rate increases which ends June 30, 2010 Uncertainties and instability in the general economy and the resulting impact on EE s sales and profitability Unanticipated increased costs associated with scheduled and unscheduled outages The size of our construction program and our ability to complete construction on budget and on time The costs at Palo Verde (PV) Deregulation of the electric utility industry Possible increased costs of compliance with environmental or other laws, regulations and policies Possible income tax and interest payments as a result of audit adjustments proposed by the IRS Uncertainties and instability in the financial markets and the resulting impact on EE s ability to access the capital and credit markets Other factors detailed by EE in its public filings with the Securities and Exchange Commission. Please refer to EE s 2008 Form 10-K and other 1934 Act filings December 9, 2009 Investor Relations 2

3 Summary of 2009 Texas Rate Case Filed December 9, 2009 with Public Utility Commission of Texas (PUCT), the City of El Paso and other incorporated cities in Texas Historical test year ended June 30, 2009 Reflects increases in electric plant including Newman 5 Reflects increases in operation and maintenance expenses Return on equity of 11.35% Requested Rate Increase $50.8mm base rate increase request ($12.3mm) reduction to fuel recoveries (primarily due to increased offsystem sales margins shared with customers) $38.5mm net rate increase request Other revenue increases Miscellaneous electric revenues - $0.8mm Energy Efficiency Rate Recovery Rider - $2.6mm for 2010 December 9, 2009 Investor Relations 3

4 Rate History EE obtained a rate order to emerge from bankruptcy in 1995 based upon an agreement that froze base rates for 10 years Fuel adjustments were allowed during the rate freeze period; fuel remained a pass-thru In 1999, EE voluntarily decreased residential base rates by approximately 8 percent ($15.4mm total reduction) In 2005, an agreement was reached with the City of El Paso that continued the rate freeze for an additional 5 years until July 2010 Provided for EE to retain 75% of off-system sales margins Fuel provisions were approved by order of the PUCT in 2006 December 9, 2009 Investor Relations 4

5 Texas Ratemaking Process Texas jurisdiction File at least 35 days before effective date Incorporated municipalities have jurisdiction over rates in their city limits Public Utility Commission of Texas has original jurisdiction in unincorporated areas and appellate jurisdiction over municipal rates EE filing simultaneously with cities and PUCT Suspension of rates after the effective date Cities 90 days PUCT 150 days (Extended 2 days for each hearing day over 15 days) PUCT effective date - January 13, 2010 Cities effective date March 2, 2010 Allows for final orders in early June and tariffs approved by July 1 December 9, 2009 Investor Relations 5

6 Components of Texas Rate Case Base rates Reflects non-fuel costs recovered through electric sales Energy efficiency cost recovery factor Recovery of current and deferred energy efficiency costs Recovery factor updated on an annual basis Fixed fuel factor Stipulated adjustments to fuel recovery effective July 2010 Customers receive 90% share of off-system sales margins Wheeling revenues and expenses reflected in base rates Request approval of formula rate calculation for future changes in fuel costs Fuel reconciliation for period March 1, 2007 June 30, 2009 $463.8mm subject to reconciliation Case could be bifurcated for hearing purposes December 9, 2009 Investor Relations 6

7 Rate Base and Adjustments Total Rate Base Total Company $1,342mm Texas jurisdictional $969mm Palo Verde fresh start accounting Reflects agreement in 2000 to write-down Palo Verde to reflect fresh start values Completion costs of Newman 5 Phase 1 Phase 1 completed and in-service i in May 2009 $5mm of completion costs reflected in rate base Customer Information System $24mm investment t April 2010 expected completion date December 9, 2009 Investor Relations 7

8 Cost of Capital Requested capital structure and rate of return Balance as of % of Cost of Rate of June 30, 2009 Total Capital Return (000) Common Equity $744, % % 5.819% Preferred Equity $ % 0.000% 0.000% Long-Term Debt $707, % 6.981% 3.402% $1,451, % 9.221% December 9, 2009 Investor Relations 8

9 Cost of Service and Adjustments Requested Cost of Service Total Company excluding fuel $594mm Texas jurisdictional excluding fuel $452mm Cost of Service Adjustments Purchased power capacity charges Palo Verde operation and maintenance expenses Payroll and benefits Rate case expenses (Two year amortization) Customer information system Revenue related taxes (El Paso franchise fee increased from 3.25% to 4%) Decommissioning o expenses Depreciation 20 year life extension for Palo Verde Revised depreciation rates Return and income taxes December 9, 2009 Investor Relations 9

10 Potential Intervenors City of El Paso PUCT Staff Office of Public Utility Counsel (OPUC) Attorney General (State agencies) The University of Texas at El Paso Texas Highway Department Department of Defense C&I Large Customers Western Refining Arcelor Mittal Texas Industrial Energy Consumers Texas Legal Services (low income) Texas Ratepayers Organization to Save Energy December 9, 2009 Investor Relations 10

11 Potential Procedural Schedule Description Intervenor and Staff testimony March 2010 Rebuttal testimony March 2010 Date Hearing March April 2010 Recommended decision May 2010 Statutory end of suspension period June 2010 End of rate freeze July 1, 2010 December 9, 2009 Investor Relations 11

12 Questions and Answers December 9, 2009 Investor Relations 12

13 EE Contact Information David G. Carpenter Senior Vice President - Chief Financial Officer (915) Steven P. Busser Vice President - Treasurer and Chief Risk Officer (915) Rachelle Williams Supervisor - Investor Relations (915) December 9, 2009 Investor Relations 13

14 APPENDIX December 9, 2009 Investor Relations 14

15 Texas Jurisdictional Rate Base June 30, 2009 Description Rate Base (000) Plant In Service $ 1,679,664 Accumulated Depr. & Amort. $ (619,920) 920) Net Plant in Service $ 1,059,744 Working Capital $ 40,461 Accumulated Deferred FIT $ (129,023) Other $ (1,942) Total Rate Base $ 969,240 Adjusted Rate of Return 9.221% Return on Rate Base $ 89,374 December 9, 2009 Investor Relations 15

16 Capital Structure Reconciliation Reconciliation of GAAP and Regulatory Capitalization June 30, 2009 Adjustments Ratemaking Requested Capitalization Description SEC 10-K to FERC Form 1 FERC Form 1 Adjustments Capitalization Ratios Common stock equity $ 726,175 $ 4,055 (a) $ 730,230 $ 13,920 (d) $ 744, % Debt Long-term net of current portion $ 739,652 $ (9,732) (b) $ 729,920 $ (22,647) $ 707,273 Financing obligations, net of current $ 69,464 $ (1,817) (c ) $ 67,647 $ (67,647) (f) $ - Current portion of financing obligations $ 34,029 $ (830) (c ) $ 33,199 $ (33,199) (e) $ - Total Debt $ 843,145 $ 830,766 $ (123,493) (e) $ 707, % Total capitalization $ 1,569,320 $ 1,560,996 $ (109,573) $ 1,451, % (a) Primarily difference between RAP and GAAP retained earnings (b) Difference in treatment of debt discount and expense (c) Difference in capitalization of interest on nuclear fuel financing (d) Removal of interest rate lock from common equity. (e) Exclusion of nuclear fuel financing from capital structure. (f) Reduction for unamortized loss on reacquired debt and refinancing debt costs on 2009 Series pollution control bonds. December 9, 2009 Investor Relations 16

17 Texas Jurisdictional Cost of Service Cost of Service Test Year Ending June 30, 2009 Other operations & maintenance $ 216,740 Depreciation & amortization $ 51,656 Interest on customer deposits $ 94 Decommissioning expense $ ,152 Taxes other than income taxes $ 54,523 State income taxes $ 2,565 Fd Federal income taxes $ 27,568 Return on rate base $ 89,374 Base rate revenue requirement $ 451,672 December 9, 2009 Investor Relations 17

18 Rate Change Since 1995 Adjustedd Percentage Description Increase Revenues Increase Base rates $ 50,759 $ 372, % Less: Change in base rates due to fuel recovery (1) $ (12,331) $ 187, % Change in base rates before formula fuel increase $ 38,428 $ 559, % 1999 rate decrease $ (15,400) Rate increase since 1995 $ 23,028 $ 559, % (1) Includes the increase in off-system sales margin sharing to 90% and elimination of wheeling revenues and expenses from fuel recovery. December 9, 2009 Investor Relations 18