AMEA Complaint

20180510-5233 FERC PDF (Unofficial) 5/10/2018 4:20:14 PM
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Alabama Municipal Electric Authority,

Cooperative Energy
Complainants,
v. Docket No. EL18-__-000
Alabama Power Company,

Georgia Power Company,
Gulf Power Company,
Mississippi Power Company,
Southern Company Services, Inc.
Respondents.
NOTICE OF COMPLAINT
(May 10, 2018)
Take notice that on May 10, 2018, Alabama Municipal Electrical Authority
(“AMEA”) and Cooperative Energy (collectively, “Joint Complainants”) filed a formal
complaint against Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, and its agent the Southern Company Services,
Inc. (collectively, “Southern Companies” or “Respondents”) pursuant to Section 206 of
the Federal Power Act and Rule 206 of the Federal Energy Regulatory Commission’s
(“FERC” or “Commission”) Rules of Practice and Procedure, alleging that the 11.25%
base return on common equity currently included in the formula transmission rate of the
Southern Companies is unjust and unreasonable and should be reduced with refunds
made effective as of the filing date of the Complaint.
Joint Complainants certify that copies of the complaint were served in accordance
with Rule 206(c).
Any person desiring to intervene or to protest this filing must file in accordance
with Rules 211 and 214 of the Commission’s Rules of Practice and Procedure, 18 CFR
§§ 385.211 and 385.214. Protests will be considered by the Commission in determining
the appropriate action to be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of intervention or
motion to intervene, as appropriate. The Respondents’ answer and all interventions or
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protests must be filed on or before the comment date. The Respondents’ answer, motions
to intervene, and protests must be served on the Joint Complainants.
The Commission encourages electronic submissions of protests and interventions

in lieu of paper using the “eFiling” link at http://www.ferc.gov. Persons unable to file
electronically should submit an original and five copies of their protests or intervention to
FERC, 888 First Street, N.E., Washington, D.C. 20426.
This filing is accessible online at http://www.ferc.gov, using the “eLibrary” link

and is available for review in the Commissions’ Public Reference Room in Washington,
D.C. There is an “eSubscription” link on the website that enables subscribers to receive
email notification when a document is added to a subscribed docket(s). For assistance
with any FERC Online service, please email FERCOnlineSupport@ferc.gov, or call
(866) 208-3676 (toll free). For TTY, call (202) 502-8659.
Comment Date: 5:00 pm Eastern Time on __, 2018.
Kimberly D. Bose
Secretary
May 10, 2018
VIA ELECTRONIC FILING
Kimberly D. Bose, Secretary

Federal Energy Regulatory Commission
888 First Street, N.E.
Washington, D.C. 20426
Re: Alabama Municipal Electric Authority, et al. v. Alabama Power Company,

et al., Docket No. EL18-__-000
Dear Secretary Bose:
Submitted under cover of this letter is the Complaint of Alabama Municipal

Electric Authority and Cooperative Energy (“Complaint”). The Complaint seeks a
reduction in the base return on common equity currently used in the formula transmission
rate of the Southern Companies, as specified in the body of this Complaint. The
Complaint is filed pursuant to Sections 206 and 306 of the Federal Power Act, 16 U.S.C.
§§ 824e & 825e (2012), and Rule 206 of the Commission’s Rules of Practice and
Procedure, 18 C.F.R. § 385.206 (2018).
The Complaint is submitted in three parts:
 Part I comprises the Complaint, a form of Notice of Complaint suitable for

publication in the Federal Register, and a Certificate of Service attesting
that service of this filing has been made in accordance with Rule 206(c).
 Part II consists of the direct testimony and supporting exhibits of

Breandan T. Mac Mathuna, and Mr. Mac Mathuna’s two-step Discounted
Cash Flow analysis using data for the six months ending March 2018
(marked Exhibit Nos. JC-1 and JC-2).
 Part III consists of the workpapers supporting Mr. Mac Mathuna’s direct
testimony (marked Exhibit No. JC-3).
In addition to the foregoing, a copy of the form of Federal Register notice also is
submitted in Microsoft Word format for the Commission’s convenience.
Please contact us if you have any questions concerning this filing. Thank you for
your assistance.
Respectfully submitted,
/s/ David A. Fitzgerald /s/ Matthew R. Rudolphi

David A. Fitzgerald Matthew R. Rudolphi
Counsel for Counsel for Cooperative Energy
Alabama Municipal Electric Authority
SCHIFF HARDIN LLP DUNCAN, WEINBERG, GENZER

901 K Street N.W., Suite 700 & PEMBROKE, P.C.
Washington, D.C. 20001 1615 M Street N.W., Suite 800
Email: dfitzgerald@schiffhardin.com Washington, D.C. 20036
Email: mrr@dwpg.com
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BEFORE THE

Cooperative Energy
Complainants,
v. Docket No. EL18-__-000

Gulf Power Company,
Respondents.
COMPLAINT OF
ALABAMA MUNICIPAL ELECTRICAL AUTHORITY AND
COOPERATIVE ENERGY
Pursuant to Sections 206 and 306 of the Federal Power Act (“FPA”), 16 U.S.C.
§§ 824e & 825e (2012), and Rule 206 of the Commission’s Rules of Practice and
Procedure, 18 C.F.R. § 385.206 (2018), Alabama Municipal Electrical Authority
(“AMEA”) and Cooperative Energy (collectively, “Joint Complainants”) hereby file this
Complaint against Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, and Southern Company Services, Inc., acting as
an agent for the transmission owning subsidiaries of The Southern Company
(collectively, “Southern Companies” or “Respondents”).
This Complaint seeks one or more Commission orders that reduce the base return
on common equity (“base ROE”) used in the Southern Companies’ formula transmission
rate to a just and reasonable amount. As described more fully below, the current 11.25%
base ROE of Respondents is unjust and unreasonable as measured by Commission
applicable standards. Joint Complainants request that the Commission: (i) find that the
current base ROE is unjust and unreasonable; and (ii) set the Respondents’ base ROE no
higher than 8.65%, which is the just and reasonable base ROE supported by the Joint
Complainants’ testimony, exhibits, and workpapers filed herein. Further, Joint
Complainants request that the Commission: (i) establish a refund effective date as of the
filing date of this Complaint; and (ii) order refunds (with interest at Commission-
approved rates) for the difference in revenue requirements that results from applying just
and reasonable base ROE that may be calculated upon determining the current 11.25%
base ROE is unjust and unreasonable.
This Complaint is supported by the Direct Testimony, Exhibits, and workpapers
of Breandan T. Mac Mathuna, Exhibit Nos. JC-1 through JC-3, which are appended to
this Complaint.
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I. COMMUNICATIONS
Communications regarding this matter should be addressed to the following
persons, who also should be designated for service on the Commission’s official list:
G. Alan Williford David A. Fitzgerald

Chief Operating Officer Sara A. McQuillen
80 TechnaCenter Drive, Suite 200 SCHIFF HARDIN LLP
Montgomery, AL 36117 901 K Street, N.W., Suite 700
Phone: (334) 387-3506 Washington, D.C. 20001
Email: alanw@amea.com Phone: (202) 246-1356
Email: dfitzgerald@schiffhardin.com
smcquillen@schiffhardin.com
Cooperative Energy
Nathan Brown Matthew R. Rudolphi

Chief Operating Officer Matthew L. Bly
7037 US HWY 49 DUNCAN, WEINBERG, GENZER
P.O. Box 15849 & PEMBROKE, P.C.
Hattiesburg, MS 39404 1615 M Street N.W., Suite 800
Phone: (601) 268-2083 Washington, D.C. 20036
Email: nbrown@cooperativeenergy.com Phone: (202) 467-6370
Email: mrr@dwgp.com
mlb@dwgp.com
Joint Complainants request that, in order to avoid delays in responding to official
documents and communications, the Commission waive the requirements of Rule
203(b)(3) to permit each person named above to be placed on the official service list.
II. THE PARTIES
A. Joint Complainants
1. AMEA is a not for profit, public joint action agency whose primary
purpose is to provide reliable and economical electrical power to its eleven members
consisting of municipalities, utilities boards, and an electric board, all located in the State
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of Alabama. Each of AMEA’s eleven participating members owns and operates an
electric distribution system. AMEA sells power to each member pursuant to long-term
power sales contracts. AMEA is a network transmission customer of Respondents
pursuant to the Open Access Transmission Tariff (“OATT”) on file with the Commission
and relies on the transmission assets of the Respondents to wheel energy to meet the
power requirements of AMEA’s members.
2. Cooperative Energy is an incorporated nonprofit cooperative electric
power association organized under and operating pursuant to the Electric Power
Association Law, ch. 184, § 5463, 1936 Miss. Laws (codified as amended at Miss. Code
Ann. § 77-5-201 (1972)), and is a public utility under the laws of the State of Mississippi.
Cooperative Energy is owned and controlled by its eleven members, which are
distribution rural electric power associations, serving rural areas in Mississippi at retail.
The loads served by Cooperative Energy’s eleven member distribution cooperatives are
predominantly domestic and include substantial farm loads. Cooperative Energy is an
electric cooperative that receives financing under the Rural Electrification Act of 1936,
7 U.S.C. § 901, and is therefore not subject to the Commission’s normal jurisdiction
under Part II of the FPA as set forth in 16 U.S.C. § 824(f). Cooperative Energy serves
approximately 950 MW of additional load located in the Southern Companies’ control
area and takes transmission service under the Southern Companies’ OATT for a portion
of this load.
B. Respondents
3. Southern Company Services, Inc. filed the tariff sections of the OATT
setting the base ROE for the Southern Companies and acts as agent for the Alabama
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Power Company, Georgia Power Company, Gulf Power Company, and Mississippi
Power Company.
4. Alabama Power Company is one of the eleven electric and natural gas
utilities operated and wholly-owned by The Southern Company, which is an energy
services holding company. Alabama Power is a regulated operating public utility
engaged in the generation, transmission, distribution, and sale of electricity in the State of
Alabama.
5. Georgia Power Company is one of the eleven electric and natural gas
utilities operated by The Southern Company. Georgia Power is a regulated operating
public utility engaged in the generation, transmission, distribution, and sale of electricity
in the State of Georgia.
6. Gulf Power Company is one of the eleven electric and natural gas utilities
operated by The Southern Company. Gulf Power is a regulated operating public utility
engaged in the generation, transmission, distribution, and sale of electricity in the State of
Florida.
7. Mississippi Power Company is one of the eleven electric and natural gas
utilities operated by The Southern Company. Mississippi Power is a regulated operating
public utility engaged in the generation, transmission, distribution, and sale of electricity
in the State of Mississippi.
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III. DISCUSSION
A. Background
8. The Southern Companies’ current 11.25% base ROE was accepted by
FERC as part of a settlement filed on June 18, 2003 concerning these companies’ open
access transmission formula rates and became effective on May 1, 2003.1
B. The Southern Companies’ Current Base ROE Is Unjust and

Unreasonable.
9. All rates for jurisdictional service under the FPA must be just and
reasonable.2 When challenging a previously-approved rate under Section 206 of the
FPA, complainants will only obtain their requested relief if the Commission: (1) finds
that the existing rate is unjust and unreasonable; and (2) determines that a proposed
replacement rate is just and reasonable.3 As the U.S. Court of Appeals for the District of
Columbia Circuit has explained, however, a complainant is not required to propose or
support a new just and reasonable rate.4 Under FPA Section 206, a complainant need
only demonstrate that the existing rate is unjust and unreasonable; it is up to the
Commission to determine the new just and reasonable rate.5 Through this instant filing,
the Joint Complainants go beyond their Section 206 burden by not only providing well-
substantiated testimony, exhibits, and workpapers to demonstrate that the Southern
1
S. Co. Servs., Inc., 105 FERC ¶ 61,019 (2003).
2
16 U.S.C. §§ 824d & 824e.
3
See, e.g., FPC v. Sierra Pac. Power Co., 350 U.S. 348, 353 (1956); Atl. City Elec. Co.
v. FERC, 295 F.3d 1, 10 (D.C. Cir. 2002); Cities of Bethany v. FERC, 727 F.2d 1131,
1143-44 (D.C. Cir. 1984); La. Pub. Serv. Comm’n v. Entergy Corp., 132 FERC ¶
61,003, at P 28 (2010).
4
Md. Pub. Serv. Comm’n v. FERC, 632 F.3d 1283, 1285 n.1 (D.C. Cir. 2011) (“It is
the Commission’s job—not the petitioner’s—to find a just and reasonable rate.”).
5
Id.
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Companies’ existing base ROE of 11.25% is unjust and unreasonable, but by also
submitting well-reasoned support, analyses, and evidence upon which the Commission
should rely to determine a new just and reasonable base ROE of no greater than 8.65%
for the Southern Companies.
10. A just and reasonable rate of return for a utility is one that does not exceed
the level required to assure confidence in the financial integrity of the enterprise, allows
the utility to maintain its credit and attract capital, and is commensurate with the returns
expected on investments in enterprises with comparable risks.6 An ROE above that level
would exploit consumers and would, for that reason, be unjust, unreasonable, and
unlawful.7 To estimate the rate of return necessary to attract equity investors, the
Commission uses a two-stage constant growth Discounted Cash Flow (“DCF”) model.8
11. Complainants meet their FPA Section 206 burden here through their
submission of the expert testimony and exhibits of Mr. Breandan T. Mac Mathuna
attached to this Complaint. In his submittal, Mr. Mac Mathuna applies the Commission’s
approved DCF method and finds that a just and reasonable base ROE for the Southern
Companies is 8.65%. The existing 11.25% base ROE is 260 basis points higher than the
6
See FPC v. Hope Nat. Gas Co., 320 U.S. 591, 603 (1944) (“Hope”); Bluefield Water
Works & Improvement Co. v. Pub. Serv. Comm’n of W. Va., 262 U.S. 679, 692-93
(1923) (“Bluefield”).
7
Martha Coakley, Mass. Atty. Gen. v. Bangor Hydro-Elec. Co., Opinion No. 531,
147 FERC ¶ 61,234, at P 50 n.89 (2014) (“Opinion No. 531”), order on paper
hearing, Opinion No. 531-A, 149 FERC ¶ 61,032 (2014) (“Opinion No. 531-A”),
order on reh’g, Opinion No. 531-B, 150 FERC ¶ 61,165 (2015) (“Opinion No. 531-
B”) (citing Jersey Cent. Power & Light Co. v. FERC, 810 F.2d 1168, 1180 (D.C. Cir.
1987) (en banc) (“In addition to prohibiting rates so low as to be confiscatory, the
holding of [Hope] makes clear that exploitative rates are illegal as well.”)). See
generally Wash. Gas Light Co. v. Baker, 188 F.2d 11, 15 (D.C. Cir. 1950).
8
Opinion No. 531 at 50.
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level that comports with the FPA’s “just and reasonable” standard. Continued use of the
current base ROE in the Southern Companies’ formula rates would force customers to
overpay for transmission service by millions of dollars each year.
12. As Mr. Mac Mathuna explains, the currently effective 11.25% base ROE
was adopted for the Southern Companies over fourteen years ago, and is no longer just
and reasonable because economic and capital market conditions have changed greatly
during the intervening period. In particular, the cost of capital for electric utilities has
declined significantly since 2003. To demonstrate the point, Mr. Mac Mathuna examined
the six-month period ending March 2018 (which incorporates the most recent data
available at the time of his analyses) and found that the average Moody’s Investors
Service, Inc. (“Moody’s”) A and Baa Public Utility Bond Index yields during that time
were 3.94% and 4.28%, respectively. In addition, public utility long-term debt costs for
the Southern Companies’ Moody’s rating category have dropped by approximately 300
basis points or more on average, and the Southern Companies’ current base ROE of
11.25% is much higher than the Southern Companies’ current cost of common equity
capital. Mr. Mac Mathuna’s testimony and supporting DCF analysis show that, when
current capital market conditions are properly considered, the current base ROE for the
Southern Companies is unjust and unreasonable and, therefore, impermissible under FPA
Section 206.
C. Application of the Commission’s DCF Method Shows That the Just

and Reasonable ROE for the Southern Companies Is 8.65%.
13. Mr. Mac Mathuna’s application of the Commission’s two-step DCF
method shows that the range of results for an appropriately selected national proxy group
of electric utilities with risks comparable to those of the Southern Companies is 7.22% to
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11.05%.9 Accordingly, Mr. Mac Mathuna recommends that the 8.65% median of his
DCF range be adopted as the base ROE in the Southern Companies’ transmission rates.10
To support the proposed 8.65% base ROE, Mr. Mac Mathuna explains that a base ROE at
that level would provide the Southern Companies an implied 437 basis point premium
over the six-month average yield on Moody’s Baa rated public utility bonds for the
period ending March 2018.11
14. To develop an ROE recommendation for the base ROE for the Southern
Companies, Mr. Mac Mathuna prepared a DCF study that applies the methodology
adopted by the Commission for electric utilities in Opinion No. 531, et al. and followed
by the Commission in Opinion No. 551.12 Specifically, Mr. Mac Mathuna selected a
national electric utility proxy group with risks similar to those of the Southern Companies
using the following criteria:13
 Companies that are included in the Value Line electric utility

industry universe;
 Electric utilities that have an Standard & Poor’s (“S&P”) corporate

credit rating of BBB+ to A and a Moody’s long-term issuer or
senior unsecured credit rating of Baa3 to Baa1 (these ratings
ranges encompass one credit rating notch above and below The
Southern Company’s S&P rating of A- and its Moody’s rating of
Baa2);
 Electric utilities having an IBES-published analysts’ consensus

“five-year” earnings per share growth rate;
9
See Exhibit Nos. JC-1, at 11:13-16 & JC-2, at 1.
10
See Exhibit Nos. JC-1, at 11:16-18 & JC-2, at 1:21.
11
See Exhibit No. JC-1, at 12:10-12.
12
Ass’n of Buss. Advocating Tariff Equity v. MISO, Opinion No. 551, 156 FERC
¶ 61,234 (2016) (“Opinion No. 551”).
13
See Exhibit No. JC-1, at 16:12 – 17:12.
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 Electric utilities that are not engaged in major merger or

acquisition (“M&A”) activity during the six-month dividend yield
analysis period;
 Electric utilities that paid dividends throughout the six-month

dividend yield analysis period and did not cut dividends or
announce a dividend cut during that period; and
 Electric utilities whose DCF results pass threshold tests of

economic logic and are not outliers.
15. Twenty-one companies included in the Value Line electric utility universe
satisfied the credit rating criteria stated above.14 Mr. Mac Mathuna also eliminated seven
companies from the proxy group due to major M&A activity, announcement of a
dividend cut, and to remove a company that was distinct in material respects from the
other proxy group companies during the dividend yield analysis period.15 This left a
proxy group of fourteen utilities to which Mr. Mac Mathuna applied the Commission’s
two-step constant growth DCF method.16
16. To apply the two-step DCF method to the proxy group, Mr. Mac Mathuna
developed a single six-month average dividend yield for each proxy company for the six-
month period ending March 2018 (the most recent data available at the time he prepared
his analysis). He then calculated a single composite average growth rate for each
company in the proxy group using a “short-term” analysts’ forecasted five-year earnings
per share growth rate weighted at two-thirds, coupled with a “long-term” forecasted
Gross Domestic Product (“GDP”) growth rate with a one-third weighting. For the short-
term growth rate, Mr. Mac Mathuna used the average of the analysts’ consensus five-year
14
See Exhibit Nos. JC-1, at 17:13-14 & JC-2, at 6.
15
See Exhibit No. JC-1, at 17:18-18:2.
16
See Exhibit Nos. JC-1, at 23:1-3 & JC-2 at 6.
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earnings per share growth rate projections for each company in the proxy group as
reported by Yahoo! Finance from the Thomson Reuters/IBES database on March 30,
2018. For the long-term GDP growth rate, Mr. Mac Mathuna used a 4.22% rate, which is
the average of the long-term projections of 4.12% by IHS Global Insight (May 27, 2017),
4.15% by the Energy Information Administration (January 5, 2017), and 4.38% by the
Social Security Administration Trustees Report (July 2017).17
17. Mr. Mac Mathuna then applied the Commission-approved DCF analysis to
his proxy group companies, which yielded a range of investor-required ROEs of 1.30% to
11.05%.18 For the reasons stated in his testimony, Mr. Mac Mathuna eliminated one low-
end ROE result but did not find it necessary or appropriate to eliminate any high-end
ROE result. After testing for outlier/illogical ROEs, Mr. Mac Mathuna found that the
resulting range of 7.22% to 11.05% serves to bracket investors’ required rates of return
for investing in companies with risk characteristics similar to the Southern Companies.
From that range, Mr. Mac Mathuna recommends the median value of 8.65% as the just
and reasonable base ROE for the Southern Companies.19
18. Mr. Mac Mathuna explains that placing the base ROE at the median rather
than the midpoint is consistent with Commission precedent holding that use of the
median value is appropriate when setting an ROE for single utilities of average risk, like
the Southern Companies, rather than for a diverse, region-wide group of utilities.20 As
17
18
See Exhibit Nos. JC-1, at 24:14-17 & JC-2, at 1:16-18.
19
See Exhibit Nos. JC-1, at 28:13 – 29:2 & JC-2, at 1:21.
20
See Exhibit No. JC-1 at 29:6 – 30:24. While The Southern Company has chosen to
house its transmission facilities in multiple subsidiaries, they are still ultimately
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further evidence that the Southern Companies possess an average amount of risk in
relation to the proxy group companies, Mr. Mac Mathuna explains that a majority of the
companies in his proxy group share the same important risk-mitigating feature with the
Southern Companies—namely, the fact that these utilities all have FERC-approved
formula rates, which assures timely and accurate recovery of costs and thereby reduces
investment risk.
19. Mr. Mac Mathuna acknowledges that, in Opinion Nos. 531 and 551, the
Commission set the ROE for the subject transmission owners based on the midpoint of
the upper half of the DCF range. He explains that such adjustment is neither necessary
nor appropriate in this case because: (1) market conditions were not “anomalous” during
the six-month DCF study period he considered here; and, as a result, (2) reference to the
benchmarks considered in Opinion Nos. 531 and 551 is not appropriate.21
20. In Opinion No. 531, the Commission expressed a concern “that capital
market conditions in the record are anomalous,” citing low bond yields as the basis for
adopting an ROE above the median and pointing to the fact that the yield on 10-year U.S.
Treasury bonds during the six-month study period ending March 2013 was below 2%.22
The Commission reached a similar conclusion in Opinion No. 551 with respect to the six-
month DCF study period there considered (January to June 2015). As Mr. Mac Mathuna
explains, however, a similar finding is unwarranted and unsupportable here for several
reasons, including the following:
owned and controlled by a single company, The Southern Company, and the proxy
group predominantly is made up of other holding companies of similar risk.
21
See Exhibit No. JC-1, at 33:6 – 37:2 & 48:12 – 52:7.
22
Opinion No. 531, at P 145 n.285.
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 Moody’s public utility and Treasury bond yields over the 80-
month period from August 2011 through March 2018 have
remained low and have varied only within a narrow range.23
 Moody’s A rated public utility average bond yield for the DCF
study period in this proceeding is 3.94%. Bond yields in this range
are not unprecedented. From 1940 to 1956, Moody’s A and Baa
rated public utility bond yields remained below 3.75% and 4.15%,
respectively.24
 The prevailing low interest rate/low bond yield conditions are

expected to continue for the foreseeable future, as evidenced by
(i) the forecasts of prominent economists, and (ii) the fact that
investors would be unlikely to purchase public utility and Treasury
bonds at these low-rate/low-yield levels if they anticipated
significant interest rate increases in the near future.25
 Oil and gas pipelines confront the same economic and capital
market conditions as electric utilities. Yet, Commission decisions
in gas and oil pipeline cases continue to apply the median of the
range of DCF outcomes in setting ROEs, with no “anomalous
conditions” adjustment to a point in the upper half of that range.26
21. A second factor noted by the Commission in Opinion No. 531 as
justifying a deviation from reliance on the point of central tendency in the zone of
reasonableness was the level of ROEs being allowed by state regulatory commissions.
Specifically, the Commission stated that evidence of state commission-approved ROEs in
23
24
25
26
See Exhibit No. JC-1, at 47:1 – 48:8; see, e.g., El Paso Nat. Gas Co., 145 FERC
¶ 61,040, at P 698 (2013), order on reh’g, 154 FERC ¶ 61,120, at PP 302-32 (2016)
(setting the utility’s base ROE at the median and rejecting the Presiding
Administrative Law Judge’s recommendation to adjust the base ROE above the
median where the utility “failed to overcome the presumption of average risk” given
that its claims of “anomalously high” financial, business, market, and regulatory risk
were speculative, exaggerated, or otherwise unsupported by record evidence).
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that case supported adjusting the ROE to a point in the middle of the upper half the zone
of reasonableness.27 The Commission reached a similar conclusion in Opinion No. 551.28
22. Mr. Mac Mathuna explains in his testimony that, as bond yields have
fallen, state commission-allowed ROEs also have dropped, albeit with a lag, and it is
expected that state ROE awards will continue in their downward trajectory.29 In fact, the
latest reports from Regulatory Research Associates (“RRA”) show that, if the
extraordinary Virginia generation surcharge/rider cases are properly set to the side, the
average state commission-awarded electric ROE was 10.01% in 2012, dropping to 9.81%
in 2013, to 9.75% in 2014, to 9.60% in 2015 and 2016, and was 9.67% in 2017. The
2016 range was 8.64% to 10.55% with a median of 9.60%. The 2017 range was 8.40% to
11.95%, with the end point being 165 basis points greater than the next highest value of
10.30%, and with a median of 9.60%. Furthermore, in the first quarter of 2018, the
average state-allowed ROE was 9.59%.30 The level of state-awarded ROEs thus provides
no basis for refusing to adopt the outcome of a conventional two-stage DCF analysis
here.
23. Further, as Mr. Mac Mathuna explains, the retail service regulated by state
commissions includes not only the distribution function, but also the generation function,
which supports a finding that such retail service is more risky than FERC-regulated
transmission service, especially where the FERC-regulated utilities have transmission
formula rates, as do the Southern Companies. In contrast to the situation in states where
27
Opinion No. 531, at P 148.
28
29
30
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there is often regulatory lag resulting in utilities earning less than their authorized ROEs,
the transmission formula rates for the Southern Companies provide for timely recovery of
their actual costs of providing service. Accordingly, FERC-approved transmission
ROEs—especially where there are formula rates that eliminate regulatory lag—are
justifiably lower than those allowed by state commissions.31 Therefore, even if evidence
of recent state-authorized ROEs being higher than the 8.65% base ROE Mr. Mac
Mathuna recommends for the Southern Companies existed, such evidence would not
justify increasing the ROE above the median value here.
24. The third factor cited by the Commission in Opinion No. 531 as justifying
its deviation from use of the central tendency point in the zone of reasonableness was that
certain alternative ROE benchmark methodologies presented by the respondents’ witness
in that case produced ROEs that were higher than the measure of central tendency
established using the DCF methodology.32 However, the Commission noted its
reservations about use of these alternative approaches, which are regularly used by
utility-sponsored witnesses to try to justify higher ROEs than can be supported using
market-driven DCF data. The Commission observed that those alternative methods had
been rejected in the past and that it was giving weight to the alternative methods only
because of what it considered, based on the record in that case, to be “unusual capital
market conditions.”33 Mr. Mac Mathuna testifies that these unreliable alternative ROE
methods do not provide a basis for setting the ROE here any higher than the median of
31
32
33
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the DCF range for the proxy group companies.34 Mr. Mac Mathuna also explains that,
even assuming arguendo that the record here could justify setting the ROE at the point of
central tendency in the upper half of the calculated ROE range, the appropriate point for
this purpose would be the true 75th percentile value (i.e. 9.15%), which is effectively the
median—not the midpoint—of the upper half of the DCF range.35
IV. ADDITIONAL INFORMATION PROVIDED IN COMPLIANCE WITH

COMMISSION RULE 206
25. To the extent not already set forth above, Joint Complainants provide the
following additional information required by Rule 206 of the Commission’s Rules of
Practice and Procedure:
A. Specification of the Action or Inaction Alleged to Violate Applicable

Statutory Standards or Regulatory Requirements (Rule 206(b)(1)):
26. The 11.25% base ROE currently reflected in the transmission formula rate
of the Southern Companies is excessive, and therefore unjust and unreasonable. As the
U.S. Court of Appeals for the D.C. Circuit recently reiterated, “the zone of
reasonableness informs FERC’s selection of a just and reasonable rate” and although
complainants can demonstrate unjust and unreasonable rates in myriad ways, the court
recognized that showing “the existing rate is entirely outside the zone of reasonableness”
is sufficient to satisfy the requirements of FPA Section 206.36 Notably, the Southern
Companies’ current base ROE of 11.25% exceeds the upper end of the zone of
reasonableness produced by Mr. Mac Mathuna’s DCF analysis by twenty basis points,
34
35
36
Emera Maine v. FERC, 854 F.3d 9, 23 (2017).
- 16 -
and exceeds the median base ROE by 240 basis points. Accordingly, the Southern
Companies’ current base ROE of 11.25% is demonstrably unjust and unreasonable.
B. How the Action or Inaction Violates Applicable Statutory Standards

or Regulatory Requirements (Rule 206(b)(2)):
27. The legal basis for this Complaint is set forth in Section III.B (¶¶ 9-12)
above. The assessment of unjust and unreasonable charges by the Southern Companies
violates Section 205 of the FPA.
C. Business, Commercial, Economic or Other Issues Presented by the

Action or Inaction as Such Relate to the Joint Complainants (Rule
206(b)(3)):
28. Each Complainant is a provider of service to loads located in the Southern
Companies Transmission System. Therefore, each Complainant is directly and adversely
affected by the assessment of charges that are based in part on an excessive base ROE.
D. Good Faith Estimate of Financial Impact or Harm (Rule 206(b)(4)):
29. Reducing the base ROE included in the Southern Companies’ formula
transmission rate from the current 11.25% level to 8.65% would produce a reduction in
the Respondents’ total collective annual transmission revenue requirements of
approximately $266.5 million. This estimated financial impact is based on an analysis of
information contained in the Southern Companies’ 2017 True-Up OATT Filing submitted
on May 1, 2018 in Docket No. ER10-203.
E. Practical, Operational, or Other Nonfinancial Impacts (Rule

206(b)(5)):
30. Joint Complainants have not identified any operation or nonfinancial
impacts resulting from the current base ROE of the Southern Companies.
- 17 -
F. Other Pending Matters (Rule 206(b)(6)):
31. Joint Complainants are not aware of any other pending matter that
concerns the Southern Companies’ base ROE.
G. Specific Relief or Remedy Requested (Rule 206(b)(7)):
32. Joint Complainants seek one or more orders of the Commission that
(i) declare that the current base ROE of 11.25% is unjust and unreasonable, (ii) direct the
Southern Companies to incorporate a 8.65% base ROE in their formula transmission
rates, (iii) establish a refund effective date as of the filing date of this Complaint, and
(iv) require the Southern Companies to pay (or cause to be paid) refunds plus interest
consistent with implementing the adjudicated reduction in the base ROE for service
rendered on and after the refund effective date. Such relief is provided for in FPA
Section 206 and 18 C.F.R. § 385.206. Pursuant to the authority granted under FPA
Section 206, the Commission has specifically found that establishing the earliest possible
refund effective date is “[c]onsistent with our general policy of providing maximum
protection to customers. . . .”37
H. Documents Supporting the Complaint (Rule 206(b)(8)):
33. Documents supporting the facts set forth in the Complaint include the
testimony attached hereto as Exhibit No. JC-1, and supporting exhibits and workpapers
marked Exhibit Nos. JC-2 and JC-3, respectively.
I. Alternative Dispute Resolution (Rule 206(b)(9)):
34. Joint Complainants and Respondents have not engaged in informal
settlement discussions prior to Complainants’ filing of this Complaint. Joint

37
See PPM Energy, Inc. v. PacifiCorp, 120 FERC ¶ 61,140, at P 36 (2007) (citing
Seminole Elec. Coop., Inc. v. Fla. Power & Light Co., 65 FERC ¶ 61,413, at 63,139
(1993)).
- 18 -
Complainants have not used the Commission’s Enforcement Hotline or Dispute
Resolution Services. After this matter is set for hearing, Joint Complainants would be
willing to engage in Alternative Dispute Resolution led by a Commission Administrative
Law Judge to attempt to negotiate a resolution of this matter.
J. Form of Notice (Rule 206(b)(10)):
35. A form of notice of the filing of this Complaint suitable for publication in
the Federal Register is provided with the Complaint.
K. Service (Rule 206(c)):
36. Simultaneous with the filing of this Complaint, Joint Complainants have
served a copy of this Complaint upon representatives for the Respondents via electronic
mail or first class mail (postage prepaid). Copies of the Complaint also are being
provided to affected agencies and other parties potentially affected by the Complaint, as
required by Rule 206(c).
V. CONCLUSION
37. WHEREFORE, for the foregoing reasons, Joint Complainants respectfully
request that the Commission: (1) find that the Southern Companies’ currently effective
base ROE of 11.25% is unjust and unreasonable and must be reduced to a just and
reasonable level, (2) find that the 8.65% base ROE recommended by Joint Complainants
is just and reasonable and should be adopted in calculating the annual transmission
revenue requirements of the Southern Companies’ OATT; (3) establish the date of the
filing of the Complaint as the refund effective date for this Complaint, and cause notice
of the establishment of the refund effective date to be published in the Federal Register;
(4) order refunds, with interest at the rates provided for in the Commissions’ Regulations,
- 19 -
of the difference between the Southern Companies’ annual transmission revenue
requirements calculated using the ROE established in this proceeding and the annual
transmission revenue requirements calculated using the current base ROE, commencing
with the refund effective date established for this Complaint; and (5) grant such other
relief as the Commission may deem appropriate in the circumstances presented.
May 10, 2018 Respectfully submitted,
/s/ David A. Fitzgerald /s/ Matthew R. Rudolphi

David A. Fitzgerald Matthew R. Rudolphi
Counsel for Counsel for Cooperative Energy
SCHIFF HARDIN LLP DUNCAN, WEINBERG, GENZER

901 K Street NW, Suite 700 & PEMBROKE, PC
Washington, D.C. 20001 1615 M Street NW, Suite 800
Email: dfitzgerald@schiffhardin.com Washington, D.C. 20036
Email: mrr@dwgp.com
- 20 -
CERTIFICATE OF SERVICE
I hereby certify that I have this day caused a copy of the foregoing Complaint to
be served via electronic mail upon the registered agent for the Respondents.
Dated at Washington, D.C. this 10th day of May 2018
/ s/ Matthew L. Bly
Matthew L. Bly
Counsel for Cooperative Energy
DUNCAN, WEINBERG, GENZER
& PEMBROKE, PC
1615 M Street NW, Suite 800
Washington, D.C. 20036
Email: mlb@dwgp.com
Exhibit No. JC-1
Exhibit No. JC-1
Direct Testimony and Exhibits of

Breandan T. Mac Mathuna
Exhibit No. JC-1

BEFORE THE

Cooperative Energy
Complainants,
Docket No. EL18-__-000
v.

Gulf Power Company,
Respondents.
DIRECT TESTIMONY AND EXHIBITS

OF BREANDAN T. MAC MATHUNA
On Behalf Of
ALABAMA MUNICIPAL ELECTRIC AUTHORITY AND

COOPERATIVE ENERGY
May 10, 2018

Exhibit No. JC-1

Page i
TABLE OF CONTENTS
I. INTRODUCTION ......................................................................................................2
II. SPONSORSHIP OF TESTIMONY ..........................................................................5
III. PURPOSE AND OVERVIEW OF TESTIMONY ..................................................6
IV. EVALUATION OF THE ROE CURRENTLY INCLUDED IN

THE SOUTHERN COMPANIES’ TRANSMISSION FORMULA
RATE ...........................................................................................................................7
V. DEVELOPMENT OF A JUST AND REASONABLE RETURN

ON COMMON EQUITY FOR THE SOUTHERN COMPANIES’
OATT TRANSMISSION SERVICE ......................................................................12
VI. ROE RECOMMENDATION ..................................................................................28
VII. CONCLUSIONS .......................................................................................................54

Exhibit No. JC-1

Page ii
LIST OF EXHIBITS
Exhibit No. Description
JC-1 Direct Testimony of Breandan T. Mac Mathuna
Two-Step DCF Analysis Using Data for Six Months Ending March
JC-2
2018
Workpapers Supporting Direct Testimony of Breandan T. Mac

JC-3
Mathuna
Exhibit No. JC-1

Page iii
SUMMARY
Breandan T. Mac Mathuna, Consultant of GDS Associates, Inc., an engineering
and consulting firm, presents Direct Testimony and Exhibits on behalf of Alabama
Municipal Electric Authority and Cooperative Energy (collectively referred to as “Joint
Complainants”). Mr. Mac Mathuna presents the results of his cost of common equity
analyses and provides a recommendation for the appropriate stated rate of return on
common equity (“ROE”) that should be reflected in the transmission formula rate of the
Southern Companies1 at issue in this proceeding.
Mr. Mac Mathuna selects a national proxy group of Value Line electric utilities
with average risk comparable to that of the Southern Companies and applies the
Commission’s preferred two-step, constant growth Discounted Cash Flow (“DCF”)
methodology in accordance with the Commission’s guidance for electric utilities in
Opinion Nos. 531, 531-A, 531-B, 551, and other relevant opinions and orders. Mr. Mac
Mathuna recognizes that on April 14, 2017, the United States Court of Appeals for the
District of Columbia Circuit vacated the Commission’s Opinion No. 531 and remanded
the case to the Commission.2 However, Mr. Mac Mathuna is advised by counsel that the
Commission’s Opinion No. 531 adoption of the two-step DCF methodology, which has
long been applied for natural gas and oil pipelines, for future use for electric utilities was
not an aspect of the Opinion that was appealed to the court and was not the subject of the
1
The Southern Companies are Alabama Power, Georgia Power, Gulf Power, and
Mississippi Power. Southern Company Services, Inc. acts as an agent for the
Southern Companies.
2
Emera Maine v. FERC, 854 F.3d 9 (D.C. Cir. 2017) (“Emera Maine”).
Exhibit No. JC-1

Page iv
court’s decision. That view was also recently confirmed in the Initial Decision issued on
March 27, 2018, by Presiding Administrative Law Judge Steven A. Glazer in Docket No.
EL16-664-002, Belmont Municipal Light Department, et al. v. Central Maine Power
Company, et al., 162 FERC ¶ 63,026 at P 58 (2018). In that Initial Decision, Judge
Glazer said that “the Emera Maine vacatur and remand does not extinguish the
Commission’s adoption in Coakley, Opinion No. 531 of the ‘two-step’ DCF
methodology for electric ROE cases.” Nonetheless, Mr. Mac Mathuna does not cite the
Commission’s adoption of the two-step DCF methodology for application to electric
utilities in Opinion No. 531 as legal precedent, but rather, as a well-reasoned statement of
the Commission’s preferred methodology that has synchronized its pipeline and electric
utility methodologies.
Per Mr. Mac Mathuna’s analysis, which is based on financial data for the recent
six-month period of October 2017 through March 2018, a just and reasonable base ROE
for the Southern Companies is 8.65%. This recommended ROE is based upon the
median of Mr. Mac Mathuna’s DCF-calculated array of investor-required ROEs for his
ultimate national electric utility proxy group comprised of fourteen electric utilities. The
range of returns for this proxy group is 7.22% to 11.05% (see generally Mac Mathuna
Testimony, Exhibit No. JC-1, at 6-50). Mr. Mac Mathuna selected his proxy group using
several screening criteria that have been used by the Commission in past cases, including
both Standard & Poor’s Global Ratings (“S&P”) and Moody’s Investors Service, Inc.
(“Moody’s”) credit ratings screens.
Mr. Mac Mathuna explains that use of the median of the proxy group ROEs as the
most appropriate measure of central tendency for a single electric utility is consistent
Exhibit No. JC-1

Page v
with Commission policy and practice. Mr. Mac Mathuna uses various metrics, including
a review of the credit ratings and Value Line Safety Rankings for the proxy companies, to
confirm that the Southern Companies’ transmission service is perceived to present
approximately the same risk as the average for the proxy group. Mr. Mac Mathuna
explains that, consistent with Opinion Nos. 531 and 551, in selecting his comparable-risk
proxy group, he used a credit rating risk band of BBB+ to A for S&P ratings and Baa3 to
Baa1 for Moody’s ratings, which includes ratings one notch above and below the A- S&P
and Baa2 Moody’s ratings of The Southern Company, respectively.
Mr. Mac Mathuna specifically addresses the Commission’s determination in
Opinion Nos. 531 and 551 to set the base ROEs for the ISO-New England Transmission
Owners and Midcontinent Independent System Operator, Inc. Transmission Owners,
respectively, at the midpoint of the upper half of the ROE range based on the specific
record in those cases. The same result is not warranted here.
Mr. Mac Mathuna explains that there have been both limited increases and
decreases in the six-month average ten-year Treasury bond yields over the last six years,
which confirms that we are experiencing a new normal level of capital costs rather than a
short-lived aberration. Additionally, he identifies lower unemployment rates, low
inflation rates, an expanding economy, the ending of the Quantitative Easing (“QE”)
program, the Federal Reserve’s initiation of a program to reduce its QE securities
holdings, initiation of short-term interest rate increases by the Federal Reserve, and a
stronger stock market as additional factors that are different from the record underlying
Opinion Nos. 531 and 551. He demonstrates that during the last 80 months, from August
2011 – March 2018, A rated public utility bond yields have settled into a range of 3.57%
Exhibit No. JC-1

Page vi
to 4.81%, with an average of 4.17%, and the 3.94% average yield for the six-month
analysis period for the DCF analyses he performed for this proceeding continues to fall
well within that range.
Finally, Mr. Mac Mathuna discusses the use of state commission-allowed ROEs
and certain other alternative benchmarks referred to in Opinion Nos. 531 and 551 that
were considered in placing the base ROE above the median in those proceedings. He
uses published reports to demonstrate that no such adjustment is warranted in this case
and explains that, as bond yields have fallen over the last several years, state commission-
allowed ROEs have come down. Mr. Mac Mathuna explains that even if the Commission
finds it appropriate to select an ROE from the upper half of the range based on evidence
in this proceeding, using the midpoint as the point of central tendency can cause
inappropriate impacts on the result by overweighting extreme values of the proxy group,
and that the 75th percentile, or effectively the median of the upper half of the range, is a
more appropriate measure of central tendency for the upper half of the range and is more
consistent with Commission precedent when setting the ROE for a single electric utility
rather than for a region-wide group of disparate utilities.
Mr. Mac Mathuna recommends a base ROE of 8.65% for the Southern
Companies’ transmission formula rate. The current stated base ROE of 11.25% included
in the Southern Companies’ transmission formula rate is demonstrably unjust and
unreasonable as it exceeds even the upper end of the zone of reasonableness (11.05%).
Exhibit No. JC-1

BEFORE THE

Cooperative Energy
Complainants,
Docket No. EL18-__-000
v.

Gulf Power Company,
Mississippi Power Company
Respondents.
DIRECT TESTIMONY AND EXHIBITS

OF BREANDAN T. MAC MATHUNA
On Behalf Of
ALABAMA MUNICIPAL ELECTRIC AUTHORITY AND

COOPERATIVE ENERGY
May 10, 2018

Exhibit No. JC-1

Page 2
I. INTRODUCTION
1 Q. PLEASE STATE YOUR NAME, BUSINESS, TITLE, AND BUSINESS
2 ADDRESS
3 A. My name is Breandan T. Mac Mathuna. I am a Project Manager for GDS
4 Associates, Inc. (“GDS”). My business address is 1850 Parkway Place, Suite
5 800, Marietta, Georgia 30067.
6 Q. PLEASE OUTLINE YOUR FORMAL EDUCATION
7 A. I graduated from the University College Dublin, Ireland with a Bachelor of
8 Commerce in 2007. My area of concentration was Finance. I received a Masters
9 of Business Studies in Strategic Management and Planning from the UCD
10 Michael Smurfit Graduate Business School, University College Dublin, Ireland in
11 2008.
12 Q. PLEASE OUTLINE YOUR PROFESSIONAL EXPERIENCE
13 A. I have over nine years of experience in the power industry. In 2008 I began my
14 career at EirGrid, the Transmission System Operator and Market Operator in
15 Ireland and Northern Ireland, which is owned by the Irish Government. As part
16 of my responsibilities, I developed a business case and financial model for the
17 transfer of transmission network assets from the Electric Supply Board, the
18 Transmission Asset Owner and dominant energy company in the then-newly
19 deregulated market, to EirGrid. I later became a transmission pricing specialist
20 and was assigned to a task force to design and implement a new transmission
21 network tariff for generators that were interconnected to the transmission system.
22 I was promoted in 2010 to the group regulation team as a regulatory analyst and
Exhibit No. JC-1

Page 3
1 later to a senior regulatory analyst role. During this time, I was tasked with
2 developing and coordinating the revenue requirement submission to the Irish
3 energy regulator regarding the Ireland and Great Britain electricity interconnector
4 link project. Additionally, I worked with senior management to develop a
5 sustainable dividend payment framework, with EirGrid subsequently paying its
6 first dividend to the Irish Government. Finally, I worked closely with senior
7 management regarding EirGrid’s regulatory engagement as part of the Price
8 Control process determining the five-year revenue requirement for EirGrid. In
9 particular, I worked on developing EirGird’s position on what the appropriate
10 Return on Equity (“ROE”) rate was, prepared material filed with the Irish
11 regulator and participated in regulatory negotiations to assert EirGrid’s position.
12 I joined GDS, a multi-disciplinary engineering and consulting firm
13 primarily serving electric, gas, and water utilities, in 2014 and have performed a
14 wide variety of financial consulting services with a focus on rates, state and
15 federal regulatory matters, and strategic power supply advice. This involves the
16 development of financial, wholesale power cost, and annual operating budget
17 forecasts for numerous clients. I have developed power supply procurement
18 strategies, managed the request for proposal processes and contracting for these
19 efforts. I have performed long-term asset reviews and economic feasibility
20 analyses of purchase power contracts and/or ownership of renewable generation
21 facilities, participated at Regional Transmission Organization (“RTO”)
22 stakeholder committees and completed a comprehensive financial analysis on
23 becoming an RTO member for a large client that is currently in an unstructured
24 market.
Exhibit No. JC-1

Page 4
1 I have assisted in conducting ROE analyses and also supported the
2 development of a transmission ROE protest and the drafting of direct testimony as
3 part of an ROE complaint, and I am currently involved in a number of ongoing
4 settlement negotiations regarding ROE complaints at FERC. I have performed
5 analyses of transmission owners’ annual FERC-approved Open Access
6 Transmission Tariff (“OATT”) filings, and numerous reactive revenue
7 requirement FERC Schedule 2 tariff filings including representing clients’
8 interests at settlement conferences regarding those filings. In connection with my
9 financial consulting assignments, I regularly follow the capital markets and
10 factors influencing the cost of capital for electric utilities.
11 Q. PLEASE DESCRIBE GENERALLY THE TYPES OF MATERIALS YOU
12 REVIEWED IN PREPARING YOUR TESTIMONY IN THIS
13 PROCEEDING.
14 A. In addition to my routine review of economic and financial market information,
15 and Commission orders and opinions on electric utility ROEs, I have reviewed
16 publicly available reports on the credit ratings and investment risks of The
17 Southern Company and its securities and the risks associated with its system-wide
18 OATT transmission service. I have also reviewed the Commission’s most recent
19 opinions on ROE for electric utilities: the Opinion No. 531 series3, Opinion No.
20 5514, Opinion No. 5545, and Opinion No. 5566.
3
Martha Coakley, Mass. Atty. Gen. v. Bangor Hydro-Elec. Co., Opinion No. 531,
147 FERC ¶ 61,234, at P 50 n.89 (2014) (“Opinion No. 531”), order on paper
hearing, Opinion No. 531-A, 149 FERC ¶ 61,032 (2014) (“Opinion No. 531-A”),
Exhibit No. JC-1

Page 5
1 Q. ARE YOU SPONSORING ANY EXHIBITS TO YOUR TESTIMONY?
2 A. Yes. In addition to my prepared direct testimony (Exhibit No. JC-1), I am
3 sponsoring the following supporting exhibits:
4 JC-2: Two-Step DCF Analysis Using Data for Six Months Ending March
5 2018; and
6 JC-3: Workpapers Supporting Direct Testimony of Breandan T. Mac
7 Mathuna.
II. SPONSORSHIP OF TESTIMONY
8 Q. ON WHOSE BEHALF ARE YOU TESTIFYING IN THIS PROCEEDING?
9 A. I am presenting this testimony on behalf of Alabama Municipal Electric Authority
10 and Cooperative Energy (collectively referred to as “Joint Complainants”).
order on reh’g, Opinion No. 531-B, 150 FERC ¶ 61,165 (2015) (“Opinion No. 531-
B”), vacated sub nom. Emera Maine v. FERC, 854 F.3d 9 (D.C. Cir. 2017).
4
Ass’n of Buss. Advocating Tariff Equity v. Midcontinent Indep. Sys. Operator, Inc.,
Opinion No. 551, 156 FERC ¶ 61,234 (2016) (“Opinion No. 551”), reh’g pending.
5
Potomac-Appalachian Transmission Highline, LLC, Opinion No. 554, 158 FERC
¶ 61,050 (2017) (“Opinion No. 554”).
6
Midcontinent Indep. Sys. Operator, Inc., Opinion No. 556, 161 FERC ¶ 61,059
(2017) (“Opinion No. 556”).
Exhibit No. JC-1

Page 6
III. PURPOSE AND OVERVIEW OF TESTIMONY
1 Q. WHAT IS THE PURPOSE OF YOUR DIRECT TESTIMONY IN THIS
2 PROCEEDING?
3 A. My direct testimony presents the results of my analyses of the current cost of
4 common equity capital for the system-wide OATT transmission service of the
5 Southern Companies, based on the FERC guidelines in Opinion Nos. 531, 531-A,
6 531-B, 551, and other relevant precedent.7 The purpose of my testimony is two-
7 fold: first, to explain the basis for my determination that the ROE currently
8 included in the transmission formula rate of the Southern Companies is excessive
9 and, therefore, unjust and unreasonable; and, second, to provide a
10 recommendation for the just and reasonable ROE that should be used in the
11 Southern Companies’ transmission formula rate.
7
I recognize that on April 14, 2017, the United States Court of Appeals for the District
of Columbia Circuit vacated the Commission’s Opinion No. 531 and remanded the
case to the Commission. See Emera Maine v. FERC, 854 F.3d 9 (D.C. Cir. 2017).
However, my primary reliance on guidance from Opinion No. 531 is in the
application of the Commission’s favored two-step DCF methodology. I am advised
by counsel that the Commission’s Opinion No. 531 adoption of the two-step DCF
methodology, which has long been applied for natural gas and oil pipelines, for future
use for electric utilities also was not an aspect of the Opinion that was appealed to the
court and was not the subject of the court’s decision. That view was also recently
confirmed by Presiding Administrative Law Judge Steven A. Glazer in his Initial
Decision in Belmont Municipal Light Department, et al. v. Central Maine Power
Company, et al., Docket No. EL16-64-002, issued March 27, 2018. In that ruling
Judge Glazer said that “the Emera Maine vacatur and remand does not extinguish the
Commission’s adoption in Coakley, Opinion No. 531 of the “two-step” DCF
methodology for electric ROE cases.” However, I do not cite the Commission’s
adoption of the two-step DCF methodology for application to electric utilities in
Opinion No. 531 as legal precedent, but rather, as a well-reasoned statement of the
Commission’s preferred methodology that has synchronized its pipeline and electric
utility methodologies.
Exhibit No. JC-1

Page 7
1 Q. PLEASE PROVIDE AN OVERVIEW OF THE REMAINDER OF YOUR
2 TESTIMONY.
3 A. In Part IV below, I present my evaluation of the justness and reasonableness of
4 the ROE currently included in the Southern Companies’ transmission formula
5 rate. I explain in Part IV the basis for my conclusion that the ROE currently
6 included in the Southern Companies’ transmission rate is substantially excessive,
7 and, therefore, unjust and unreasonable.
8 In Part V below, I discuss my application of the Commission’s favored
9 two-step DCF methodology for determining the cost of common equity capital for
10 electric utility companies to financial data for the most recent six-month period at
11 the time my analyses were conducted (the six months ending March 31, 2018).
12 In Part VI below, I set forth my recommendation regarding the just and
13 reasonable ROE for inclusion in the transmission formula rate of the Southern
14 Companies at issue in this proceeding. I also discuss whether or how certain case-
15 specific determinations referred to in Opinion Nos. 531 and 551 should or should
16 not have a bearing on the Commission’s determination in this case.
17 Finally, in Part VII below, I summarize the conclusions I believe are
18 supported by the analyses described in the preceding sections of my testimony.
IV. EVALUATION OF THE ROE CURRENTLY INCLUDED IN THE

SOUTHERN COMPANIES’ TRANSMISSION FORMULA RATE
19 Q. PLEASE DESCRIBE THE SOUTHERN COMPANIES.
20 A. The Southern Companies are Alabama Power Company, Georgia Power
21 Company, Gulf Power Company, and Mississippi Power Company. Southern

Exhibit No. JC-1

Page 8
1 Company Services, Inc. (“SCS”), acts as an agent for the Southern Companies.
2 Each company is a wholly-owned subsidiary of The Southern Company and each
3 is a regulated operating public utility. Each company is a vertically integrated
4 electric utility primarily engaged in the generation, transmission, distribution, and
5 sale of electricity in the states of Alabama, Georgia, Florida, and Mississippi. The
6 electric utility assets of these operating companies and certain electric utility
7 assets of Southern Power Company, which constructs, acquires, owns, and
8 manages generation assets, and sells electricity at market-based rates in certain
9 wholesale markets, are operated as a single integrated electric system, or power
10 pool, pursuant to the Intercompany Interchange Contract.8 The Southern
11 Companies provide regional transmission service pursuant to a FERC approved
12 single OATT under a cost-of-service formula transmission rate where the unit
13 charges are developed and applied based on forward-looking investment and
14 costs, and subsequently trued-up annually to recover actual costs including the
15 authorized ROE. On June 18, 2003, the Southern Companies filed an Offer of
16 Settlement in Docket No. ER02-851-009, a proceeding in which their OATT
17 stated revenue requirement rate approach was changed by agreement to the
18 formula rate approach. On the first page of the transmittal letter of that filing, the
19 Southern Companies pointed out that this “formula rate methodology [] more
20 closely tracks costs, investment, and load” than the former fixed revenue
21 requirement approach did. This combination of a forward-looking formula rate
22 together with an annual true-up, which assures full and timely recovery of costs,
8
See The Southern Company 2017 SEC Form 10-K.
Exhibit No. JC-1

Page 9
1 substantially reduces the risk profile of the Southern Companies’ transmission
2 operations. The transmission formula rate produces single postage stamp rates,
3 which are charged in respect of transmission service across the entire transmission
4 footprint of the Southern Companies. No distinction whatsoever is made in the
5 rates charged to transmission customers based on location on the system and all
6 transmission customers may use the entire transmission footprint for the single
7 system-wide average rate for the class (i.e., network, point-to-point, etc.) of
8 transmission service they use. Each company has a long-term issuer and/or senior
9 unsecured credit rating from S&P Global Ratings (“S&P”) and Moody’s Investors
10 Service, Inc., (“Moody’s”). Currently all companies have the same A- S&P rating
11 as the parent, The Southern Company. All but one company has a better rating
12 than The Southern Company’s Baa2 Moody’s rating.9
13 Q. WHAT BASE ROE IS CURRENTLY INCLUDED IN THE SOUTHERN
14 COMPANIES’ TRANSMISSION FORMULA RATE?
15 A. Southern Companies’ current open access transmission formula rate, which was
16 resolved through a settlement that was filed on June 18, 2003, and became
17 effective on May 1, 2003, contains an 11.25% base ROE.10
9
Mississippi Power’s senior unsecured rating from Moody’s is Ba1 which is two
notches lower than the Baa2 of The Southern Company. The Moody’s long-term
issuer and senior unsecured debt rating for Georgia Power is A3, for Gulf Power is
A2 and for Alabama Power is A1 which are, respectively, two, three, and four
notches higher than The Southern Company’s Moody’s rating of Baa2.
10
The Southern Companies’ transmission formula rate settlement was filed on June 18,
2003 in Docket No. ER02-851-009. FERC eLibrary accession number 20030620-
0064. That settlement was approved by order dated October 3, 2003. See S. Co.
Servs., Inc., 105 FERC ¶ 61,019 (2003).
Exhibit No. JC-1

Page 10
1 Q. IS THE 11.25% BASE ROE JUST AND REASONABLE FOR USE IN THE
2 SOUTHERN COMPANIES’ CURRENT TRANSMISSION FORMULA
3 RATE?
4 A. No. The current 11.25% base ROE, which was negotiated over fourteen years
5 ago, is no longer just and reasonable for use in the Southern Companies’
6 transmission formula rate because the economic environment and capital markets
7 have changed dramatically since that ROE was determined through settlement.
8 Capital costs in general, and capital costs for electric utilities in particular, have
9 substantially declined over the ensuing years. For example, for the six-month
10 period ending December 2002, immediately before the filing of an amendment to
11 the Southern Companies’ OATT in Docket No. ER02-851-000, the average
12 Moody’s Baa Rated Public Utility Bond Index yield was 7.80% and for the six-
13 month period ending May 2003, immediately before the June 18, 2003 settlement
14 agreement in Docket No. ER02-851-009, it was 7.12%.11 For the six-month
15 period ending March 2018 used in my DCF analyses, the comparable average
16 bond yield was 4.28%. Thus, public utility long-term debt costs for the Southern
17 Companies’ Moody’s rating category have dropped by approximately 300 basis
18 points or more, and the Southern Companies’ ROE of 11.25% is much higher
19 than the Southern Companies’ current cost of common equity capital. As I will
20 discuss in more detail below, this fact is borne out by my analyses applying the
11
The Southern Company’s senior unsecured credit rating is Baa2 from Moody’s and
its long-term issuer rating is A- from S&P.
Exhibit No. JC-1

Page 11
1 Commission’s favored two-step DCF methodology as explained in its Opinion
2 No. 531 series and as applied in its Opinion No. 551.
3 That brings me to another reason the existing 11.25% ROE should be
4 reevaluated. In addition to economic and capital cost changes over time, the
5 Commission has since changed the way it applies the DCF methodology in
6 determining the ROE for electric utilities. The current ROE was negotiated
7 through settlement during the time of the Commission’s old single-stage DCF
8 methodology. Subsequently, in Opinion No. 531, the Commission found that the
9 two-step DCF methodology it has long used for natural gas and oil pipelines
10 should also be used for electric utilities. Thus, the Southern Companies’ formula
11 transmission rate ROE should be reexamined based on the Commission’s current
12 DCF application methodology.
13 My application of the Commission’s preferred two-step DCF methodology
14 shows that the range of results for a properly selected national proxy group of
15 electric utilities with risks comparable to that of the Southern Companies’
16 transmission service is 7.22% to 11.05%.12 Based on that analysis, I recommend
17 that the 8.65% median of my proxy group ROEs be adopted as the base ROE in
18 the Southern Companies’ formula transmission rate.
19 As I discuss below, I do not believe the facts warrant selection of a point
20 in the upper half of the proxy group ROEs for the Southern Companies’ ROE in
21 this proceeding. However, if the Commission finds on the basis of the record here
22 that conditions warrant awarding the central tendency of the upper half of the
12
See Exhibit No. JC-2, at 1.
Exhibit No. JC-1

Page 12
1 proxy group DCF results, as it did in Opinion Nos. 531 and 551, the appropriate
2 measure of the central tendency for the upper half of the range is the median or
3 true 75th percentile value of 9.15%. While this case would not set the ROE for a
4 diverse, region-wide RTO group of electric utilities like those in Opinion Nos.
5 531 and 551, if the Commission determines that the midpoint of the upper half of
6 the DCF range should be used here, as it was in those cases, that result is
7 10.09%.13
8 The reasonableness of an 8.65% base ROE is further supported by the fact
9 that the average yield on Moody’s Baa rated public utility bonds for the six-month
10 period ending March 2018 was 4.28%. Thus, a 8.65% ROE would provide an
11 implied 437 basis point premium over the six-month average yield on Moody’s
12 Baa rated public utility bonds for the period ending March 2018. That is a very
13 substantial premium.
V. DEVELOPMENT OF A JUST AND REASONABLE

RETURN ON COMMON EQUITY FOR THE SOUTHERN COMPANIES’
OATT TRANSMISSION SERVICE
14 Q. WHAT CRITERIA DID YOU USE IN DETERMINING THE COST OF
15 COMMON EQUITY CAPITAL FOR THE SOUTHERN COMPANIES’
16 OATT TRANSMISSION SERVICE?
17 A. To determine the cost of common equity capital for the Southern Companies’
18 OATT transmission service, I used the criteria set forth in Bluefield Waterworks
19 & Improvement Co. v. Public Service Commission of West Virginia, 262 U.S. 679
13
Id.
Exhibit No. JC-1

Page 13
1 (1923) (“Bluefield”) and Federal Power Commission v. Hope Natural Gas Co.,
2 320 U.S. 591 (1944) (“Hope”). In these landmark decisions, the Supreme Court
3 established standards for regulatory determinations of allowable rates of return on
4 common equity capital. These standards recognize that ratemaking involves a
5 balancing of investor and consumer interests, and that the equity investor’s
6 interest is served if the return to the equity owner is comparable to the returns on
7 investments in other enterprises having similar risks. In addition, the Court’s
8 standards support an ROE that is sufficient to ensure confidence in the financial
9 integrity of the enterprise so as to maintain its credit and to attract capital. The
10 consumer interest is described as including protection from “exploitation at the
11 hands of” the utility.14 In Order No. 489,15 the Commission recognized that the
12 best way to meet these standards is through the use of the DCF method. The
13 Commission stated:
14 There is compelling economic justification for relying on

15 the market cost of capital as the standard for rate of return
16 decisions. Furthermore, a market cost of capital approach
17 addresses both the comparable earnings and attraction of
18 capital standards of the Hope decision. In the
19 Commission’s judgment, the DCF method is the best
20 available means of estimating the market cost of capital.16
21 Thus, the Commission recognized that the market-based DCF methodology was
22 the best means of meeting the comparable earnings and capital attraction
23 standards of Hope and Bluefield, and the Commission has since continued to rely
14
See, e.g., Hope, 320 U.S. at 603, 610.
15
Generic Determination of Rate of Return on Common Equity for Public Utilities,
Order No. 489, FERC Stats. & Regs. ¶ 30,795 (1988) (“Order No. 489”).
16
Order No. 489, at 30,993.
Exhibit No. JC-1

Page 14
1 on the results of the DCF methodology in determining just and reasonable ROEs
2 for electric utilities.
3 Q. HOW DID YOU DERIVE THE COST OF COMMON EQUITY THAT
4 YOU RECOMMEND FOR USE IN THE SOUTHERN COMPANIES’
5 TRANSMISSION FORMULA RATE?
6 A. In determining a fair ROE that would meet the criteria of comparability of
7 earnings and capital attraction, I followed the guidance provided by the
8 Commission for determining the allowable ROE to be used in setting wholesale
9 electric rates. In conducting my analyses, I applied the Commission’s Opinion
10 No. 531 two-step DCF methodology to a national proxy group of electric utility
11 companies that reflects, as closely as possible, the risk characteristics associated
12 with the electric transmission service of the Southern Companies. This is the
13 methodology long used for natural gas and oil pipelines, and was set forth for
14 future application to electric utilities in the Commission’s Opinion Nos. 531, 531-
15 A, and 531-B.
16 Q. PLEASE DESCRIBE THE COMMISSION’S TWO-STEP DCF
17 METHODOLOGY AND YOUR APPLICATION OF THAT
18 METHODOLOGY IN MORE DETAIL.
19 A. The Commission’s preferred two-step, constant growth DCF formula is:
20 k = (D/P) (1 + 0.5g) + g
21 The “D/P” term is the dividend yield. Pursuant to Opinion No. 531 and other
22 opinions, the Commission prefers the use of the latest six-month average dividend
23 yield for each proxy company. Thus, to gauge the Southern Companies’ current
24 cost of common equity capital, I have used dividend yields for the six months
Exhibit No. JC-1

Page 15
1 ending March 2018, which were the most recent available at the time my analyses
2 were prepared. The “g” term is the expected long-term dividend growth rate. In
3 order to reflect investors’ expected long-term dividend growth rate, the
4 Commission in Opinion Nos. 531 and 531-A expressed its preference for the use
5 of a single, weighted average of two different growth rates for each proxy
6 company – a shorter-term growth rate weighted at two-thirds and a longer-term
7 growth rate weighted at one-third, as has long been its practice in the natural gas
8 and oil pipeline industries. The shorter-term growth rate is the analysts’
9 consensus forecasted “five-year” earnings per share growth rate as reported by
10 I/B/E/S International, Inc. (“IBES”)17 or a comparable analysts’ consensus
11 forecasted growth rate for each proxy company.18 The longer-term growth rate is
12 based on forecasts of long-term growth of the economy as a whole, as reflected by
13 the Gross Domestic Product (“GDP”).19 The dividend yield is multiplied by 1 +
14 0.5g to reflect the quarterly payment of dividends.20
15 Q. DID OPINION NO. 531 DEFINITIVELY RESOLVE THE GROWTH
16 RATE ISSUE?
17
IBES was purchased by Thomson Financial, which later became Thomson Reuters.
Such “IBES” growth rates are regularly retrieved from the Thomson Reuters/IBES
data base and published on the Yahoo! Finance website.
18
Other reputable financial and investment information services also publish
comparable forecasts of “five-year” earnings per share growth rates that also are used
by investors. The key to being “comparable” to IBES is that the forecast represents a
consensus of analysts’ growth rate forecasts. See Opinion No. 551, at P 64.
19
Currently, the Commission uses an average of forecasted long-term GDP data from
EIA, Social Security Administration, and IHS Global Insight.
20
See Opinion No. 531, at PP 15, 17 & 39.
Exhibit No. JC-1

Page 16
1 A. No. Using the GDP growth rate as the appropriate long-term growth rate was an
2 aspect of the two-step DCF method adopted for application to electric utilities in
3 Opinion No. 531 that was not advocated by any of the underlying parties.
4 Accordingly, the Commission directed the parties to establish an evidentiary
5 record on the long-term growth rate issue through a paper hearing. After
6 considering the evidence, the Commission followed the proposal concerning the
7 GDP growth rate that it had made in Opinion No. 531.21 That approach was
8 followed by the Presiding Judge in the Midcontient Independent System Operator
9 Corporation (“MISO”) ROE proceeding that resulted in Opinion No. 551, and
10 was not contested on exceptions.22
11 Q. HOW DID YOU SELECT YOUR ELECTRIC UTILITY PROXY GROUP?
12 A. Applying the guidance provided by the Commission in Opinion No. 531 and other
13 opinions, I selected a national electric utility proxy group using the following
14 criteria:
15 (1) companies that are included in the Value Line electric utility
16 industry universe;
17 (2) electric utilities that have an S&P corporate credit rating

18 (“CCR”) of BBB+ to A and a Moody’s long-term issuer or
19 senior unsecured credit rating of Baa3 to Baa123 (These ratings
20 ranges encompass one credit rating notch above and below The
21
See Opinion No. 531-A, at P 10.
22
See Opinion No. 551, at PP 21-22.
23
Pursuant to Opinion No. 531, at P 107, both the S&P and Moody’s ratings are used
when both are available, but if a rating is only available from one of the two rating
agencies, that single rating is used to apply this criterion.
Exhibit No. JC-1

Page 17
1 Southern Company’s S&P rating of A- and its Moody’s rating

2 of Baa2.24);
3 (3) electric utilities having an IBES published analysts’ consensus

4 “five-year” earnings per share growth rate;
5 (4) electric utilities that were not engaged in major merger or

6 acquisition (“M&A”) activity during the six-month dividend
7 yield analysis period;
8 (5) electric utilities that paid dividends throughout the six-month

9 dividend yield analysis period, did not cut dividends or
10 announce a dividend cut during that period; and
11 (6) electric utilities whose DCF results pass threshold tests of

12 economic logic and are not outliers.
13 Twenty-one companies included in the Value Line electric utility universe
14 satisfied the credit ratings criteria listed in item 2 above.25
15 Q. WERE ANY OF THESE TWENTY-ONE VALUE LINE ELECTRIC
16 UTILITIES ELIMINATED FROM THE PROXY GROUP BASED ON
17 OTHER FACTORS?
18 A. Yes. Five companies, Dominion Energy (“Dominion”), Great Plains Energy, Inc.
19 (“GPE”), Sempra Energy, Inc. (“Sempra”), Vectren Corporation (“Vectren”), and
20 Westar Energy, Inc. (“Westar”) were eliminated from the proxy group due to
21 major M&A activity during the dividend yield analysis period, one company,
22 PG&E Corporation (“PG&E”) was eliminated due to the announcement that it
24
Because the S&P and Moody’s ratings diverge for the majority of the Value Line
electric utilities that are rated by both firms, using both S&P and Moody’s ratings for
proxy group selection purposes results in a group that is more truly comparable in risk
to Southern than using S&P ratings only and conforms to the Commission’s findings
in Opinion Nos. 531 and 551.
25
Exhibit No. JC-1

Page 18
1 will suspend its common stock dividends and one company, Avangrid, Inc.
2 (“Avangrid”), was eliminated for other reasons that I describe below.
3  On May 31, 2016, GPE announced its still pending deal to acquire Westar.
4 The announced transaction value of the deal was about $11.87 billion or
5 approximately 148% of (almost one and one-half times) GPE’s $8.02
6 billion total capitalization.26 It was later announced on July 10, 2017, that
7 the transaction was amended to a stock-for-stock merger of equals.27 This
8 is proposed to be a major combination of two complete companies that is
9 significant enough to affect the DCF inputs of both.
10  On August 21, 2017, Sempra announced its agreement to acquire 80.03%
11 of indirect interest in Oncor from Energy Future Holdings Corp, with a
12 reported transaction value of $18.8 billion. This major acquisition was
13 closed near the end of my DCF study period on March 9, 2018.28
14  Vectren was eliminated from the proxy group due to speculation of major
15 M&A activity during the dividend yield analysis period. The September
16 15, 2017 Value Line report notes that “[s]hares of Vectren have moved
17 higher in price recently on takeover speculation,” and that Vectren is
18 “reportedly working with a financial adviser after being approached by at
19 least one potential buyer.” An August 22, 2017 Bloomberg article stated,
26
Exhibit No. JC-3. at 68, 70.
27
Id. at 73.
28
Id. at 75.
Exhibit No. JC-1

Page 19
1 “[s]hares of Vectren jump 9.1 percent after takeover interest.”29
2 Subsequently, on February 6, 2018, it was reported that Vectren launched
3 a sale process on the back of this earlier takeover interest, which according
4 to the report “pushed Vectren stock up more than 5% to end the day at
5 $61.79 per share on more than four-times average volume.”30 While
6 Vectren has not made a formal announcement, there is a clear indication
7 that some investors may be expecting future M&A activity for Vectren
8 and that expectation may have affected its stock price.
9  On January 3, 2018, Dominion announced that it has agreed to acquire
10 SCANA Corp. (“SCANA”) at a reported transaction value of $14.6
11 billion.31 Following this announcement, it was reported that the stock
12 price of SCANA “skyrocketed 22.59% on about eight times the average
13 volume, closing at $47.65, while Dominion Energy Inc. retreated 3.85%
14 on brisk volume, ending the day at $77.19.”32 Therefore, it appears that
15 the Dominion share price was negatively impacted by this planned
16 acquisition.
17 Thus, I eliminated these companies from the proxy group because they were
18 engaged in major M&A activity during the six-month dividend yield analysis
19 period that I used for my DCF analysis. The size and scope of each of the
20 transactions is significant enough to affect one or more of the DCF model inputs.
29
Id. at 76.
30
See id. at 78.
31
Id. at 79.
32
Id. at 81.
Exhibit No. JC-1

Page 20
1 PG&E announced on December 20th, 2017, that it suspended its common
2 stock dividend, beginning with the fourth quarter of 2017, citing uncertainty
3 related to causes and potential liability associated with the extraordinary October
4 2017 Northern California wildfires.33 As a result of this action, I eliminated
5 PG&E from the proxy group.
6 Avangrid was relatively recently included in Value Line’s electric utility
7 group in November 2016 and there are several reasons for excluding it from the
8 proxy group. Avangrid has precious little historical data having just been created
9 a little over two years ago on December 16, 2015.34 Thus, Avangrid’s Value Line
10 report is unlike those for the proxy group companies, because Avangrid is unlike
11 the proxy group companies.35 The report contains no extensive historical data
12 like those included for the other Value Line electric utilities and the report does
13 not contain the forecast earnings, dividend, and other growth rates as well as other
14 financial indicators like price growth persistence, and earnings predictability that
15 are normally included for an electric utility, rather omitting or listing these items
16 as not meaningful for Avangrid. Furthermore, it appears that Avangrid’s
17 Earnings Per Share (“EPS”) were relatively depressed in its beginning year (2015
18 at $1.05) and are forecasted by Value Line to have doubled by the end of 2017
19 ($2.15). Thus, while we have little history to judge the starting point EPS, it is
33
Id. at 83.
34
See
http://www.avangrid.com/NewsRoom/NewsReleases/2015/121615AVANGRIDJoins
NYSE.html.
35
Exhibit No. JC-1

Page 21
1 clearly abnormal for an electric utility that is comparable to the Southern
2 Companies to double its EPS in two years. A further distinguishing feature is that
3 the Value Line reported Beta for Avangrid is significantly lower than the Beta for
4 other electric utilities in my proxy group.36 The February 16, 2018 Value Line
5 report further notes that Avangrid’s share price in 2017 increased by 34% and that
6 they “attribute this outperformance to takeover speculation.” This indicates that
7 some investors may be expecting future M&A activity for Avangrid. As Value
8 Line notes, that expectation may have affected its stock price.
9 Avangrid’s corporate ownership and structure is also unlike the rest of the
10 electric utilities in my proxy group. Avangrid is essentially a closely held,
11 foreign-owned and controlled corporation. The vast majority (81.5%) of
12 Avangrid shares are owned by a Spanish company – Iberdrola, S.A.
13 (“Iberdrola”)37 – and thus, those shares are not available for public trading,
14 meaning that trading in Avangrid’s stock is relatively thin. Having only
15 approximately 18.5% of its outstanding common stock available for public
16 ownership and trading stands in stark contrast to the electric utilities in my proxy
17 group with the shares available for public trading, or free float, percentages of
18 these other companies all greater than 99%.38 Moreover, Avangrid’s share
19 turnover ratio of 0.45 is considerably lower than the median share turnover ratio
36
Id. at 85.
37
See Avangrid’s SEC Form 10-K Annual Report for 2016 at 96.
38
See id. at 85.
Exhibit No. JC-1

Page 22
1 of 1.84 for the other electric utilities in the proxy group. 39 Additionally, on page
2 41 of its 2016 SEC Form 10-K, Avangrid notes that Iberdrola will exercise
3 significant influence over it, that Iberdrola’s interests in Avangrid may be
4 different than the public holders of the remaining 18.5% of Avangrid’s common
5 stock, and that future sales or issuances of Avangrid common stock by Iberdrola
6 could have a negative impact on the price of the stock. Additionally, on page 41,
7 Avangrid says: “We have elected to take advantage of the ‘controlled company’
8 exemption to the corporate governance rules for NYSE-listed companies, which
9 could make our common stock less attractive to some investors or otherwise harm
10 our stock price.” (Emphasis added). Avangrid explains further that,
11 In light of our status as a controlled company, we currently

12 rely on the NYSE exemptions with respect to board,
13 compensation committee and nominating and corporate
14 governance committee independence. Because we are a
15 controlled company, you will not have the same
16 protections afforded to shareholders of companies that are
17 subject to all of the corporate governance requirements of
18 the NYSE without regard to the exemptions available for
19 “controlled companies.” Our status as a controlled
20 company could make our shares of common stock less
21 attractive to some investors or otherwise harm our stock
22 price.
23 Id. (emphasis added). Thus, Avangrid itself has noted that its unique ownership
24 and control structure may affect its stock price, which is a critical input to the
25 DCF model. For these reasons, Avangrid should be excluded from the proxy
26 group, and I have done so.
39
Id.
Exhibit No. JC-1

Page 23
1 Elimination of these seven companies left a proxy group of fourteen
2 electric utilities to which I applied the Commission’s favored two-step constant
3 growth DCF method.40
4 Q. HOW DID YOU APPLY THE TWO-STEP DCF METHOD TO YOUR
5 PROXY GROUP OF ELECTRIC UTILITIES?
6 A. Consistent with the Commission’s guidance in Opinion No. 531, and as followed
7 in Opinion No. 551, I first developed a single six-month average dividend yield
8 for each proxy company for the six-month period ending March 2018.41 Then, in
9 accordance with the Commission’s directives,42 I calculated a single composite
10 average growth rate for each proxy group company using a “short-term” analysts’
11 forecasted “five-year” EPS growth rate weighted at two-thirds, and a “long-term”
12 forecasted GDP growth rate with a one-third weighting. For the short-term
13 growth rate, I used the average of the analysts’ consensus “five-year” EPS growth
14 rate projections for each proxy group company as reported by Yahoo! Finance
15 from the Thomson Reuters/IBES database on March 30, 2018. The long-term
16 growth rate incorporated in my analysis is 4.22%. This growth rate is based on
17 forecasted long-term GDP growth as prescribed by the Commission in Opinion
40
41
As directed by the Commission in Opinion No. 531, at P 78, I used the average
monthly high and low stock prices combined with the indicated annualized dividend
for each month and then averaged the six monthly results to get the six-month
average (the “average yield approach”). The Presiding Judge in the MISO ROE
proceeding that culminated in Opinion No. 551 also relied on the average yield
approach (see ABATE v. MISO, 153 FERC ¶ 63,027, at PP 38-41 (2015). No
exceptions to his use of this method were taken.
42
See Opinion No. 531, at P 39.
Exhibit No. JC-1

Page 24
1 Nos. 531 and 531-A, which relied upon forecasts from the Energy Information
2 Administration, Social Security Administration, and IHS Global Insight. In
3 Opinion No. 531, the Commission calculated a long-term GDP growth rate of
4 4.39%. The most recent long-term GDP growth rate, using the same three data
5 sources refered to above, is 4.22%, which is the average of the long-term
6 projections of 4.12% by IHS Global Insight (May 27, 2017), 4.15% by the Energy
7 Information Administration (January 5, 2017), and 4.38% by the Social Security
8 Administration Trustees Report (July 2017).43 The calculations of the dividend
9 yields and composite average growth rates are shown in Exhibit No. JC-2.
10 Q. PLEASE EXPLAIN THE RESULTS OF YOUR APPLICATION OF THE
11 TWO-STEP, CONSTANT GROWTH DCF MODEL TO THE PROXY
12 ELECTRIC UTILITIES.
13 A. The results of my application of the two-step DCF model to the proxy group
14 electric utilities are shown on page 1 of Exhibit No. JC-2. Prior to applying tests
15 of economic logic and eliminating outliers, the investor-required ROE results for
16 the fourteen-member national electric utility proxy group range from 1.30% to
17 11.05%, with a median of 8.54%.44
18 Q. WITH REGARD TO THE RANGE OF INVESTOR-REQUIRED
19 RETURNS YOU CALCULATED FOR THE PROXY GROUP, IS IT
20 CORRECT TO CONCLUDE THAT ANY ROE WITHIN THAT RANGE IS
43
See Pac. Gas & Elec. Co., Docket No. ER16-2320-002, Prepared Direct Testimony of
FERC Staff witness Marina J. Fishbein, Exhibit No. S-0007, at 9 (Aug. 22, 2017),
eLibrary Accession No. 20170822-5151.
44
Exhibit No. JC-1

Page 25
1 JUST AND REASONABLE FOR CURRENT APPLICATION IN THE
2 SOUTHERN COMPANIES’ FORMULA TRANSMISSION RATE?
3 A. No. The range merely sets out the highest and lowest DCF results for the
4 companies that remained in the proxy group after initial application of the
5 selection criteria. Neither the highest nor the lowest level of investor-required
6 returns among the proxy group companies is a valid measure of the appropriate
7 cost of common equity for OATT transmission service like that of the Southern
8 Companies, which has risk characteristics comparable to the average for the proxy
9 group.
10 Q. WHAT IS THE PURPOSE OF SPECIFYING THE RANGE OF DCF
11 RESULTS IN YOUR TESTIMONY?
12 A. The range is informative in that it shows the maximum degree of variation in
13 investor-required returns among the members of the proxy group. The range
14 helps confirm that the proxy group includes a robust group of companies with
15 average risk that is comparable to that of the subject utility and that the proxy
16 group is not a group that was selectively chosen to produce a particular ROE
17 result.45 It is not the extreme ROEs from the proxy group that are representative
18 of the return required by investors for the average amount of risk represented by
19 the group, but rather the ROE around which the DCF results cluster. The value
20 that best represents this clustering of ROEs is the median, which is determined by
21 identifying the ROE value for which there is an equal number of higher and lower
45
Also, the Commission uses the DCF range to constrain the results of any incentive
adders that it might allow.
Exhibit No. JC-1

Page 26
1 calculated proxy group ROEs. It would be incorrect to suggest that each and
2 every particular point within the proxy company ROE range is “just and
3 reasonable” for current application in the Southern Companies’ transmission
4 formula rate simply because it happens to fall within the range of the DCF results
5 – including extreme high and low points – calculated for the proxy group
6 companies.
7 Q. HAVE YOU VERIFIED THAT THE LOW-END AND HIGH-END ROE
8 RESULTS IN YOUR PROXY GROUP PASS THRESHOLD TESTS OF
9 ECONOMIC LOGIC, AND HAVE YOU ELIMINATED ANY OUTLIERS
10 AS THE COMMISSION HAS DONE IN OTHER CASES?
11 A. Yes. Regarding the low-end test, in the SCE Paper Hearing Order,46 the
12 Commission found that it is “reasonable to exclude any company whose low-end
13 ROE fails to exceed the average bond yield by about 100 basis points or more,
14 taking into account the extent to which the excluded low-end ROEs are outliers
15 from the low-end ROEs of other proxy group companies.”47 The Commission
16 reaffirmed this practice in Opinion No. 531, at PP 122-23. The averages of the
17 Moody’s A and Baa Public Utility Bond Index yields for the six months ending
18 March 2018 are 3.94% and 4.28%, respectively. Thus, adding 100 basis points to
19 these average yields creates thresholds of 4.94% and 5.28%, respectively, for A
46
See S. Cal. Edison Co., 131 FERC ¶ 61,020, at P 55 (2010) (the “SCE Paper Hearing
Order”), aff’d in relevant part, So. Cal. Edison Co. v. FERC, 717 F.3d 177 (D.C. Cir.
2013).
47
The Commission has relied on the six-month average bond yields for the period used
in determining the DCF dividend yields based on the Moody’s Public Utility Bond
Index of the same rating category as the utility whose low-end ROE is being tested.
Exhibit No. JC-1

Page 27
1 and Baa rated companies. The proxy group low-end ROE of 1.30% for Entergy
2 Corp., which has S&P and Moody’s ratings of BBB+ and Baa2, respectively, is
3 below the 5.28% Baa threshold. Therefore, I have eliminated this one low-end
4 ROE result.
5 In the SCE Paper Hearing Order, the Commission also affirmed its
6 practice of rejecting companies whose high-end ROEs are illogical, are outliers,
7 or are calculated with unsustainable growth rates.48 Of course, capital costs and
8 expected growth rates change over time based on changes in market and
9 economic conditions; accordingly, what constitutes a “high-end outlier” or an
10 “unsustainable growth rate” also will change over time. In Opinion No. 531, the
11 Commission found, based on the record in that proceeding, that this issue was
12 moot because the Commission’s adoption of the two-step DCF methodology
13 reduced the highest proxy company growth rate to 7.66% and the highest ROE to
14 11.74%.49 The Commission noted that “those percentages are well within any
15 high-end outlier test we have previously applied in utility rate cases and are
16 within the high-end outlier test advocated by the Complainants on exceptions.”50
17 The Commission also stated that “[u]nder the two-step DCF methodology, it is
18 unnecessary to screen the proxy group for unsustainable growth rates because the
19 methodology assumes that the long-term growth rate for each company is equal to
48
See SCE Paper Hearing Order, at P 57.
49
See Opinion No. 531, at P 118.
50
Id.
Exhibit No. JC-1

Page 28
1 GDP.”51 However, that does not mean that it would be impossible for an aberrant
2 or otherwise illogical or erroneous short-term growth rate that is given a two-
3 thirds weighting to contribute to an illogical or outlying ROE. Those high-end
4 tests are still necessary to ensure just and reasonable results, especially if the
5 Commission uses the absolute highest ROE of the proxy group in any substantial
6 way in determining the allowed ROE. In this case, I did not find it necessary or
7 appropriate to eliminate any high-end DCF result.
VI. ROE RECOMMENDATION
8 Q. WHAT IS YOUR RECOMMENDATION FOR THE BASE ROE TO BE
9 USED IN CALCULATING THE SOUTHERN COMPANIES’
10 TRANSMISSION FORMULA RATE AT ISSUE IN THIS PROCEEDING?
11 A. As noted above, I calculated a range of investor-required returns for my national
12 proxy group of electric utilities by applying the Commission’s two-step DCF
13 methodology to financial data for the six months ending March 31, 2018. After
14 testing for outlier/illogical ROEs, the resulting range of 7.22% to 11.05% brackets
15 investors’ required rates of return for investing in companies with risk
16 characteristics similar to the Southern Companies. As to a specific ROE to be
17 used in the Southern Companies’ transmission formula rate at issue in this
18 proceeding, I recommend using the median of the array of calculated ROEs. That
51
Id.
Exhibit No. JC-1

Page 29
1 median value, and my recommended base ROE for the Southern Companies’
2 OATT rate, is 8.65%.52
3 Q. WHY IS YOUR RECOMMENDATION BASED ON THE MEDIAN OF
4 THE ROE RANGE RATHER THAN THE MIDPOINT OR SOME OTHER
5 MEASURE?
6 A. The short answer is that Commission policy, as affirmed by the United States
7 Court of Appeals for the District of Columbia Circuit, correctly requires use of the
8 median of the proxy group DCF results when an ROE is derived for a single
9 electric utility of average risk (like The Southern Company) rather than for a
10 diverse, region-wide group of utilities (e.g., all the transmission-owning members
11 of an RTO).53 While The Southern Company has chosen to house its transmission
12 facilities in multiple subsidiaries, they are still ultimately owned and controlled by
13 a single company, The Southern Company, and the proxy group predominantly is
14 made up of other holding companies of comparable risk.
15 Q. PLEASE EXPLAIN.
16 A. The ROE in this proceeding is being determined for what in essence is an
17 individual electric utility with risks comparable to the average for the proxy group
18 being used. Commission policy is that, in such instances, the appropriate ROE
19 point estimate is the median DCF result for the proxy group, which is the best
52
See Exhibit JC-2, at 1:21
53
See, e.g., SCE Paper Hearing Order, at PP 84-95, aff’d in relevant part, S. Cal.
Edison Co. v. FERC, 717 F.3d 177 (D.C. Cir. 2013); Midwest Indep. Transmission
Sys. Operator, Inc., 106 FERC ¶ 61,302, aff’d in relevant part sub nom., Pub. Serv.
Comm’n of Ky. v. FERC, 397 F.3d 1004, 1010-1011 (D.C. Cir. 2005); Golden Spread
Elec. Coop. Inc. v. Sw. Pub. Serv. Co., Opinion No. 501, 123 FERC ¶ 61,047 (2008);
Va. Elec. Power Co., 123 FERC ¶ 61,098 (2008).
Exhibit No. JC-1

Page 30
1 measure of the central tendency of the ROE results. That policy, which was
2 articulated in the Commission’s SCE Paper Hearing Order, was affirmed by the
3 D.C. Circuit on May 10, 2013 in SoCal Edison v. FERC, 717 F.3d 177 (D.C. Cir.
4 2013) (“SoCal Ed”). In regard to the proper basis for the ROE point estimate, the
5 Court of Appeals described the Commission policy that it was affirming as
6 follows:
7 In 2008, the Commission announced in Golden Spread Electric

8 Coop., Inc., 123 FERC ¶ 61,047 (2008), that it would use the
9 median as the measure of the ROE for a single electric utility of
10 average risk. Drawing on the distinction identified in Midwest
11 ISO, and the advantages of using the median noted in
12 Transcontinental Gas, the Commission observed that, although
13 there were no concerns of extremes in that case, “using the median
14 also has the advantage of taking into account more of the
15 companies in a proxy group rather than only those at the top and
16 bottom.” Id. at ¶ 61,1247 [sic]. Since then, the Commission has
17 continued to use the median to set the ROE for electric utilities
18 filing individually. See, e.g., Pub. Serv. Co. of N.M., 142 FERC
19 ¶ 61,168 (2013); Pac. Gas & Elec. Co., 141 FERC ¶ 61,168
20 (2012); Pub. Serv. Co. of N.M., 137 FERC ¶ 61,119 (2011);
21 Pioneer Transmission, LLC, 126 FERC ¶ 61,281 (2009); Va. Elec.
22 & Power Co., 123 FERC ¶ 61,098 (2008).54
23 The Commission has subsequently affirmed that policy in Opinion Nos. 531 and
24 554.55
54
SoCal Ed, 717 F. 3d at 183.
55
See Opinion No. 531, at P 144 (differentiating between the use of the midpoint as the
“appropriate measure of central tendency for determining the base ROE for a diverse
group of utilities,” and “the median, used for a single utility”); see also Potomac-
Appalachian Transmission Highline, LLC, Opinion No. 554, 158 FERC ¶ 61,050 at
P 270 n.485 (2017) (“Opinion No. 554”) (explaining that “when applying a measure
of central tendency, it is the Commission’s practice to use the median when setting
the ROE for a single utility and the midpoint when setting the ROE for a diverse
group of utilities.”)
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1 Q. DOTHE SOUTHERN COMPANY AND ITS OPERATING SUBSIDIARIES
2 HAVE HIGHER RISK THAN THE PROXY GROUP AVERAGE RISK?
3 A. No. As the credit ratings and Value Line Safety Rankings for the proxy
4 companies and The Southern Company and subsidiaries demonstrate (see Exhibit
5 No. JC-2 at 1), The Southern Company and subsidiaries’ risk is of approximately
6 the same as the average for the proxy group. The Southern Company has an S&P
7 rating of A- and a Moody’s rating of Baa2 and all of the operating subsidiaries
8 have the same S&P rating and all but one has a better rating than The Southern
9 Company’s Moody’s rating.56 The proxy group average credit ratings are less
10 than one notch away from the The Southern Company’s ratings, between BBB+
11 and A- S&P ratings, and between the Baa2 and Baa1 Moody’s ratings, which
12 indicates comparable perceived risk for The Southern Company and subsidiaries
13 and the proxy group average. The Southern Company has a Value Line Safety
14 Rank57 of 2, and the average for the proxy group is 2.1, indicating similar risk for
15 The Southern Company and the proxy group average. Thus, overall, investors are
16 likely to view The Southern Companies and subsidiaries as having about the same
17 risk as the proxy group average.
56
As discussed earlier in the testimony, Mississippi Power’s senior unsecured rating
from Moody’s is Ba1 which is two notches lower than the Baa2 of The Southern
Company. The Moody’s long term issuer and senior unsecured debt rating for
Georgia Power is A3, for Gulf Power is A2 and for Alabama Power is A1 which are,
respectively, two, three, and four notches higher than The Southern Company’s
Moody’s rating of Baa2.
57
The Value Line Safety Rank is a measure of the overall relative risk of a company,
and the rankings range from 1, lowest risk, to 5, highest risk. Only The Southern
Company and not it operating subsidiaries has a Value Line Safety Rank.
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1 Q. ARE THERE ANY RISK REDUCING FEATURES OF THE SOUTHERN
2 COMPANIES’ FORMULA RATE THAT SHOULD BE TAKEN INTO
3 CONSIDERATION?
4 A. Yes. As I have previously mentioned, the Southern Companies’ FERC approved
5 OATT formula rate is forward-looking and has an annual true-up mechanism,
6 which assures full and timely recovery of actual costs including the allowed ROE.
7 These features substantially reduce the risk profile of the Southern Companies’
8 transmission operations given the greater certainty of cost recovery provided.
9 Q. HOW MANY UTILITIES IN YOUR PROXY GROUP ALSO HAVE FERC
10 APPROVED TRANSMISSION FORMULA RATES?
11 A. Ten of the fourteen companies in my proxy group have FERC approved
12 transmission formula rates. Alliant Energy, CenterPoint Energy, DTE Energy,
13 and NextEra Energy lack transmission formula rates.
14 Q. WOULD YOU AGREE THAT THE PROXY GROUP SIMIARILY
15 SHARES THE SOUTHERN COMPANIES’ LOWER RISK IN
16 RECOVERING TRANSMISSION COST?
17 A. Yes, since the majority of the proxy group has FERC approved transmission
18 formula rates and the Southern Companies have a FERC approved transmission
19 formula rate, the transmission service risk of the proxy group and of the Southern
20 Companies is mitigated by the presence of those transmission formula rates. Both
21 the proxy group and The Southern Company are assured full and timely recovery
22 of transmission costs making them less risky to investors.
23 Q. IN OPINION NOS. 531 AND 551, THE COMMISSION SET THE ROE
24 FOR THE ISO-NEW ENGLAND TRANSMISSION OWNERS (“NETOs”)

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Page 33
1 AND MIDCONTINENT INDEPENDENT SYSTEM OPERATOR, INC.
2 TRANSMISSION OWNERS (“MISO TOs”), RESPECTIVELY, BASED ON
3 THE MIDPOINT OF THE UPPER HALF OF THE ROE RANGE.
4 WOULD THAT APPROACH BE APPROPRIATE IN THIS CASE?
5 A. No, it would not, for at least the following reasons.
6 First, the premise for that adjustment was that capital market conditions
7 were “anomalous” and that the inputs to the DCF model might be distorted such
8 that the Commission had less confidence that the point of central tendency of the
9 full array of the results of applying that model was reliable as an indication of the
10 utilities’ cost of common equity capital. For the reasons I discuss below, I believe
11 that premise is incorrect under the current circumstances. But even if the premise
12 were accepted, setting the ROE at the midpoint of the upper half of the range
13 would be incorrect for a single company of average risk, like The Southern
14 Company and the Southern Companies. In Opinion Nos. 531 and 551, the
15 Commission used the “point of central tendency” of the upper half of the range in
16 setting the NETOs’ and MISO TOs’ ROEs. In Opinion No. 531, at P 151, the
17 Commission said:
18 [W]e believe that here in selecting the appropriate return

19 we likewise should look to the central tendency to identify
20 the appropriate return but, in light of the record in this
21 proceeding, we should look to the central tendency for the
22 top half of the zone of reasonableness. [Footnote omitted.]
23 As discussed above, when setting the ROE for a diverse, region-wide group of
24 utilities within an RTO or ISO that applies to all group members—as it was doing
25 for the NETOs in Opinion No. 531 and for the MISO TOs in Opinion No. 551—
26 the Commission has previously used the midpoint as the point of central
Exhibit No. JC-1

Page 34
1 tendency. In setting the ROE for a single utility of average risk, however, the
2 Commission has used the median as the point of central tendency. A different
3 approach is not warranted where the purpose is to find the point of central
4 tendency for the upper half of the range, instead of for the full range. The
5 Commission specifically recognized this in Opinion No. 551, at P 276:
6 Our decision to utilize the midpoint of the upper half of the

7 zone is based on the record evidence in this proceeding and
8 is consistent with the Commission’s established policy of
9 using the midpoint of the ROEs in a proxy group when
10 establishing a central tendency for a region-wide group of
11 utilities. [Footnote omitted.]
12 Subsequently, the Commission specifically addressed the issue of how to
13 calculate the appropriate point of central tendency for the lower half of the proxy
14 group range in the case of a single electric utility in Opinion No. 554, at P 270:
15 As we explained in Opinion No. 531, “[t]he Commission

16 has traditionally looked to the central tendency to identify
17 the appropriate return within the zone of reasonableness.”
18 In this case, however, in light of the foregoing
19 determinations, we conclude that the just and reasonable
20 ROE for PATH’s abandonment phase is the median of the
21 lower half of the zone of reasonableness, 8.11 percent . . .
22 we will set PATH’s ROE at the measure of central
23 tendency of the lower half of the zone of reasonableness, in
24 this case the median of the lower half of the zone of
25 reasonableness. [Footnotes omitted.]58
26 In the Appendix to Opinion No. 531, the Commission labeled the 10.57%
27 ROE it adopted as the 75th percentile, but it was not the true 75th percentile value.
28 The 75th percentile value is that value below which lie 75% of the observations in
29 the array, and thus, is effectively the median of the upper half of the array of
58
See Potomac-Appalachian Transmission Highline, LLC, Opinion No. 554, 158 FERC
¶ 61,050, at P 270, n.485 (2017).
Exhibit No. JC-1

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1 ROEs. The midpoint of the upper half of the range is simply the average of the
2 midpoint and the top end of the range. The true 75th percentile value is not nearly
3 as affected by the extreme values in the array as is the midpoint of the upper half,
4 and therefore it more accurately represents the “central tendency for the top half.”
5 Therefore, even if the Commission were to determine based on the record in this
6 case that the ROE should be set at the point of central tendency in the upper half
7 of the DCF range, that point should be the true 75th percentile value (9.15%),
8 which is the median of the upper half of the range, rather than the midpoint
9 (10.09%) of the upper half of the range.
10 Use of the true 75th percentile or median rather than the midpoint of the
11 upper half of the proxy group ROEs is further supported by the fact that the
12 Commission routinely uses the median of the DCF array of ROEs for the proxy
13 group as the point of central tendency to set the ROE for average risk single
14 electric utilities as well as for natural gas and oil pipelines. The Commission has
15 provided many good reasons for use of the median as the most accurate measure
16 of central tendency. Not the least of these reasons is that the median better
17 considers all the ROEs within the array than does the midpoint, and that it helps to
18 minimize the impact of extreme values on the results.59 Thus, for this case, the
19 appropriate point of central tendency of the top half of the proxy group ROEs
20 would be the 75th percentile value, which is the median – not the midpoint – of
21 those ROEs.
59
See Golden Spread Elec. Coop., Inc., 123 FERC ¶ 61,047, at P 64 (2008).
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Page 36
1 Second, in deciding to set the NETOs’ ROE in the upper half of the range
2 in Opinion No. 531, the Commission noted that it was “concerned that capital
3 market conditions in the record are anomalous,” citing then-historically low bond
4 yields and pointing to the fact that the average yield on ten-year U.S. Treasury
5 bonds during the six-month study period ending March 2013 was below 2%,
6 while elsewhere noting expectations in the record of that proceeding that such
7 conditions would change significantly in the near term.60 The Commission said
8 that, in those circumstances, it had less confidence that the central tendency of the
9 DCF results in that case reflected the equity returns necessary for the NETOs to
10 attract capital. The Commission similarly found that market conditions during the
11 study period considered in Opinion No. 551 (the six-month period ending June
12 30, 2015) were anomalous noting that “the principal argument [in Opinion No.
13 531] was based on low interest rates and bond yields, conditions that persisted
14 throughout the [Opinion No. 551] study period.”61 However, the relatively low
15 level of interest rates and bond yields have not only persisted during the Opinion
16 Nos. 531 and 551 study periods, they now have persisted for over six years and
17 are widely expected to continue at relatively low levels into the foreseeable
18 future. I believe that the persistence of these conditions for such a long period of
19 time, and the expectation they will continue into the future, means these
20 conditions can no longer be considered unusual or anomalous. In my opinion,
60
See, e.g., Opinion No. 531, at P 145.
61
Exhibit No. JC-1

Page 37
1 current economic and market conditions are neither anomalous nor unusual, so an
2 adjustment to the DCF results on that basis is unwarranted.
3 Q. PLEASE EXPLAIN WHY YOU DO NOT BELIEVE CURRENT
4 ECONOMIC AND MARKET CONDITIONS ARE “ANOMALOUS.”
5 A. There are several reasons.
6 First, it appears that a key factor underlying the Commission’s
7 “anomalous conditions” finding in both Opinion Nos. 531 and 551 was the low
8 level of U.S. Treasury and utility bond yields. It is important to recognize,
9 however, that Treasury and utility bond yields have fluctuated up and down
10 around the relatively low levels experienced just prior to and during the study
11 period used in Opinion No. 531 (a study period now over four years old), through
12 the study period used in Opinion No. 551 (a study period over two years old), and
13 continuing to the present.62 While the six-month average ten-year Treasury bond
14 yield for the period ending March 2018 used in calculating my DCF dividend
15 yields was 2.57%, that yield has fluctuated around the 2% level for the last six-
16 plus years. The monthly average declined from 2.30% in August 2011 to 1.65%
17 in November 2012 (the low point in the Opinion No. 531 study period) to 2.90%
18 in December 2013, before retreating again down to 1.64% in June 2016 and then
19 increasing back to 2.84% by March 2018. Low Treasury bond yields that have
20 hovered around the 2% mark for six-plus years can no longer be deemed
21 anomalous.
62
The Opinion No. 531 study period was October 2012 – March 2013 and the Opinion
No. 551 study period was January – June 2015.
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Page 38
1 Second, there is a great deal of evidence demonstrating that prevailing
2 economic and capital market conditions are not anomalous: (1) the
3 unemployment rate has dropped substantially from an average of 7.8% for the six
4 months ending March 2013 to an average of 4.1% for the six months ending
5 March 2018; (2) the economy is expanding albeit slowly; (3) the stock market has
6 recovered significantly from its Great Recession lows and is much stronger than it
7 was during the Opinion No. 531 study period, setting new highs above 26,000 on
8 the Dow Jones Industrial Average (“DJIA”), while the DJIA only averaged
9 13,560 during the Opinion No. 531 study period; (4) the Federal Reserve ceased
10 its Quantitative Easing purchases over three years ago in October 2014, initiated a
11 program to methodically reduce its QE holdings in October 2017, and, on
12 December 16, 2015, began what is expected to be a very slow and gradual process
13 of increasing its Federal Funds target rate63; and (5) inflation remains below the
14 Federal Reserve Open Market Committee’s 2.0% target level. While many of
15 these economic indicators also had improved by the time of the Opinion No. 551
16 study period, there has been continued improvement during the 33 months
17 thereafter. The persistence of these economic and market conditions means they
18 should no longer be viewed as unusual during the six-month period ending March
19 31, 2018. For that reason, a base ROE for the Southern Companies’ transmission
20 rate that is above the median-of-range value is not warranted.
63
The Federal Reserve increased its Federal Funds target rate by one quarter of a
percent in December 2015, December 2016, March 2017, June 2017, December 2017
and again in March 2018 with the current target level standing at 1.50% to 1.75%.
See Exhibit. No. JC-3, at 86, 88, 89 & 91.
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Page 39
1 Third, in Opinion No. 531, the Commission noted that the NETOs had
2 argued that “once the Federal Reserve’s Quantitative Easing program ends,
3 ‘which may be in the very near future, interest rates can be expected to rise to
4 more normal levels,’ and bond levels can be expected to increase.”64 Although
5 interest rates did increase during 2013, just the opposite of the NETOs’ prediction
6 occurred during 2014 while the Federal Reserve was winding down and ending its
7 Quantitative Easing program. In fact, even as the Federal Reserve decreased and
8 ended its QE bond purchases, ten-year Treasury bond yields declined throughout
9 2014, ending the year with a December 2014 average yield of 2.21%. Since then,
10 although there have been some normal fluctuations, ten-year Treasury bond yields
11 have generally continued to remain low, even as the Federal Reserve has begun a
12 gradual process of increasing the Federal Funds target rate, which is completely
13 contrary to the projections of the NETOs and their experts in the Opinion No. 531
14 case. Similarly, Moody’s A Rated Public Utility Bond yields increased from an
15 average of 3.84% in November 2012 to 4.81% in December 2013 and then
16 proceeded to decline throughout 2014, reaching an average of 3.95% in December
17 2014 and 3.79% in December 2017, bringing these yields back to levels relatively
18 near what they were during the DCF analysis periods used in Opinion Nos. 531
19 and 551.
20 Q. HAVE YOU PREPARED A GRAPH THAT DEPICTS THE
21 PERSISTENCE OF THE LOW BOND YIELDS YOU HAVE DESCRIBED?
64
Exhibit No. JC-1

Page 40
1 A. Yes. Figure 1 below shows Moody’s Public Utility and Treasury Bond Yields
2 over the 80-month period from August 2011 through March 2018. The
3 consistency and persistence of the levels of capital costs over that period
4 demonstrate that current bond yields cannot be considered anomalous or
5 aberrational, but rather reflect a new and consistent normal. Investors would be
6 very unlikely to purchase public utility and Treasury bonds at the yields shown on
7 Figure 1 if they anticipated significant interest rate increases in the near future.
Fig. 1 Moody's Public Utility and Treasury Bond Yields

6.00%
5.00%
Mohthly Average Yields
4.00%
3.00%
2.00%
1.00%
0.00%
August, 2011
August, 2012
August, 2013
August, 2014
August, 2015
August, 2016
August, 2017
May, 2012
May, 2013
May, 2014
May, 2015
May, 2016
May, 2017
November, 2011
November, 2012
November, 2013
November, 2014
November, 2015
November, 2016
November, 2017
February, 2012
February, 2013
February, 2014
February, 2015
February, 2016
February, 2017
February, 2018
Moody's A Moody's Baa 10-Yr T
8 As shown in Figure 1, during the last 80 months (from August 2011 –
9 March 2018), A rated public utility bond yields have settled into a range of
10 approximately 3.6% to 4.8% (which encompasses the 3.94% average yield for my
11 six-month DCF analysis period) and have averaged 4.17% over that period. The
Exhibit No. JC-1

Page 41
1 persistence of yields around these average levels over the past six-plus years
2 cannot be considered anomalous or aberrational, especially considering that they
3 are not expected to significantly increase in the near future.
4 Q. ARE BOND YIELDS THIS LOW UNPRECEDENTED?
5 A. No, they are not. As shown in my workpapers, Exhibit No. JC-3 at 98-99, the
6 monthly average Moody’s A and Baa Public Utility Bond yields remained below
7 3.75% and 4.15%, respectively, for the 16-plus years from March 1940 –
8 September 1956, so yields that average near 3.88% and 4.23%, respectively, for
9 my six-month DCF analysis period, cannot be said to be unprecedented or
10 aberrational from a historical perspective. Once again, there currently is no
11 justification for setting the base ROE for the Southern Companies’ transmission
12 rate at a level above the median of the proxy group DCF ROE results.
13 Q. HAVE INVESTMENT PROFESSIONALS WRITTEN ABOUT THE
14 VALIDITY OF THE COMPARISON BETWEEN THE BOND YIELDS
15 DURING THE LAST SEVERAL YEARS AND THOSE EXPERIENCED
16 DURING THE NINETEEN FOURTIES AND FIFTIES?
17 A. Yes. Morgan Stanley Wealth Management has written on the subject of such
18 comparisons. In the November 24, 2015 article entitled “‘Low and Slow’ is the
19 Old Normal”65, Jon Mackay, Senior Markets Strategist, explains that
20 notwithstanding:
21 [P]lenty of differences between today and the 1940s and

22 1950s, the low level of [economic] growth and interest
23 rates is similar and makes an important point: Interest
65
See Exhibit No. JC-3, at 100-02.
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Page 42
1 rates follow growth. If we are in an environment of slower,

2 lower and subpar growth then we should expect interest
3 rates to also remain low.66
4 As Mr. Mackay explains, the era of low growth, low rates and low returns since
5 emerging from the Great Recession should not be referred to as “Secular
6 Stagnation,” as coined by former Treasury Secretary Lawrence Summers, or even
7 as “Mohammed El‐Erian’s even more commonly quoted ‘New Normal.’”67
8 Rather, Mr. Mackay notes that current trends have been paralleling trends from
9 the 1940s and 1950s, and he concluded that Morgan Stanley Wealth
10 Management’s Chief Information Officer Mike Wilson’s description is the most
11 apt: “[t]his isn’t the new normal. This is the old normal.” Id. at 102. Mr.
12 Mackay explained: “[w]e have seen something similar before, it just happened a
13 long time ago – and it speaks to our current environment.”68 Further, Mr. Mackey
14 noted that the Federal Reserve also was actively intervening in the bond markets
15 in the 1940s and 1950s, which “kept long term [Treasury bond] interest rates in
16 the 2.0% to 2.5% range for more than a decade,” and “[y]ields didn't move above
17 3% until 1957.”69
18 Q. WHAT VIEWS HAVE INDEPENDENT EXPERT ECONOMISTS
19 EXPRESSED ABOUT WHETHER RECENT AND CONTINUING
20 CONDITIONS ARE ABBERATIONAL, ARTIFICIAL, OR ANOMALOUS
21 AND WHETHER THEY MAY BE EXPECTED TO CONTINUE?
66
Id. at 101 (emphasis added).
67
Id. at 100.
68
Id.
69
Id.
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Page 43
1 A. A number of the nation’s most prominent economists—former Federal Reserve
2 Chairman Benjamin Bernanke, current Member of the Federal Reserve Board of
3 Governors Dr. Lael Brainard, former Treasury Secretary Lawrence Summers, and
4 Nobel Prize winning economist Paul Krugman, for example—reject the claim that
5 today’s relatively low capital cost conditions are aberrational or artificial. They
6 also express the view that relatively low long-term capital costs will continue for
7 the foreseeable future.
8 Q. WHAT HAS DR. BERNANKE SAID IN THIS REGARD?
9 A. In his March 30, 2015 blog entitled “Why are interest rates so low?”, Dr.
10 Bernanke explained:
11 Low interest rates are not a short-term aberration, but

12 part of a long-term trend. As the figure below shows, ten-
13 year government bond yields in the United States were
14 relatively low in the 1960s, rose to a peak above 15 percent
15 in 1981, and have been declining ever since.70
16 The figure that Dr. Bernanke presents is a graph of 10-year Treasury bond yields
17 and inflation rates since 1960. Dr. Bernanke noted that the inflation rate, at least
18 partly, explains the pattern of interest rates. In his blog, Dr. Bernanke also
19 answered the “confused criticism” that “the Fed is somehow distorting financial
20 markets and investment decisions by keeping interest rates ‘artificially low.’” Dr.
21 Bernanke explained:
22 The best strategy for the Fed I can think of is to set rates at
23 a level consistent with the healthy operation of the
24 economy over the medium term, that is, at the (today, low)
25 equilibrium rate. There is absolutely nothing artificial
26 about that! (Emphasis added).
70
Exhibit No. JC-3, at 103-05 (emphasis added).
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Page 44
1 Q. DOES DR. BRAINARD CONCUR WITH THE VIEW THAT THE LOWER
2 RATES SET BY FEDERAL RESERVE MONETERARY POLICY ARE
3 APPROPRIATE GIVEN ECONOMIC CONDITIONS?
4 A. Yes. Dr. Brainard, in her October 12, 2017 paper entitled “Rethinking Monetary
5 Policy in a New Normal,” discusses how an appropriate federal funds rate is now
6 much lower than it was in the decades before the financial crisis. Dr. Brainard
7 stated:
8 A key feature of the new normal is that the neutral interest

9 rate--the level of the federal funds rate that is consistent
10 with the economy growing close to its potential rate, full
11 employment, and stable inflation--appears to be much
12 lower than it was in the decades prior to the crisis. In the
13 Federal Open Market Committee’s (FOMC) most recent
14 Summary of Economic Projections (SEP), the median
15 FOMC participant expected a longer-run real federal funds
16 rate, after subtracting inflation, of 3/4 percent, down
17 sharply from the value the first time the policy projection
18 was published in the January 2012 SEP of 2-1/4 percent--
19 and the average value in the decades prior to the financial
20 crisis of 2-1/2 percent.71
21 Q. WHAT VIEWS HAS DR. SUMMERS EXPRESSED REGARDING THESE
22 LOW INTEREST RATE CONDITIONS?
23 A. Writing in the Financial Times on August 23, 2015, Dr. Summers explained that
24 the state of the global economy dictates that, if we are to achieve satisfactory
25 economic growth, historically low interest rates are now and shall be required for
26 quite some time, noting that long-term bond markets are telling us that real
27 interest rates are expected to be close to zero in the industrialized world over the
28 next decade. Dr. Summers said:
71
Exhibit No. JC-3, at 106-20.
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Page 45
1 Much more plausible is the view that, for reasons rooted in

2 technological and demographic change and reinforced by
3 greater regulation of the financial sector, the global
4 economy has difficulty generating demand for all that can
5 be produced. This is the “secular stagnation” diagnosis, or
6 the very similar idea that Ben Bernanke, former Fed
7 chairman, has urged of a “savings glut”. Satisfactory
8 growth, if it can be achieved, requires very low interest
9 rates that historically we have only seen during economic
10 crises. This is why long term bond markets are telling us
11 that real interest rates are expected to be close to zero in
12 the industrialised world over the next decade.72
13 Q. DOES DR. KRUGMAN SHARE HIS COLLEAGUES’ VIEW THAT
14 CURRENT CAPITAL MARKET CONDITIONS ARE NEITHER
15 UNNATURAL NOR ARTIFICIAL?
16 A. Yes, he does. In his August 25, 2015 New York Times opinion column, Dr.
17 Krugman pointed to the evidence over the last seven years that demonstrates that
18 the low interest rates we have been experiencing are not unnatural or artificial.
19 The underlying claim in all such demands is that the low

20 interest rates we’ve had since 2008 are “unnatural” or
21 “artificial”. So it’s probably worth repeating that while
22 very low rates may seem strange, they also seem fully
23 justified by the economic situation. The original
24 Wicksellian concept of the natural rate of interest defined
25 that rate as the rate consistent with stable prices, with an
26 economy that was neither too hot nor too cold. If we had
27 had an unnaturally low rate these past 7 years, we should
28 have seen accelerating inflation; we haven’t.73
29 In short, all three of these very prominent and respected economists
30 believe that, owing to both domestic and international influences, the U.S.
31 economy has not been capable of sustaining higher interest rate levels over the
72
Id. (emphasis added).
73
Id. at 123-25 (emphasis added).
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Page 46
1 past several years. Importantly, they do not expect this circumstance to change
2 significantly any time soon.
3 Q. ARE DCF MODEL RESULTS PRODUCED UNDER THESE
4 CONDITIONS TRULY INDICATIVE OF THE COST OF COMMON
5 EQUITY FOR AN ELECTRIC UTILITY?
6 A. Yes, they are. Consistent with economic theory and the realities displayed by
7 investor behavior in the stock and bond markets, lower public utility bond yields
8 compared to those that prevailed when the Southern Companies’ existing 11.25%
9 base ROE was established are a reflection of lower public utility capital costs, and
10 the DCF method reflects the reality of such lower capital costs. The growth rates
11 used by the Commission in its DCF analyses are widely publicized consensus
12 estimates from independent investment analysts and reflect the expectations of the
13 investors who rely now, as before, on those estimates in forming their outlooks
14 for the future. The only other input to the DCF calculations is the dividend yield,
15 which is directly observable market evidence of investors’ requirements. Thus,
16 the ROEs produced by the DCF method directly reflect the realities of the capital
17 markets and the actual cost of equity capital for electric utilities. For that reason,
18 there is no basis for setting the allowed base ROE for the Southern Companies’
19 transmission rate at any point other than the median of the entire array of proxy
20 group DCF results.
21 Q. IS YOUR VIEW CONCERNING THE RELIABILITY OF DCF RESULTS
22 SUPPORTED BY COMMISSION DECISIONS CONCERNING THE
23 COST OF EQUITY FOR OTHER TYPES OF UTILITIES?

Exhibit No. JC-1

Page 47
1 A. Yes, it is. In Opinion No. 531, the Commission adopted the same two-step DCF
2 methodology it has long used in gas and oil pipeline cases. Pipelines are faced
3 with the same economic and market conditions as electric utilities, and the
4 Commission has found no reason to question whether the point of central
5 tendency of pipeline DCF results accurately reflects the pipelines’ equity costs.
6 In pipeline cases, the Commission has continued to rely on the median of the
7 proxy group DCF results to set the ROE, diverging from that practice only if there
8 is a very clear showing that the subject pipeline is substantially more or less risky
9 than the proxy group average. For example, in the Commission’s October 2013
10 Opinion No. 528, El Paso Natural Gas Company, 145 FERC ¶ 61,040, at P 698
11 (2013), order on reh’g, 154 FERC ¶ 61,120 (2016), the Commission stated:
12 Finally, any analysis attempting to demonstrate that a

13 deviation from the median ROE is justified must present a
14 comparison between the risk level of the subject company
15 and the risk level of each of the proxy group companies.
16 This is the crux of the analysis, and if it is lacking, the
17 analysis is incomplete. However, the record indicates that
18 neither El Paso nor the Presiding Judge performed this
19 analysis satisfactorily. This critical failing is sufficient, by
20 itself, to reverse the Presiding Judge’s ROE finding.
21 Accordingly, for all of the above reasons, the Commission
22 reverses the Presiding Judge’s ROE finding and finds that
23 El Paso’s ROE should be set at the median ROE of the
24 proxy group. [Footnote omitted.]
25 The Commission has continued to find that participants have a heavy burden in
26 pipeline cases to show that the subject pipeline’s risk substantially deviates from
27 the proxy group average in order to justify a departure from setting the allowed
28 ROE at the median of the proxy group DCF results. The Commission has not
29 found it necessary to set pipeline ROEs in the upper half of the range, even
30 though they raise equity capital in the same economic and capital market
Exhibit No. JC-1

Page 48
1 conditions faced by electric utilities.74 As the Commission noted in Opinion No.
2 551, at P 134, “capital market conditions apply across the entire economy and are
3 not specific to individual utilities.” This fact indicates that the DCF method is
4 working properly to determine the cost of common equity for utilities and that, in
5 a case such as this where the average risk for The Southern Company and
6 subsidiaries is comparable to that of the average for the proxy group, the allowed
7 transmission service base ROE should be no higher than the median of the range
8 of DCF results.
9 Q. DOES THE LEVEL OF STATE-ALLOWED ROEs OR OTHER
10 PURPORTED “BENCHMARKS” JUSTIFY SETTING THE SOUTHERN
11 COMPANIES’ TRANSMISSION RATE ROE ABOVE THE MEDIAN?
12 A. No. In Opinion Nos. 531 and 551, the Commission referred to state commission-
13 allowed ROEs and certain other alternative benchmarks to justify placing the
14 ROE for the NETOs and MISO TOs at the midpoint of the upper half of the range
15 of reasonableness. The facts in this case, however, demonstrate that no such
16 adjustment is warranted here. As bond yields have fallen over the last several
17 years, state commission-allowed ROEs also have declined, but with a lag. Given
18 the persistence of low bond yields, state-allowed ROEs might be expected to fall
19 even further.
20 Q. PLEASE EXPLAIN.
74
See Seaway Crude Pipeline Co, Opinion No. 546, 154 FERC ¶ 61,070, at PP 194-96
(2016) (“Opinion No. 546”) (setting the allowed ROE at the median of the five-
member proxy group DCF results for the six-month period ending December 2012).
See also Exhibit No. SEA-49, eLibrary accession number 20130215-5170.
Exhibit No. JC-1

Page 49
1 A. The latest reports from Regulatory Research Associates (“RRA”) show that,
2 excluding the Virginia limited issue surcharge/rider generation cases that
3 determined generation construction incentive ROEs rather than base ROEs,75 the
4 average state commission-authorized electric ROE was 10.01% in 2012, dropping
5 to 9.81% in 2013, to 9.75% in 2014, to 9.60% in 2015 and 2016, and was 9.67%
6 in 2017. The 2016 range was 8.64% to 10.55%, with a median of 9.60%. The
7 2017 range was 8.40% to 11.95%, with the end point being 165 basis points
8 greater than the 10.30% next highest value, and has a median of 9.60%.
9 Furthermore, in the first quarter of 2018 the average ROE was 9.59%.76
10 The ROEs allowed in these state base rate cases, however, are not directly
11 comparable to the ROE that is applied in the Southern Companies’ formula
12 transmission rate. The ROE authorized for the Southern Companies’ formula
13 transmission rate is essentially guaranteed to be earned because the unit charges
14 are developed and applied based on forward-looking investment and costs, and
15 subsequently trued-up annually to recover actual costs including the authorized
16 ROE. The state commission-allowed ROEs, on the other hand, often involve
17 relatively stale cost data and, without any ability to true-up collections to match
75
RRA specifically notes that the state commission ROE decisions include several
limited issue surcharge/rider generation cases in Virginia that incorporate plant-
specific ROE incentive premiums based on Virginia statutes that authorize the State
Corporation Commission to approve ROE premiums of up to 200 basis points for
certain generation projects, and therefore, presents statistics that summarize the
annual average ROEs from those limited issue incentive cases separately from the
general rate cases that determine the base ROEs.
76
See RRA Regulatory Focus, Major Rate Case Decisions – January-December 2016
(Jan. 18, 2017); RRA Regulatory Focus, Major Rate Case Decisions – January-
December 2017 (Jan. 30, 2018) and RRA Regulatory Focus, Major Rate Case
Decisions – January-March 2018 (Apr. 17, 2018).
Exhibit No. JC-1

Page 50
1 actual costs, lead to collection of an actual ROE less than that authorized. For
2 example, the 9.85% ROE that was authorized for Indianapolis Power & Light
3 Company (“IP&L”) on March 16, 2016 was among the highest awarded in a
4 regular base rate case and relied on a stale cost of service for the twelve months
5 ending June 2014 using a year-end rate base.77 Thus, as is often the case at the
6 state regulatory level, it would be unrealistic to expect that IP&L could actually
7 earn as much as its authorized 9.85% ROE.
8 Also, the Edison Electric Institute (“EEI”), in its Rate Case Summary, Q4
9 2017 Financial Update, reports that in the fourth quarter of 2017, shareholder-
10 owned electric utilities’ average requested ROE before state commissions was
11 10.33%.78 In other words, the 10.33% ROE was the average ROE sought from
12 state commissions, and the expectation (as reflected in the data included in that
13 EEI report) is that state commissions will ultimately allow lower ROEs than
14 requested by the utilities, and even that only after a significant lag between the
15 filing of a case and the implementation of rates based on the request. For
16 example, the EEI report notes that the average lag for Q4 2017 was 6.91 months,
17 but this “was considerably below the industry’s approximate ten-month long-term
18 average since restructuring” and the report further states that “this does not appear
19 to indicate a change in a trend, but instead results from an unusual number of
20 special cases. Average regulatory lag will likely continue to hold near the ten-
21 month average unless state commissions accelerate the speed of rate case
77
See RRA Regulatory Focus, Major Rate Case Decisions – January-December 2016
(Jan. 18, 2017)
78
Exhibit No. JC-1

Page 51
1 decisions.”79 Thus, retail service regulated by the state commissions is riskier
2 than FERC-regulated formula rate based service such as the transmission service
3 of the Southern Companies at issue here. While, as EEI notes, state commission
4 proceedings often result in regulatory lag that can cause utilities to earn less than
5 their authorized ROEs, the formulary transmission rates of the Southern
6 Companies provide for timely recovery of the actual costs of providing service,
7 including recovery of the authorized ROE, through the use of forward-looking
8 investment and cost data, automatic annual rate changes, and true-ups despite
9 fluctuations in sales volumes and cost changes.
10 In its Rate Case Summary, Q2 2013 Financial Update,80 EEI explains the
11 state commission regulatory lag issue and its effects:
12 Average regulatory lag in Q2 was 11.8 months, the highest

13 in two years and slightly above the roughly 10-month
14 average in recent years….
***
15 During times of rapidly rising spending, utilities attempt to

16 recover costs by filing rate cases. However, rate case
17 decisions are based primarily on historical costs, and
18 preparing for and administrating a case takes time. If costs
19 continue to rise, rates may already be outdated by the time
20 the commission decides the case and puts rates into effect.
21 We define regulatory lag as the time between a rate case
22 filing and decision because those events are specific and
23 measureable. We consider this a rough proxy for the time
24 between when a utility needs recovery and when new rates
25 take effect.
26 Some analysts have argued that regulatory lag is actually

27 longer when other delays are considered, such as the time
79
Id.
80
Exhibit No. JC-3, at 126-31.
Exhibit No. JC-1

Page 52
1 needed to prepare for a case. This suggests an average

2 closer to twice what our definition measures, or close to
3 two years. However it is measured, lag obstructs utilities’
4 ability to earn their allowed return when costs are rising
5 and can ultimately increase their borrowing costs. Electric
6 utilities often fall short of achieving their allowed return
7 due to regulatory lag.81
8 Q. WHAT DOES THIS IMPLY ABOUT THE USE OF STATE-ALLOWED
9 ROEs AS A CHECK ON DCF RESULTS?
10 A. If the intent is to use the retail jurisdiction-allowed state ROEs as a check on the
11 results of the DCF analysis and the allowed ROE, the Commission’s allowed
12 ROEs for formula rates should be set lower than those allowed by state
13 commissions. Doing so would appropriately recognize that, while utilities’
14 earnings under their retail rates often suffer erosion due to regulatory lag, FERC
15 formula rates—including those in use by the Southern Companies—assure full
16 and timely recovery of costs. In addition, most retail rates are for entities that
17 bear generation risk either through ownership or through the requirement to be the
18 energy provider of last resort. Since generation service risk is greater than wires
19 (transmission and distribution service) risk, the retail authorized ROEs should be
20 commensurately higher than FERC authorized transmission ROEs.
21 Q. ARE YOU AWARE OF STATE COMMISSION, RETAIL ELECTRIC
22 RATE EVIDENCE SUPPORTING THE FACT THAT ANNUALLY
23 ADJUSTING FORMULA RATES LOWER RISK AND SHOULD BE
24 ACCOMPANIED BY LOWER ALLOWED ROES THAN GENERAL
25 RATE CASE FILING BASED STATED RATES?
81
Id. at 127.
Exhibit No. JC-1

Page 53
1 A. Yes. Recently, on April 13, 2017, both Commonwealth Edison Company and
2 Ameren Illinois Company filed electric distribution rate cases in annual formula
3 rate plan proceedings seeking an ROE of 8.4%.82 These are examples of the risk-
4 reducing impact of formula rates and corroborate the reasonableness of my 8.65%
5 ROE recommendation for the Southern Companies’ formula transmission rate at
6 issue here.
7 Q. PLEASE COMMENT ON THE USE OF OTHER ROE METHODS, SUCH
8 AS THE CAPM OR COMPARABLE EARNINGS METHODS, AS A
9 CHECK ON DCF RESULTS.
10 A. Other methods for estimating investor-required ROEs have been shown to be
11 unreliable, and the Commission has rightly placed little or no weight on them
12 except where the Commission had less confidence in the DCF point of central
13 tendency due to its finding of anomalous capital market conditions.83 Even when
14 the Commission has found there to be anomalous capital market conditions, it still
15 has only used other methods to determine the placement of the allowed ROE
16 within the DCF range. Because (as discussed above) I find that capital market
17 conditions are not anomalous, the Commission may (and, in fact, should) rely on
18 the point of central tendency of the DCF results without adjustment. For that
19 reason, the alternative methods the Commission consulted in Opinion Nos. 531
20 and 551 should play no role in determining the Southern Companies’ allowed
82
See RRA’s Monthly Retrospective – April 2017, dated May 4, 2017 at 3.
83
See, e.g., ITC Holdings Corp., 121 FERC ¶ 61,229, at P 43, n.37 (2007); N. Ind. Pub.
Serv. Co., 101 FERC ¶ 61,394, at P 38 (2002); Jersey Cent. Power & Light Co.,
Opinion No. 408, 77 FERC ¶ 61,001, at 61,002-03 (1996).
Exhibit No. JC-1

Page 54
1 transmission service base ROE here. However, to the extent such non-DCF
2 analyses may be put forward during the course of this proceeding, their usefulness
3 may be evaluated on the record.
VII. CONCLUSIONS
4 Q. PLEASE SUMMARIZE THE CONCLUSIONS YOU HAVE REACHED
5 THROUGH THE ANALYSES DESCRIBED ABOVE.
6 A. My conclusions are as follows:
7 First, the current 11.25% base ROE in the Southern Companies’ formula
8 transmission rate is substantially excessive, and, therefore, unjust and
9 unreasonable for use in the Southern Companies’ transmission rate at this time.
10 That ROE was negotiated years ago when capital costs were much higher than
11 they are currently. It is substantially above the median and even the top-end
12 ROEs of the proxy group DCF analysis I performed, and, thus, well above The
13 Southern Company and subsidiaries’ cost of common equity capital.
14 Accordingly, the Southern Companies should not be allowed to continue using the
15 11.25% ROE in their transmission formula rate.
16 Second, based on the application of the Commission’s two-step DCF
17 methodology to my national electric utility proxy group and using financial data
18 for the six-month period ending March 31, 2018, the range of calculated DCF
19 results for the proxy group is 7.22% to 11.05%.
20 Third, because the appropriate point of central tendency within the range
21 of DCF results for the proxy group will provide a just and reasonable ROE for use
22 in the Southern Companies’ OATT transmission service, which has a risk profile
Exhibit No. JC-1

Page 55
1 approximately equal to that of the proxy group, the Commission should adopt the
2 median value of the calculated range, which is 8.65%, as the base ROE to be
3 applied in the Southern Companies’ formula transmission rate.
4 Finally, a base ROE higher than the median of proxy group DCF results
5 cannot be justified by a claim that economic and capital market conditions during
6 the DCF study period were anomalous. In point of fact, these conditions were not
7 anomalous during the study period, as evidenced by the fact that bond yields have
8 stayed within a relatively low range for at least the last six years. Nor can a
9 higher ROE be justified by reliance on state-allowed ROEs or alternative cost of
10 equity methods. Reliance on those purported alternatives is premised on capital
11 market conditions being anomalous, which I have shown is not the case for the
12 DCF study period I examined.
13 Q. THANK YOU. I HAVE NO FURTHER QUESTIONS AT THIS TIME.

Exhibit No. JC-3
Page 1 of 141
Exhibit No. JC-3

Workpapers Supporting Direct
Testimony of Breandan T. Mac Mathuna
Exhibit No. JC-3
Page 2 of 141
Line Safety Long‐term Issuer Senior Unsecured

No. Company Ticker Industry Name Rank S&P Moody's S&P Moody's Note
Utilities With S&P CCR of A, A‐, or BBB+ and Moody's Long‐term Issuer or Senior Unsecured Rating of Baa1, Baa2, or Baa3
1 Alliant Energy LNT Electric Util. (Central) 2 A‐ Baa1 Baa1
2 Amer. Elec. Power AEP Electric Util. (Central) 1 A‐ BBB+ Baa1
3 Ameren Corp. AEE Electric Util. (Central) 2 BBB+ Baa1 BBB Baa1
4 CenterPoint Energy CNP Electric Util. (Central) 3 A‐ Baa1 BBB+ Baa1
5 CMS Energy CMS Electric Util. (Central) 2 BBB+ BBB Baa1
6 DTE Energy DTE Electric Util. (Central) 2 BBB+ BBB Baa1
7 Duke Energy DUK Electric Utility (East) 2 A‐ Baa1 BBB+ Baa1
8 Entergy Corp. ETR Electric Util. (Central) 3 BBB+ Baa2 BBB Baa2
9 Fortis, Inc. FTS Electric Util. (Central) 2 A‐ Baa3 BBB+ Baa3
10 NextEra Energy NEE Electric Utility (East) 1 A‐ Baa1 BBB
11 PNM Resources, Inc. PNM Electric Utility (West) 3 BBB+ Baa3
12 PPL Corp. PPL Electric Utility (East) 2 A‐ Baa2
13 Public Serv. Enterprise PEG Electric Utility (East) 1 BBB+ BBB Baa1
14 Southern Co. SO Electric Utility (East) 2 A‐ BBB+ Baa2
Utilities Meeting the Ratings Screens But Eliminated For Other Reasons
15 Avangrid, Inc. AGR Electric Utility (East) 2 BBB+ Baa1 BBB Baa1 Foreign control & other
16 Dominion Energy D Electric Utility (East) 2 BBB+ BBB Baa2 M&A activity
17 G't Plains Energy GXP Electric Util. (Central) 3 BBB+ BBB Baa2 M&A activity
18 PG&E Corp. PCG Electric Utility (West) 3 BBB+ Baa1 BBB Baa1 Dividend cut
19 Sempra Energy SRE Electric Utility (West) 2 BBB+ Baa1 BBB+ Baa1 M&A activity
20 Vectren Corp. VVC Electric Util. (Central) 2 A‐ M&A activity
21 Westar Energy WR Electric Util. (Central) 2 BBB+ Baa1 M&A activity
Utilities Eliminated By the Credit Ratings Screen
22 ALLETE ALE Electric Util. (Central) 2 BBB+ A3
23 Avista Corp. AVA Electric Utility (West) 2 BBB Baa1 M&A activity
24 Black Hills Corp. BKH Electric Utility (West) 2 BBB Baa2 BBB Baa2
25 Consol. Edison ED Electric Utility (East) 1 A‐ A3 BBB+ A3
26 Edison Int'l EIX Electric Utility (West) 2 BBB+ A3 BBB A3
27 El Paso Electric EE Electric Utility (West) 2 BBB Baa1 BBB Baa1
28 Eversource Energy ES Electric Utility (East) 1 A+ Baa1 A Baa1
29 Exelon Corp. EXC Electric Utility (East) 3 BBB Baa2 BBB‐ Baa2
30 FirstEnergy Corp. FE Electric Utility (East) 3 BBB‐ Baa3 BB+ Baa3
31 Hawaiian Elec. HE Electric Utility (West) 2 BBB‐
32 IDACORP, Inc. IDA Electric Utility (West) 2 BBB Baa1
33 MGE Energy, Inc. MGEE Electric Util. (Central) 1 No ratings
34 NorthWestern Corp. NWE Electric Utility (West) 3 BBB BBB Baa1
35 OGE Energy Corp. OGE Electric Util. (Central) 2 A‐ A3
36 Otter Tail Corp. OTTR Electric Util. (Central) 2 BBB Baa2
37 Pinnacle West PNW Electric Utility (West) 1 A‐ A3 BBB+ A3
38 Portland General POR Electric Utility (West) 2 BBB A3
39 SCANA Corp. SCG Electric Utility (East) 3 BBB Ba1 BBB‐ Ba1 M&A activity
40 WEC Energy Group WEC Electric Util. (Central) 1 A‐ A3 BBB+ A3
41 Xcel Energy XEL Electric Utility (West) 1 A‐ A3 BBB+ A3
42 Southern Co. SO Electric Utility (East) 2 A‐ BBB+ Baa2

Exhibit No. JC-3
Page 3 of 141
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Page 13 of 141
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Page 14 of 141
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Page 15 of 141
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Page 30 of 141
ALLIANT ENERGY NYSE-LNT RECENT

PRICE 38.17 P/ERATIO 17.7(Trailing:
Median: 15.0) P/E RATIO 0.93 YLD 3.5%
19.2 RELATIVE DIV’D VALUE
LINE
TIMELINESS 2 Raised 3/9/18 High:
Low:
23.3
17.5
21.2
11.4
15.8
10.2
18.8
14.6
22.2
17.0
23.8
20.9
27.1
21.9
34.9
25.0
35.4
27.1
41.0
30.4
45.6
36.6
42.7
36.8
Target Price Range
2021 2022 2023
SAFETY 2 Raised 9/28/07 LEGENDS
0.90 x Dividends p sh
TECHNICAL 3 Lowered 3/2/18 divided by Interest Rate
. . . . Relative Price Strength
80
BETA .70 (1.00 = Market) 2-for-1 split 5/16 60
Options: Yes 50
2021-23 PROJECTIONS Shaded area indicates recession 40
Ann’l Total
Price Gain Return 30
High 45 (+20%) 8% 25
Low 35 (-10%) 2% 20
Insider Decisions 15
M J J A S O N D J
to Buy 1 0 0 0 0 0 0 0 0 10
Options 0 0 0 0 0 0 0 0 0
to Sell 1 0 0 0 1 0 0 0 0 7.5
% TOT. RETURN 2/18
Institutional Decisions THIS VL ARITH.*
2Q2017 3Q2017 4Q2017 STOCK INDEX
Percent 24 1 yr. 1.0 10.1
to Buy 198 194 190 shares 16
to Sell 188 187 165 3 yr. 34.3 24.2
traded 8
Hld’s(000) 179256 182717 166325 5 yr. 92.2 76.2
Alliant Energy, formerly called Interstate En- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 © VALUE LINE PUB. LLC 21-23
ergy Corporation, was formed on April 21, 16.67 15.51 15.40 16.51 13.94 14.77 15.10 14.34 14.58 14.62 15.30 15.55 Revenues per sh 17.75
1998 through the merger of WPL Holdings, 2.28 2.10 2.60 2.75 2.95 3.34 3.44 3.45 3.45 3.97 4.25 4.45 ‘‘Cash Flow’’ per sh 5.00
IES Industries, and Interstate Power. WPL 1.27 .95 1.38 1.38 1.53 1.65 1.74 1.69 1.65 1.99 2.10 2.25 Earnings per sh A 2.60
stockholders received one share of Inter- .70 .75 .79 .85 .90 .94 1.02 1.10 1.18 1.26 1.34 B
1.42 Div’d Decl’d per sh ■ † 1.66
state Energy stock for each WPL share, IES 3.98 5.43 3.91 3.03 5.22 3.32 3.78 4.25 5.26 6.34 6.75 7.10 Cap’l Spending per sh 5.30
stockholders received 1.14 Interstate Ener- 12.78 12.54 13.05 13.57 14.12 14.79 15.54 16.41 16.96 18.08 19.00 20.25 Book Value per sh C 22.85
gy shares for each IES share, and Interstate 220.90 221.31 221.79 222.04 221.97 221.89 221.87 226.92 227.67 231.35 233.00 235.00 Common Shs Outst’g D 235.00
Power stockholders received 1.11 Interstate 13.4 13.9 12.5 14.5 14.5 15.3 16.6 18.1 22.3 20.6 Bold figures are Avg Ann’l P/E Ratio 15.0
Energy shares for each Interstate Power .81 .93 .80 .91 .92 .86 .87 .91 1.17 1.01 Value Line Relative P/E Ratio .85
estimates
share. 4.1% 5.7% 4.6% 4.3% 4.1% 3.7% 3.5% 3.6% 3.2% 3.1% Avg Ann’l Div’d Yield 4.3%
CAPITAL STRUCTURE as of 12/31/17 3681.7 3432.8 3416.1 3665.3 3094.5 3276.8 3350.3 3253.6 3320.0 3382.2 3560 3650 Revenues ($mill) 4175
Total Debt $5186.5 mill. Due in 5 Yrs $1500.0 mill. 280.0 208.6 303.9 304.4 337.8 382.1 385.5 380.7 373.8 455.9 490 530 Net Profit ($mill) 610
LT Debt $4010.6 mill. LT Interest $180.0 mill. 33.4% - - 30.1% 19.0% 21.5% 12.4% 10.1% 15.3% 13.4% 12.5% 12.0% 12.0% Income Tax Rate 12.0%
(LT interest earned: 4.0x)
-- -- -- -- -- -- -- 6.5% 7.0% 7.0% 7.0% 7.0% AFUDC % to Net Profit 7.0%
Pension Assets-12/17 $950.7 mill. Oblig. $1303.1 36.3% 44.3% 46.3% 45.7% 48.4% 46.1% 49.7% 48.6% 52.8% 49.0% 50.0% 50.0% Long-Term Debt Ratio 50.0%
mill. 58.6% 51.2% 49.5% 50.9% 48.4% 50.8% 47.5% 51.4% 47.2% 51.0% 50.0% 50.0% Common Equity Ratio 50.0%
Pfd Stock $400.0 mill. Pfd Div’d $10.2 mill. 4815.6 5423.0 5840.8 5921.2 6476.6 6461.0 7257.2 7246.3 8177.6 8192.8 8300 8400 Total Capital ($mill) 8700
16,000,000 shs. 5353.5 6203.0 6730.6 7037.1 7838.0 7147.3 6442.0 8970.2 9809.9 10797.9 11125 11645 Net Plant ($mill) 12900
Common Stock 231,348,646 shs. 7.0% 5.1% 6.6% 6.4% 6.3% 7.0% 6.3% 6.3% 5.6% 5.6% 6.0% 6.5% Return on Total Cap’l 7.0%
9.1% 6.9% 9.7% 9.5% 10.1% 11.0% 10.6% 10.2% 9.7% 10.9% 11.0% 11.0% Return on Shr. Equity 11.5%
9.3% 6.8% 9.9% 9.5% 10.3% 11.3% 10.9% 10.2% 9.7% 10.9% 11.0% 11.0% Return on Com Equity E 11.5%
MARKET CAP: $8.8 billion (Large Cap) 3.8% .9% 3.8% 3.3% 3.9% 4.9% 4.3% 3.6% 2.8% 4.0% 4.0% 4.0% Retained to Com Eq 4.0%
ELECTRIC OPERATING STATISTICS 62% 88% 64% 67% 64% 57% 59% 65% 72% 63% 64% 63% All Div’ds to Net Prof 64%
2015 2016 2017 BUSINESS: Alliant Energy Corp., formerly named Interstate Ener-
% Change Retail Sales (KWH) -.1 +2.0 1.0 sources, 2017: coal, 40%; gas, 17%; other, 43%. Fuel costs: 45%
Avg. Indust. Use (MWH) 11735 11987 12102 gy, is a holding company formed through the merger of WPL Hold- of revs. 2017 depreciation rate: 5.5%. Estimated plant age: 15
Avg. Indust. Revs. per KWH (¢) 6.92 7.04 7.16 ings, IES Industries, and Interstate Power. Supplies electricity, gas, years. Has approximately 3,989 employees. Chairman & Chief Ex-
Capacity at Peak (Mw) 5385 5615 5375 and other services in Wisconsin, Iowa, and Minnesota. Elect. revs. ecutive Officer: Patricia L. Kampling. Incorporated: Wisconsin. Ad-
Peak Load, Summer (Mw) 5385 5615 5375
Annual Load Factor (%) NA NA NA by state: WI, 38%; IA, 61%; MN, 1%. Elect. rev.: residential, 36%; dress: 4902 N. Biltmore Lane, Madison, Wisconsin 53718. Tele-
% Change Customers (yr-end) +.3 +1.0 +.4 commercial, 24%; industrial, 30%; wholesale, 8%; other, 2%. Fuel phone: 608-458-3311. Internet: www.alliantenergy.com.
Fixed Charge Cov. (%) 315 295 319 Alliant Energy’s largest utility subsid- much of the anticipated savings will be re-
ANNUAL RATES Past Past Est’d ’14-’16
iary has reached a settlement of its turned to customers through fewer/lower
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 rate case. Under the agreement, electric rate increases over time.
Revenues .5% -1.5% 3.0% rates for Interstate Power and Light Com- Wind energy remains an area of focus
‘‘Cash Flow’’ 3.5% 6.5% 5.5% pany (IPL) would rise $130 million (7.8%) for Alliant. In December, the utility
Earnings 5.0% 6.5% 6.5%
Dividends 7.5% 6.5% 6.0% in 2018. That is down from the original agreed to purchase English Farms Wind
Book Value 4.0% 4.5% 5.0% $176 million (11.6%) request, but within Farm for an undisclosed sum. The 170-
QUARTERLY REVENUES ($ mill.) our range of estimates. The Iowa Utilities megawatt, Iowa-based project is expected
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year Board also approved a return on common to power approximately 75,000 homes
equity of 9.6% and said that temporary upon completion. Alliant is aiming to gen-
2015 897.4 717.2 898.9 740.1 3253.6
2016 843.8 754.2 925.0 797.0 3320.0 rates, which have been in effect since April erate at least one-third of its Iowa energy
2017 853.9 765.3 906.9 856.1 3382.2 2017, would remain until the board mix from wind starting in 2020.
2018 950 790 945 875 3560 reviews and approves tariff filings to be The board raised the dividend in the
2019 960 815 975 900 3650 made by Alliant. The company said it first quarter of 2018. This is the usual
EARNINGS PER SHARE A would use the funds to upgrade power timing of the annual increase. The direc-
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year grids and improve facilities like the Mar- tors boosted the yearly disbursement by
2015 .44 .30 .80 .15 1.69 shalltown natural gas generating station. $0.08 a share (6.3%), the same increase as
2016 .43 .37 .57 .28 1.65 Earnings should advance in 2018 and in each of the past four years. Alliant is
2017 .44 .41 .73 .41 1.99 2019. Each year, the utility is expected to targeting a payout ratio of 60%-70%.
2018 .50 .40 .85 .35 2.10 benefit from electric and gas rate increases This good-quality stock is well ranked
2019 .53 .43 .90 .39 2.25 at IPL and Wisconsin Power and Light for year-ahead relative price perform-
Cal- QUARTERLY DIVIDENDS PAID B ■† Full
Company (WPL). Our 2018 profit estimate ance. The dividend yield is slightly below
endar Mar.31 Jun.30 Sep.30 Dec.31 Year is near the midpoint of management’s the median for a utility. Appreciation
guidance range of $2.04-$2.18 a share, potential, while improved since our De-
2014 .255 .255 .255 .255 1.02
2015 .275 .275 .275 .275 1.10 while our 2019 estimate calls for 7% year- cember report, is still well below the Value
2016 .295 .295 .295 .295 1.18 on-year growth. It should be noted that Line median. Accordingly, we advise long-
2017 .315 .315 .315 .315 1.26 tax reform is not forecasted to have a ma- term investors to wait on the sidelines.
2018 .335 terial impact on earnings. This is because Daniel Henigson March 16, 2018
(A) Diluted EPS. Excl. nonrecur. gains (losses): Aug., and Nov. ■ Div’d reinvest. plan avail. † Orig. cost. Rates all’d on com. eq. in IA in ’17: Company’s Financial Strength A
’08, 4¢; ’09, (44¢); ’10, (8¢); ’11, (1¢); ’12, (8¢). Shareholder invest. plan avail. (C) Incl. 10.5%; in WI in ’17 Regul. Clim.: WI, Above Stock’s Price Stability 95
Next earnings report due early May. (B) deferred chgs. In ’17: $69.7 mill., $0.30/sh. (D) Avg.; IA, Avg. Price Growth Persistence 90
Dividends historically paid in mid-Feb., May, In millions, adjusted for split. (E) Rate base: Earnings Predictability 90
© 2018 Value Line, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber’s own, non-commercial, internal use. No part To subscribe call 1-800-VALUELINE
of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product.
Exhibit No. JC-3
Page 31 of 141
AMERICAN ELEC. PWR. NYSE-AEP RECENT

LINE
TIMELINESS 3 Lowered 1/19/18 High:
Low:
51.2
41.7
49.1
25.5
36.5
24.0
37.9
28.2
41.7
33.1
45.4
37.0
51.6
41.8
63.2
45.8
65.4
52.3
71.3
56.8
78.1
61.8
73.4
63.3
Target Price Range
2021 2022 2023
0.67 x Dividends p sh 128
. . . . Relative Price Strength 96
BETA .65 (1.00 = Market) Options: Yes 80
Shaded area indicates recession
2021-23 PROJECTIONS 64
Ann’l Total 48
High 80 (+20%) 9%
Low 65 (Nil) 4% 32
M J J A S O N D J
to Buy 0 0 0 0 0 0 0 0 0 16
Options 9 0 0 0 0 0 0 0 0 12
to Sell 1 0 0 0 0 0 0 0 0
% TOT. RETURN 2/18
Percent 15 1 yr. 1.4 10.1
to Buy 376 388 371 shares 10
to Sell 369 351 342 3 yr. 26.9 24.2
traded 5
Hld’s(000) 384520 382879 352776 5 yr. 69.1 76.2
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 © VALUE LINE PUB. LLC 21-23
42.96 36.82 35.51 30.76 31.82 33.41 35.56 28.22 30.01 31.27 30.77 31.48 34.78 33.51 33.31 31.35 30.60 31.30 Revenues per sh 33.00
6.99 5.76 5.89 5.96 6.67 6.80 6.84 6.32 6.29 6.83 6.92 7.02 7.57 7.98 8.47 7.95 8.30 8.60 ‘‘Cash Flow’’ per sh 9.50
2.86 2.53 2.61 2.64 2.86 2.86 2.99 2.97 2.60 3.13 2.98 3.18 3.34 3.59 4.23 3.62 3.90 4.10 Earnings per sh A 5.00
2.40 1.65 1.40 1.42 1.50 1.58 1.64 1.64 1.71 1.85 1.88 1.95 2.03 2.15 2.27 2.39 2.51 2.63 Div’d Decl’d per sh B ■ 3.05
5.08 3.44 4.28 6.11 8.89 8.88 9.83 6.19 5.07 5.74 6.45 7.75 8.68 9.37 9.98 11.79 12.50 12.95 Cap’l Spending per sh 11.25
20.85 19.93 21.32 23.08 23.73 25.17 26.33 27.49 28.33 30.33 31.37 32.98 34.37 36.44 35.38 37.17 38.70 40.25 Book Value per sh C 46.75
338.84 395.02 395.86 393.72 396.67 400.43 406.07 478.05 480.81 483.42 485.67 487.78 489.40 491.05 491.71 492.01 493.50 495.00 Common Shs Outst’g D 516.00
12.7 10.7 12.4 13.7 12.9 16.3 13.1 10.0 13.4 11.9 13.8 14.5 15.9 15.8 15.2 19.3 Bold figures are Avg Ann’l P/E Ratio 14.5
.69 .61 .66 .73 .70 .87 .79 .67 .85 .75 .88 .81 .84 .80 .80 .96 Value Line Relative P/E Ratio .80
estimates
6.6% 6.1% 4.3% 3.9% 4.1% 3.4% 4.2% 5.5% 4.9% 5.0% 4.6% 4.2% 3.8% 3.8% 3.5% 3.4% Avg Ann’l Div’d Yield 4.2%
CAPITAL STRUCTURE as of 12/31/17 14440 13489 14427 15116 14945 15357 17020 16453 16380 15425 15100 15500 Revenues ($mill) 17000
Total Debt $22812 mill. Due in 5 Yrs $9694 mill. 1208.0 1365.0 1248.0 1513.0 1443.0 1549.0 1634.0 1763.4 2073.6 1783.2 1870 1960 Net Profit ($mill) 2490
LT Debt $19420 mill. LT Interest $874 mill. 31.3% 29.7% 34.8% 31.7% 33.9% 36.2% 37.8% 35.1% 26.8% 33.7% 23.0% 23.0% Income Tax Rate 23.0%
Incl. $1410.5 mill. securitized bonds. Incl. $294
mill. capitalized leases. 9.9% 10.9% 10.4% 10.6% 11.2% 7.3% 9.0% 11.0% 8.0% 8.0% 11.0% 10.0% AFUDC % to Net Profit 6.0%
(LT interest earned: 3.8x) 59.1% 54.4% 53.1% 50.7% 50.6% 51.1% 49.0% 49.8% 50.0% 51.5% 52.5% 54.5% Long-Term Debt Ratio 50.5%
Leases, Uncapitalized Annual rentals $245.9 mill. 40.7% 45.4% 46.7% 49.3% 49.4% 48.9% 51.0% 50.2% 50.0% 48.5% 47.5% 45.5% Common Equity Ratio 49.5%
Pension Assets-12/17 $5174.1 mill. 26290 28958 29184 29747 30823 32913 33001 35633 34775 37707 40325 43775 Total Capital ($mill) 48800
Oblig $5215.8 mill. 32987 34344 35674 36971 38763 40997 44117 46133 45639 50262 54250 58450 Net Plant ($mill) 68700
Pfd Stock None
6.2% 6.2% 5.7% 6.6% 6.1% 6.0% 6.3% 6.1% 7.2% 5.9% 6.0% 6.0% Return on Total Cap’l 6.5%
Common Stock 492,005,598 shs. 11.2% 10.3% 9.1% 10.3% 9.5% 9.6% 9.7% 9.9% 11.9% 9.8% 10.0% 10.0% Return on Shr. Equity 10.5%
MARKET CAP: $32 billion (Large Cap) 5.1% 4.6% 3.1% 4.2% 3.5% 3.7% 3.8% 3.9% 5.5% 3.2% 3.5% 3.5% Retained to Com Eq 4.0%
2015 2016 2017 BUSINESS: American Electric Power Company, Inc. (AEP),
% Change Retail Sales (KWH) -1.2 +.3 -1.6 Pipeline ’05; commercial barge operation in ’15. Generating
Avg. Indust. Use (MWH) NA NA NA through 10 operating utilities, serves 5.4 mill. customers in Arkan- sources not available. Fuel costs: 34% of revenues. ’17 reported
Avg. Indust. Revs. per KWH (¢) NA NA NA sas, Kentucky, Indiana, Louisiana, Michigan, Ohio, Oklahoma, Ten- depreciation rates (utility): 1.6%-9.2%. Has 17,700 employees.
Capacity at Peak (Mw) NA NA NA nessee, Texas, Virginia, & West Virginia. Electric revenue break- Chairman, President & CEO: Nicholas K. Akins. Incorporated: New
Peak Load (Mw) NA NA NA
Annual Load Factor (%) NA NA NA down: residential, 40%; commercial, 23%; industrial, 19%; whole- York. Address: 1 Riverside Plaza, Columbus, Ohio 43215-2373.
% Change Customers (yr-end) +.3 NA NA sale, 15%; other, 3%. Sold SEEBOARD (British utility) ’02; Houston Telephone: 614-716-1000. Internet: www.aep.com.
Fixed Charge Cov. (%) 356 374 354 American Electric Power’s earnings billion and would be completed by the
will likely advance solidly in 2018 and fourth quarter of 2020. This needs the ap-
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 2019. The company’s utilities are bene- proval of the state commissions in Oklaho-
Revenues -- 1.5% Nil fiting from rate relief. Public Service of ma, Arkansas, Texas, and Louisiana. (Op-
‘‘Cash Flow’’ 2.5% 4.0% 2.5% Oklahoma received an $84 million rate in- position to the project has emerged in Ok-
Earnings 3.0% 5.5% 4.5%
Dividends 4.0% 4.5% 5.0% crease (before passing through to custom- lahoma.) Rulings on the proposals are ex-
Book Value 4.0% 4.0% 4.5% ers the reduction in federal taxes), based pected by the end of April.
QUARTERLY REVENUES ($ mill.) on a 9.3% return on equity. Also this quar- AEP no longer has exposure to the
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year ter, SWEPCo was granted a hike of $50 vagaries of the power markets. The
million, based on a 9.6% ROE. Indiana & company has sold or written off its non-
2015 4580 3827 4431 3615 16453
2016 4045 3893 4652 3790 16380 Michigan has rate cases pending in each regulated generating facilities. (This
2017 3933 3577 4105 3810 15425 state. In Indiana, the utility reached a caused a large nonrecurring charge in
2018 3850 3450 4100 3700 15100 settlement (subject to approval by the 2016.) It is still seeking a buyer for its
2019 4000 3650 4200 3650 15500 state commission) for an increase of $97 remaining generating assets.
EARNINGS PER SHARE A million, based on a 9.95% ROE. New tar- Finances are solid. The fixed-charge cov-
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year iffs would take effect in mid-2018. In erage, common-equity ratio, and earned
2015 1.27 .88 1.04 .41 3.59 Michigan, I&M requested a $52 million ROE are healthy. AEP’s exit from mer-
2016 1.02 1.03 1.43 .76 4.23 hike, based on a 10.6% ROE. An order is chant (uncontracted) power has lowered
2017 .94 .76 1.11 .81 3.62 expected in April. Heavy investment in its business risk, too. The company’s Fi-
2018 1.10 .80 1.25 .75 3.90 electric transmission (some $3 billion an- nancial Strength rating is A+.
2019 1.15 .85 1.30 .80 4.10 nually) is also expanding the company’s The stock has a dividend yield that is
Cal- QUARTERLY DIVIDENDS PAID B ■ Full
earning power. Our 2018 and 2019 share- somewhat above the utility average.
endar Mar.31 Jun.30 Sep.30 Dec.31 Year earnings estimates are within AEP’s tar- This might well appeal to conservative in-
geted ranges of $3.75-$3.95 and $4.00- vestors, given the stock’s Safety rank of 1
2014 .50 .50 .50 .53 2.03
2015 .53 .53 .53 .56 2.15 $4.20, respectively. (Highest). Total return potential to 2021-
2016 .56 .56 .56 .59 2.27 The company wants to build a large 2023 does not stand out among electric
2017 .59 .59 .59 .62 2.39 wind project to serve four states. The companies, however.
2018 .62 2,000-megawatt facility would cost $4.5 Paul E. Debbas, CFA March 16, 2018
(A) Dil. EPS. Excl. nonrec. gains (losses): ’03, (32¢); ’04, 15¢; ’05, 7¢; ’06, 2¢; ’08, 3¢; ’15, ■ Div’d reinv. plan avail. (C) Incl. intang. In ’17: Company’s Financial Strength A+
($1.92); ’04, 24¢; ’05, (62¢); ’06, (20¢); ’07, 58¢; ’16, (1¢). ’15-’16 EPS don’t sum due to $12.59/sh. (D) In mill. (E) Rate base: various. Stock’s Price Stability 95
(20¢); ’08, 40¢; ’10, (7¢); ’11, 89¢; ’12, (38¢); rounding. Next egs. report due late April. Rates all’d on com. eq.: 9.65%-10.9%; earn. on Price Growth Persistence 50
’13, (14¢); ’16, ($2.99); ’17, 26¢; disc. ops.: ’03, (B) Div’ds paid early Mar., June, Sept., & Dec. avg. com. eq., ’17: 10.0%. Regul. Climate: Avg. Earnings Predictability 85
Exhibit No. JC-3
Page 32 of 141
AMEREN NYSE-AEE RECENT

LINE
Low:
55.0
47.1
54.3
25.5
35.3
19.5
29.9
23.1
34.1
25.5
35.3
28.4
37.3
30.6
48.1
35.2
46.8
37.3
54.1
41.5
64.9
51.4
59.0
51.9
Target Price Range
2021 2022 2023
80
Shaded area indicates recession 50
Ann’l Total
High 60 (+10%) 6% 25
Low 45 (-15%) Nil 20
M J J A S O N D J
to Buy 0 0 0 0 0 0 0 0 0 10
Options 0 1 0 0 0 0 0 0 21
to Sell 0 1 0 0 0 0 1 0 0 7.5
% TOT. RETURN 2/18
Percent 15 1 yr. 2.4 10.1
to Buy 247 229 212 shares 10
to Sell 209 215 192 3 yr. 42.4 24.2
traded 5
Hld’s(000) 185587 186752 171005 5 yr. 94.9 76.2
24.93 28.20 26.43 33.12 33.30 36.23 36.92 29.87 31.77 31.04 28.14 24.06 24.95 25.13 25.04 25.46 25.20 25.85 Revenues per sh 28.00
5.28 6.29 5.57 6.10 6.02 6.76 6.44 6.06 6.33 5.87 5.87 5.25 5.77 6.08 6.59 6.80 7.35 7.85 ‘‘Cash Flow’’ per sh 9.25
2.66 3.14 2.82 3.13 2.66 2.98 2.88 2.78 2.77 2.47 2.41 2.10 2.40 2.38 2.68 2.77 3.05 3.25 Earnings per sh A 3.75
.86 .77 .86 .89 1.05 .92 .85 .62 .62 .75 .85 .93 .88 .88 .96 1.02 Value Line Relative P/E Ratio .80
estimates
Leases, Uncapitalized Annual rentals $10 mill. 4.6% 5.8% 7.8% 5.6% 6.1% 7.1% 5.7% 5.1% 4.1% 3.5% 4.0% 4.0% AFUDC % to Net Profit 3.0%
Pension Assets-12/17 $4293 mill. 47.8% 49.7% 48.2% 45.3% 49.5% 45.2% 47.2% 49.3% 47.7% 49.2% 49.5% 49.0% Long-Term Debt Ratio 49.5%
Oblig $4827 mill. 50.8% 49.1% 50.9% 53.7% 49.4% 53.7% 51.7% 49.7% 51.3% 49.8% 49.5% 50.0% Common Equity Ratio 50.0%
Pfd Stock $142 mill. Pfd Div’d $6 mill. 13712 15991 15185 14738 13384 12190 12975 13968 13840 14420 15225 15925 Total Capital ($mill) 18600
807,595 sh. $3.50 to $5.50 cum. (no par), $100 16567 17610 17853 18127 16096 16205 17424 18799 20113 21466 22800 24225 Net Plant ($mill) 27100
stated val., redeem. $102.176-$110/sh.; 616,323
sh. 4.00% to 6.625%, $100 par, redeem. $100- 5.7% 5.3% 6.0% 5.6% 6.0% 5.6% 5.8% 5.3% 6.0% 5.9% 6.0% 6.0% Return on Total Cap’l 6.5%
$104/sh. 8.6% 7.8% 8.5% 7.5% 8.7% 7.7% 8.7% 8.3% 9.1% 9.3% 10.0% 10.0% Return on Shr. Equity 10.0%
Common Stock 242,634,798 shs. as of 1/31/18 8.7% 7.8% 8.6% 7.5% 8.8% 7.8% 8.7% 8.3% 9.2% 9.4% 10.0% 10.0% Return on Com Equity E 10.0%
2015 2016 2017 BUSINESS: Ameren Corporation is a holding company formed
% Change Retail Sales (KWH) -1.1 -4.2 -3.4 dustrial, 8%; other, 11%. Generating sources: coal, 71%; nuclear,
Avg. Indust. Use (MWH) NA NA NA through the merger of Union Electric and CIPSCO. Acq’d CILCORP 19%; hydro & other, 4%; purchased, 6%. Fuel costs: 27% of revs.
Avg. Indust. Revs. per KWH (¢) NA NA NA 1/03; Illinois Power 10/04. Has 1.2 mill. electric and 127,000 gas ’17 reported deprec. rates: 3%-4%. Has 8,600 employees. Chair-
Capacity at Peak (Mw) NA NA NA customers in Missouri; 1.2 mill. electric and 813,000 gas customers man, President & CEO: Warner L. Baxter. Inc.: MO. Address: One
Peak Load, Summer (Mw) NA NA NA
Annual Load Factor (%) NA NA NA in Illinois. Discontinued nonregulated power-generation operation in Ameren Plaza, 1901 Chouteau Ave., P.O. Box 66149, St. Louis,
% Change Customers (yr-end) NA NA NA ’13. Electric rev. breakdown: residential, 46%; commercial, 35%; in- MO 63166-6149. Tel.: 314-621-3222. Internet: www.ameren.com.
Fixed Charge Cov. (%) 343 351We think Ameren’s earnings will ex-
362 cates profit growth of 7%, which is within
ANNUAL RATES Past
ceed the $3.00-a-share level in 2018.
Past Est’d ’15-’17
management’s annual goal of 5%-7%.
of change (per sh) 10 Yrs. 5 Yrs. The company will benefit from a full year’s
to ’21-’23 Will 2018 be the year in which a regu-
Revenues -3.0% -3.5% effect of the rate increase that took effect
2.0% latory law is passed in Missouri? Utili-
‘‘Cash Flow’’ .5% 1.5% 6.5%
in Missouri at the start of April of 2017. A ties in the state have been hurt by regu-
Earnings -1.0% .5% 7.5%
Dividends -4.0% 2.0% return to normal weather patterns would
4.5% latory lag because Missouri uses a histori-
Book Value -1.0% -1.0% help after unfavorable weather was a drag
4.0% cal test year and doesn’t use a lot of me-
QUARTERLY REVENUES ($ mill.) on profits last year. The Callaway nuclear chanisms that allow for concurrent re-
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year facility will not have a refueling outage covery of certain kinds of capital spending
this year. The refinancing of debt will or expenses. The state senate has passed a
2015 1556 1401 1833 1308 6098.0
2016 1434 1427 1859 1356 6076.0 boost earnings. Our earnings estimate is bill that would be beneficial for utilities in
2017 1514 1538 1723 1402 6177.0 at the midpoint of Ameren’s targeted this regard. If the bill is enacted into law,
2018 1500 1500 1750 1400 6150 range of $2.95-$3.15 a share. Note that the Ameren will boost its capital spending in
2019 1550 1550 1800 1450 6350 2017 tally was depressed by the revalua- the state, with an estimated $1 billion for
EARNINGS PER SHARE A tion of deferred taxes, which stemmed grid modernization through 2023.
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year from the new federal tax law. This forced Ameren filed a gas rate application in
2015 .45 .40 1.41 .12 2.38 Ameren to take a nonrecurring charge of Illinois. The utility requested a $49 mil-
2016 .43 .61 1.52 .13 2.68 $0.63 a share in the fourth quarter. lion increase, based on a 10.3% return on a
2017 .42 .79 1.18 .39 2.77 We forecast further profit growth in 50% common-equity ratio. A ruling is ex-
2018 .55 .70 1.40 .40 3.05 2019. One factor that boosts Ameren’s pected in late 2018, with new tariffs tak-
2019 .60 .70 1.50 .45 3.25 earning power annually is the utility’s in- ing effect in January of 2019.
vestment in electric transmission. There is This timely stock has a dividend yield
endar Mar.31 Jun.30 Sep.30 Dec.31 Year still uncertainty about what the allowed that is about average, by utility stan-
return on equity will be—the Federal En- dards. Like many utility equities, the
2014 .40 .40 .40 .41 1.61
2015 .41 .41 .41 .425 1.66 ergy Regulatory Commission must still is- recent quotation is within our 3- to 5-year
2016 .425 .425 .425 .44 1.72 sue a ruling on this—but this will still ex- Target Price Range. Accordingly, total re-
2017 .44 .44 .44 .4575 1.78 ceed the allowed ROEs in Missouri and Il- turn potential over that time frame is low.
2018 .4575 linois. Our 2019 earnings estimate indi- Paul E. Debbas, CFA March 16, 2018
(A) Dil. EPS. Excl. nonrec. gain (losses): ’05, ing. Next egs. report due early May. (B) Div’ds depr. Rate all’d on com. eq. in MO in ’17: elec., Company’s Financial Strength A
(11¢); ’10, ($2.19); ’11, (32¢); ’12, ($6.42); ’17, histor. paid in late Mar., June, Sept., & Dec. ■ none spec.; in ’11: gas, none spec.; in IL in ’14: Stock’s Price Stability 95
(63¢); gain (loss) from disc. ops.: ’13, (92¢); Div’d reinv. plan avail. (C) Incl. intang. In ’17: elec., 8.7%, in ’16: gas, 9.6%; earned on avg. Price Growth Persistence 40
’15, 21¢. ’16-’17 EPS don’t sum due to round- $6.76/sh. (D) In mill. (E) Rate base: Orig. cost com. eq., ’17: 7.3%. Reg. Climate: Below Avg. Earnings Predictability 80
Exhibit No. JC-3
Page 33 of 141
CENTERPOINT EN’RGY NYSE-CNP RECENT

LINE
Low:
20.2
14.7
17.3
8.5
14.9
8.7
17.0
5.5
21.5
15.1
21.8
18.1
25.7
19.3
25.8
21.1
23.7
16.0
25.0
16.4
30.5
24.5
28.5
25.8
Target Price Range
2021 2022 2023
SAFETY 3 Lowered 12/18/15 LEGENDS
Ann’l Total 24
High 30 (+10%) 7%
Low 20 (-25%) -2% 16
M J J A S O N D J
to Buy 0 0 0 0 0 0 0 0 0 8
Options 8 0 0 0 0 0 0 0 0 6
to Sell 1 1 1 1 1 1 1 1 1
% TOT. RETURN 2/18
Percent 30 1 yr. 2.9 10.1
to Buy 251 241 208 shares 20
to Sell 236 236 200 3 yr. 49.2 24.2
traded 10
Hld’s(000) 371022 375340 332194 5 yr. 56.2 76.2
26.40 31.87 27.63 31.33 29.71 29.82 32.71 21.14 20.69 19.83 17.43 18.90 21.51 17.18 17.48 22.30 22.30 24.00 Revenues per sh 27.50
3.34 3.98 2.56 2.72 3.47 3.39 3.42 2.94 3.14 3.43 3.89 3.54 3.85 3.40 3.68 4.03 4.10 4.35 ‘‘Cash Flow’’ per sh 5.00
1.29 1.37 .61 .67 1.33 1.17 1.30 1.01 1.07 1.27 1.35 1.24 1.42 1.08 1.00 1.57 1.55 1.65 Earnings per sh A 2.00
1.07 .40 .40 .40 .60 .68 .73 .76 .78 .79 .81 .83 .95 .99 1.03 1.35 1.11 1.15 Div’d Decl’d per sh B ■ 1.27
.31 .34 .94 1.02 .56 .80 .68 .79 .88 .92 .94 1.05 .89 .91 1.15 .89 Value Line Relative P/E Ratio .75
estimates
CAPITAL STRUCTURE as of 12/31/17 11322 8281.0 8785.0 8450.0 7452.0 8106.0 9226.0 7386.0 7528.0 9614.0 9850 10350 Revenues ($mill) 12000
Incl. $1500 mill. securitized transition & system
restoration bonds. 2.7% 1.3% 2.7% 1.6% 2.6% 3.5% 4.1% 4.7% 3.5% 2.9% 3.0% 3.0% AFUDC % to Net Profit 2.0%
Leases, Uncapitalized Annual rentals $5 mill. 16.7% 22.4% 26.2% 32.8% 34.0% 35.6% 36.2% 30.5% 31.5% 36.4% 37.0% 37.5% Common Equity Ratio 39.5%
Pension Assets-12/17 $1801 mill. 12218 11758 12199 12863 12658 12146 12557 11362 10992 12883 13175 13550 Total Capital ($mill) 15300
Oblig $2225 mill. 10296 10788 11732 12402 13597 9593.0 10502 11537 12307 13057 13875 14600 Net Plant ($mill) 16600
Pfd Stock None 6.0% 5.8% 6.1% 6.4% 6.8% 6.3% 6.7% 6.1% 5.8% 6.8% 6.5% 7.0% Return on Total Cap’l 7.0%
as of 2/9/18 21.9% 14.1% 13.8% 12.9% 13.5% 12.4% 13.4% 13.4% 12.5% 14.5% 14.0% 14.0% Return on Com Equity E 14.5%
MARKET CAP: $12 billion (Large Cap) 9.9% 3.6% 3.8% 5.0% 5.5% 4.2% 4.5% 1.1% NMF 4.7% 4.0% 4.5% Retained to Com Eq 5.0%
ELECTRIC OPERATING STATISTICS 55% 74% 72% 62% 60% 66% 67% 92% NMF 68% 71% 69% All Div’ds to Net Prof 64%
2015 2016 2017 BUSINESS: CenterPoint Energy, Inc. is a holding company for
% Change Retail Sales (KWH) +2.9 +3.1 +2.1 31%; industrial, 15%; other, 2%. Does not own generating assets.
Avg. Indust. Use (MWH) NA NA NA Houston Electric, which serves 2.4 million customers in Houston Gas costs: 51% of revenues. ’17 depreciation rate: 5.6%. Has
Avg. Indust. Revs. per KWH (¢) NA NA NA and environs, and gas utilities with 3.4 million customers in Texas, 8,000 employees. Chairman: Milton Carroll. President & CEO: Scott
Capacity at Peak (Mw) NA NA NA Minnesota, Arkansas, Louisiana, and Oklahoma. Owns 54.1% of M. Prochazka. Incorporated: Texas. Address: 1111 Louisiana, P.O.
Annual Load Factor (%) NA NA NA Enable Midstream Partners. Discontinued Texas Genco Holdings in Box 4567, Houston, Texas 77210-4567. Telephone: 713-207-1111.
% Change Customers (avg.) +2.1 +2.3 +1.7 ’04. Electric revenue breakdown: residential, 52%; commercial, Internet: www.centerpointenergy.com.
Fixed Charge Cov. (%) 200 219 CenterPoint Energy wants to reduce
269 ings growth goal of 5%-7%. We think the
ANNUAL RATES Past
its exposure to commodity prices,
company will benefit from rate relief, in-
of change (per sh) 10 Yrs. 5 Yrs. which stems from its ownership inter-
to ’21-’23 creased electric deliveries, greater income
Revenues -4.5% -.5% est in Enable Midstream Partners. The
6.5% from its interest in Enable, and a rise in
‘‘Cash Flow’’ 1.5% 1.0% 1.5%
goal is to sell its stake gradually over a profits as the company’s energy services
Earnings 1.5% -- -.5%
Dividends 7.0% 7.0% multiyear period. Because the amount and
2.0% subsidiary grows. Note, though, that the
Book Value 6.0% -.5% timing of any sales cannot be predicted,
7.5% energy services unit books mark-to-market
QUARTERLY REVENUES ($ mill.) our estimates and projections are based on gains or charges, which we include in our
Cal- Full
endar Mar.31 Jun. 30 Sep. 30 Dec. 31 Year CenterPoint’s current 54.1% interest in earnings presentation, so this adds an ele-
the master limited partnership. ment of unpredictability to our estimates.
2015 2433 1532 1630 1791 7386.0
2016 1984 1574 1889 2081 7528.0 Tax reform is helping CenterPoint’s The board of directors raised the divi-
2017 2735 2143 2098 2638 9614.0 earnings. The revaluation of deferred dend. This move is usually made in early
2018 2800 2200 2150 2700 9850 taxes, which was necessitated by the new January every year, but the declaration
2019 2950 2300 2250 2850 10350 federal tax law, added $2.56 a share to was moved up to December of 2017. Thus,
EARNINGS PER SHARE A earnings in the fourth quarter of 2017. five dividends were declared last year,
Cal- Full
endar Mar.31 Jun. 30 Sep. 30 Dec. 31 Year This was a noncash, nonrecurring item, which is why the statistical array above
2015 .30 .18 .34 .26 1.08 but boosted the company’s common-equity shows a sharp rise in dividends declared
2016 .36 d.01 .41 .25 1.00 ratio. In 2018, the reduced federal tax rate in 2017. The quarterly increase was a cent
2017 .44 .31 .39 .43 1.57 should boost the bottom line by $0.10 a a share (3.7%), the same hike as in each of
2018 .44 .33 .47 .31 1.55 share thanks to the positive effect on the previous three years.
2019 .47 .35 .50 .33 1.65 CenterPoint’s equity income from its stake The dividend yield of CenterPoint
in Enable. Finally, the company’s fore- stock is above the utility average.
endar Mar.31 Jun.30 Sep.30 Dec.31 Year casted rate base at yearend will be $300 However, with the recent price above the
million greater because deferred taxes midpoint of our 2021-2023 Target Price
2014 .2375 .2375 .2375 .2375 .95
2015 .2475 .2475 .2475 .2475 .99 (which offset rate base) will be lower. This Range, the modest dividend growth we
2016 .2575 .2575 .2575 .2575 1.03 will raise CenterPoint’s earning power. project over that period is unlikely to pro-
2017 .2675 .2675 .2675 .2675 1.07 We forecast 6% profit growth in 2019. duce an above-average total return.
2018 .2775 This is within CenterPoint’s annual earn- Paul E. Debbas, CFA March 16, 2018
(A) Diluted EPS. Excl. extraordinary gains don’t sum due to rounding. Next earnings re- In ’17: $7.46/sh. (D) In mill. (E) Rate base: Net Company’s Financial Strength B+
(losses): ’04, ($2.72); ’05, 9¢; ’11, $1.89; ’12, port due early May. (B) Div’ds historically paid orig. cost. Rate all’d on com. eq. (elec.) in ’11: Stock’s Price Stability 90
(38¢) net; ’13, (52¢); ’15, ($2.69); ’17, $2.56; in early Mar., June, Sept. & Dec. 5 declarations 10%; (gas): 9.45%-11.25%; earned on avg. Price Growth Persistence 45
losses on disc. ops.: ’04, 37¢; ’05, 1¢. ’16 EPS in ’17. ■ Div’d reinv. plan avail. (C) Incl. intang. com. eq., ’17: NMF. Regulatory Climate: Avg. Earnings Predictability 70
Exhibit No. JC-3
Page 34 of 141
CMS ENERGY CORP. NYSE-CMS RECENT

LINE
Low:
19.5
15.0
17.5
8.3
16.1
10.0
19.3
14.1
22.4
17.0
25.0
21.1
30.0
24.6
36.9
26.0
38.7
31.2
46.3
35.0
50.8
41.1
47.4
40.5
Target Price Range
2021 2022 2023
80
Ann’l Total
High 50 (+15%) 7% 25
Low 35 (-20%) -1% 20
M J J A S O N D J
to Buy 0 0 0 0 0 0 0 0 0 10
Options 11 0 0 0 0 0 0 0 11
to Sell 5 0 0 3 0 0 2 0 0 7.5
% TOT. RETURN 2/18
Percent 30 1 yr. -1.8 10.1
to Buy 242 210 223 shares 20
to Sell 217 225 170 3 yr. 32.6 24.2
traded 10
Hld’s(000) 273775 282715 254375 5 yr. 87.8 76.2
60.28 34.21 28.06 28.52 30.57 28.95 30.13 27.23 25.77 25.59 23.90 24.68 26.09 23.29 22.92 23.37 23.40 24.10 Revenues per sh 26.00
d.09 2.39 2.87 3.43 3.22 3.08 3.88 3.47 3.70 3.65 3.82 4.06 4.22 4.59 4.88 5.29 5.65 5.95 ‘‘Cash Flow’’ per sh 7.00
d2.99 d.29 .74 1.10 .64 .64 1.23 .93 1.33 1.45 1.53 1.66 1.74 1.89 1.98 2.17 2.35 2.50 Earnings per sh A 3.00
1.09 -- -- -- -- .20 .36 .50 .66 .84 .96 1.02 1.08 1.16 1.24 1.33 1.43 1.53 Div’d Decl’d per sh B ■ 1.85
-- -- 12.4 12.6 22.2 26.8 10.9 13.6 12.5 13.6 15.1 16.3 17.3 18.3 20.9 21.3 Bold figures are Avg Ann’l P/E Ratio 14.5
-- -- .66 .67 1.20 1.42 .66 .91 .80 .85 .96 .92 .91 .92 1.10 1.06 Value Line Relative P/E Ratio .80
estimates
7.5% -- -- -- -- 1.2% 2.7% 4.0% 4.0% 4.3% 4.2% 3.8% 3.6% 3.4% 3.0% 2.9% Avg Ann’l Div’d Yield 4.2%
Incl. $91 mill. capitalized leases.
(LT interest earned: 3.2x) 1.3% 13.0% 2.2% 2.6% 2.9% 2.0% 2.3% 2.7% 3.1% 1.1% 2.0% 2.0% AFUDC % to Net Profit 1.0%
Leases, Uncapitalized Annual rentals $15 mill. 69.4% 67.9% 70.1% 66.9% 67.9% 67.5% 68.7% 68.3% 67.1% 67.3% 64.5% 63.5% Long-Term Debt Ratio 62.0%
Pension Assets-12/17 $2305 mill. 27.4% 29.0% 29.5% 32.6% 31.6% 32.2% 31.0% 31.4% 32.6% 32.4% 35.5% 36.0% Common Equity Ratio 37.5%
Oblig $2780 mill. 8993.0 8977.0 9473.0 9279.0 10101 10730 11846 12534 13040 13692 13625 14475 Total Capital ($mill) 17500
Pfd Stock $37 mill. Pfd Div’d $2 mill. 9190.0 9682.0 10069 10633 11551 12246 13412 14705 15715 16761 17925 19350 Net Plant ($mill) 22100
Incl. 373,148 shs. $4.50 $100 par, cum., callable at
$110.00. 5.4% 4.7% 5.8% 6.3% 5.9% 6.0% 5.7% 5.7% 5.8% 5.9% 6.5% 6.5% Return on Total Cap’l 6.5%
2015 2016 2017 BUSINESS: CMS Energy Corporation is a holding company for
% Change Retail Sales (KWH) -.8 +1.7 -1.4 6%. Generating sources: coal, 28%; gas, 15%; other, 2%; pur-
Avg. Indust. Use (MWH) 5922 6031 NA Consumers Energy, which supplies electricity and gas to lower chased, 55%. Fuel costs: 43% of revenues. ’17 reported deprec.
Avg. Indust. Revs. per KWH (¢) 8.07 7.76 NA Michigan (excluding Detroit). Has 1.8 million electric, 1.8 million gas rates: 3.9% electric, 2.9% gas, 10.0% other. Has 7,900 employees.
Capacity at Peak (Mw) 8762 8331 NA customers. Has 1,034 megawatts of nonregulated generating capa- Chairman: John G. Russell. President & CEO: Patricia K. Poppe.
Annual Load Factor (%) 55.5 54.6 NA city. Sold Palisades nuclear plant in ’07. Electric revenue break- Incorporated: Michigan. Address: One Energy Plaza, Jackson, MI
% Change Customers (yr-end) +.6 +.5 +1.2 down: residential, 43%; commercial, 34%; industrial, 17%; other, 49201. Tel.: 517-788-0550. Internet: www.cmsenergy.com.
Fixed Charge Cov. (%) 288 CMS

292 Energy’s
301 utility subsidiary of $2.35 a share is slightly above the com-
ANNUAL RATES Past
should soon get an order in its elec-
pany’s typically narrow guidance of $2.30-
of change (per sh) 10 Yrs. 5 Yrs. tric rate case. Consumers Energy is
to ’21-’23 $2.34.
Revenues -2.5% -1.5% seeking an increase of $173 million, based
2.0% We forecast profit growth next year in
‘‘Cash Flow’’ 4.0% 5.5% 6.5%
on a 10.5% return on equity. The utility line with CMS’ annual target of 6%-
Earnings 10.0% 7.0% 8.5%
Dividends -- 8.5% self-implemented an increase of $130 mil-
7.0% 8%. Again, rate relief and effective cost
Book Value 4.0% 5.0% lion on October 1st. The staff of the Michi-
6.5% control ought to be key factors. A bit of
QUARTERLY REVENUES ($ mill.) gan Public Service Commission (MPSC) kilowatt-hour sales growth should help,
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year recommended an increase of $65 million, too.
based on a 9.8% ROE, and an administra- The board of directors raised the divi-
2015 2111 1350 1486 1509 6456.0
2016 1801 1371 1587 1640 6399.0 tive law judge proposed a hike of $30 mil- dend in the current quarter. The in-
2017 1829 1449 1527 1778 6583.0 lion, based on a 9.8% ROE. A decision crease was $0.10 a share (7.5%) annually.
2018 1850 1450 1550 1800 6650 from the MPSC is due by the end of the We project dividend growth in a range of
2019 1900 1550 1600 1850 6900 month. 6%-8% a year over the 3- to 5-year period.
EARNINGS PER SHARE A Consumers Energy also has a gas rate This is the same as CMS’ target for profit
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year pending. The utility filed for a hike of growth.
2015 .73 .25 .53 .38 1.89 $178 million, based on a 10.5% ROE. Con- Tax reform caused a nonrecurring
2016 .59 .45 .67 .28 1.98 sumers also requested a regulatory me- charge of $0.53 a share in the fourth
2017 .71 .33 .61 .52 2.17 chanism that would allow concurrent re- quarter of 2017. The new tax law will
2018 .80 .40 .65 .50 2.35 covery of certain capital expenditures, also make cash flow lower than it other-
2019 .85 .45 .70 .50 2.50 along with the decoupling of gas volume wise would have been in the near term.
and revenues. A decision is due by the end This timely equity’s dividend yield is
endar Mar.31 Jun.30 Sep.30 Dec. 31 Year of August. only about average for a utility. Like
We expect a solid bottom-line showing many utility issues, the recent price is well
2014 .27 .27 .27 .27 1.08
2015 .29 .29 .29 .29 1.16 in 2018. Rate relief should help. A return within our 2021-2023 Target Price Range.
2016 .31 .31 .31 .31 1.24 to normal weather patterns would be posi- Thus, total return potential over that time
2017 .3325 .3325 .3325 .3325 1.33 tive for the utility. Management is control- frame is unimpressive.
2018 .3575 ling expenses effectively, too. Our estimate Paul E. Debbas, CFA March 16, 2018
(A) Diluted EPS. Excl. nonrec. gains (losses): (40¢); ’09, 8¢; ’10, (8¢); ’11, 1¢; ’12, 3¢. ’16 plan avail. (C) Incl. intang. In ’17: $6.26/sh. Company’s Financial Strength B++
’05, ($1.61); ’06, ($1.08); ’07, ($1.26); ’09, (7¢); EPS don’t sum due to rounding. Next earnings (D) In mill. (E) Rate base: Net orig. cost. Rate Stock’s Price Stability 100
’10, 3¢; ’11, 12¢; ’12, (14¢); ’17, (53¢); gains report due late Apr. (B) Div’ds historically paid allowed on com. eq. in ’17: 10.1%; earned on Price Growth Persistence 85
(losses) on disc. ops.: ’05, 7¢; ’06, 3¢; ’07, late Feb., May, Aug., & Nov. ■ Div’d reinvest. avg. com. eq., ’17: 10.6%. Regul. Climate: Avg. Earnings Predictability 90
Exhibit No. JC-3
Page 35 of 141
DTE ENERGY CO. NYSE-DTE RECENT

LINE
Low:
54.7
44.0
45.3
27.8
45.0
23.3
49.1
41.3
55.3
43.2
62.6
52.5
73.3
60.3
90.8
64.8
92.3
73.2
100.4
78.0
116.7
96.6
110.5
97.7
Target Price Range
2021 2022 2023
160
Ann’l Total
High 125 (+25%) 9% 50
Low 90 (-10%) 2% 40
M J J A S O N D J
to Buy 0 0 0 0 0 0 0 0 0 20
Options 1 0 2 0 0 0 1 0 7
to Sell 2 2 1 2 0 0 1 0 0 15
% TOT. RETURN 2/18
Percent 21 1 yr. 2.5 10.1
to Buy 257 252 223 shares 14
to Sell 242 249 225 3 yr. 35.7 24.2
traded 7
Hld’s(000) 139403 138883 123868 5 yr. 79.5 76.2
40.30 41.76 40.84 50.74 50.93 54.28 57.23 48.45 50.51 52.57 51.01 54.56 69.50 57.60 59.24 70.28 71.25 71.35 Revenues per sh 81.00
8.31 6.95 6.81 8.14 8.19 8.48 8.26 9.38 9.78 9.57 9.77 10.13 11.85 9.44 10.60 11.77 12.20 12.65 ‘‘Cash Flow’’ per sh 15.50
3.83 2.85 2.55 3.27 2.45 2.66 2.73 3.24 3.74 3.67 3.88 3.76 5.10 4.44 4.83 5.73 5.80 6.20 Earnings per sh A 7.50
.62 .78 .85 .73 .94 .97 .89 .69 .78 .85 .95 1.01 .78 .91 1.00 .92 Value Line Relative P/E Ratio .80
estimates
CAPITAL STRUCTURE as of 12/31/17 9329.0 8014.0 8557.0 8897.0 8791.0 9661.0 12301 10337 10630 12607 13000 13700 Revenues ($mill) 15800
Incl. $1 mill. capitalized leases and $756 mill. Trust
Preferred Securities. 11.2% 2.6% 1.6% 1.6% 3.0% 3.5% 4.1% 4.3% 3.6% 3.5% 3.0% 3.0% AFUDC % to Net Profit 2.0%
43.6% 46.0% 48.7% 49.4% 51.2% 52.3% 50.0% 49.8% 44.4% 43.8% 45.0% 46.0% Common Equity Ratio 45.0%
Leases, Uncapitalized Annual rentals $40 mill. 13736 13648 13811 14196 14387 15135 16670 17607 20280 21697 22800 24975 Total Capital ($mill) 29600
Pension Assets-12/17 $4636 mill. 12231 12431 12992 13746 14684 15800 16820 18034 19730 20721 23100 24375 Net Plant ($mill) 27700
Oblig $5576 mill.
2015 2016 2017 BUSINESS: DTE Energy Company is a holding company for DTE
% Change Retail Sales (KWH) -.6 +3.5 -3.1 13%; other, 6%. Generating sources: coal, 67%; nuclear, 17%; gas,
Avg. Indust. Use (MWH) NA NA NA Electric (formerly Detroit Edison), which supplies electricity in De- 1%; purchased, 15%. Fuel costs: 57% of revenues. ’17 reported
Avg. Indust. Revs. per KWH (¢) NMF NMF NMF troit and a 7,600-square-mile area in southeastern Michigan, and deprec. rates: 3.6% electric, 2.7% gas. Has 10,200 employees.
Capacity at Peak (Mw) NA NA NA DTE Gas (formerly Michigan Consolidated Gas). Customers: 2.1 Chairman & CEO: Gerard M. Anderson. President & COO: Jerry
Annual Load Factor (%) NA NA NA mill. electric, 1.3 mill. gas. Has various nonutility operations. Electric Norcia. Inc.: MI. Address: One Energy Plaza, Detroit, MI 48226-
% Change Customers (yr-end) NA NA NA revenue breakdown: residential, 46%; commercial, 35%; industrial, 1279. Tel.: 313-235-4000. Internet: www.dteenergy.com.
Fixed Charge Cov. (%) 279 300 300 DTE Energy’s electric utility subsidi- fourth quarter of 2017, which is excluded
ary should get a rate order by the end from our presentation. This year, the
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 of April. DTE Electric is seeking a tariff lower tax rate will augment the income of
Revenues 2.0% 4.0% 4.5% hike of $231 million, based on a 10.5% re- DTE’s nonutility operations, thereby lift-
‘‘Cash Flow’’ 2.5% 2.0% 6.0% turn on equity. The company self- ing earnings by an estimated $0.10 a
Earnings 6.0% 6.0% 6.5%
Dividends 4.0% 6.0% 6.5% implemented a $125 million increase at share. (This is why management raised its
Book Value 4.0% 4.0% 5.0% the start of November. The staff of the guidance from $5.48-$5.88 to $5.57-$5.99.)
QUARTERLY REVENUES ($ mill.) Michigan Public Service Commission However, because the electric and gas util-
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year (MPSC) recommended a $71 million, based ities will pass their tax reductions through
on a 9.8% ROE. An administrative law to customers, this will hurt cash flow. Ac-
2015 2984 2268 2598 2487 10337
2016 2566 2262 2928 2874 10630 judge proposed an increase of $12 million cordingly, DTE Energy will issue an addi-
2017 3236 2855 3245 3271 12607 that is based on a 9.6% ROE. tional $300 million of common equity over
2018 3350 2950 3400 3300 13000 Another regulatory ruling is expected the next three years.
2019 3550 3050 3600 3500 13700 next month. DTE Electric asked the We forecast solid earnings growth in
EARNINGS PER SHARE A MPSC for a certificate of need to build a 2019. The utilities will benefit from a full
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year 1,100-megawatt gas-fired plant at a cost of year’s effect of the rate hikes obtained in
2015 1.53 .61 1.47 .83 4.44 $989 million. This would replace the coal- 2018. The nonutility subsidiaries are ex-
2016 1.37 .84 1.88 .73 4.83 fired capacity that DTE Electric plans to panding their pipeline capacity and adding
2017 2.23 .99 1.51 1.01 5.73 retire by 2022. projects (such as cogeneration facilities)
2018 1.90 1.00 1.65 1.25 5.80 DTE Gas has a rate case pending. The with industrial customers. Our estimate of
2019 2.00 1.10 1.75 1.35 6.20 utility filed for an increase of $85 million, $6.20 a share would produce growth with-
based on a 10.5% ROE. It also wants to ac- in the company’s target of 5%-7%.
endar Mar.31 Jun.30 Sep.30 Dec.31 Year celerate its gas main-replacement program This timely stock has a dividend yield
from 25 years to 15 years. The MPSC’s or- equal to the utility average. Like most
2014 .655 .655 .655 .69 2.66
2015 .69 .69 .69 .73 2.80 der is due by late September. utility stocks, the recent price is within
2016 .73 .73 .73 .77 2.96 The new federal tax law is benefiting our 2021-2023 Target Price Range. Thus,
2017 .825 .825 .825 .825 3.30 earnings. The revaluation of deferred total return potential is unspectacular.
2018 .8825 taxes boosted share net by $0.59 in the Paul E. Debbas, CFA March 16, 2018
(A) Diluted EPS. Excl. nonrec. gains (losses): (20¢); ’06, (2¢); ’07, $1.20; ’08, 13¢; ’12, (33¢). intang. In ’17: $38.37/sh. (D) In mill. (E) Rate Company’s Financial Strength B++
’03, (16¢); ’05, (2¢); ’06, 1¢; ’07, $1.96; ’08, ’16-’17 EPS don’t sum due to rounding. Next base: Net orig. cost. Rate all’d on com. eq. in Stock’s Price Stability 100
50¢; ’11, 51¢; ’15, (39¢); ’17, 59¢; gains egs. due late Apr. (B) Div’ds pd. mid-Jan., Apr., ’17: 10.1% elec.; in ’16: 10.1% gas; earned on Price Growth Persistence 85
(losses) on disc. ops.: ’03, 40¢; ’04, (6¢); ’05, July & Oct. ■ Div’d reinvest. plan avail. (C) Incl. avg. com. eq., ’17: 12.2%. Regul. Climate: Avg. Earnings Predictability 80
Exhibit No. JC-3
Page 36 of 141
DUKE ENERGY NYSE-DUK RECENT

LINE
Low:
63.9
50.7
61.8
40.5
53.8
35.2
55.8
46.4
66.4
50.6
71.1
59.6
75.5
64.2
87.3
67.1
90.0
65.5
87.8
70.2
91.8
76.1
84.4
72.9
Target Price Range
2021 2022 2023
SAFETY 2 New 6/1/07 LEGENDS
1-for-3
TECHNICAL 1 Raised 12/22/17 divided by Interest Rate
. . . . Relative Price Strength Reverse
160
BETA .60 (1.00 = Market) 1-for-3 Rev split 7/12 120
Options: Yes 100
Ann’l Total
High 110 (+50%) 14% 50
Low 85 (+15%) 8% 40
A M J J A S O N D
to Buy 0 2 0 0 0 0 0 0 0 20
Options 0 6 0 0 0 0 0 0 0
to Sell 0 2 0 0 1 0 0 1 0 15
% TOT. RETURN 1/18
Percent 15 1 yr. 4.2 17.3
to Buy 552 528 531 shares 10
to Sell 500 509 494 3 yr. 2.4 38.0
traded 5
Hld’s(000) 437355 435858 442941 5 yr. 41.5 85.6
-- -- -- -- -- - - 31.15 29.18 32.22 32.63 27.88 34.84 33.84 34.10 32.49 33.50 33.85 34.80 Revenues per sh 37.75
-- -- -- -- -- -- 7.34 7.58 8.49 8.68 6.80 8.56 9.11 9.40 9.20 10.15 10.95 11.40 ‘‘Cash Flow’’ per sh 13.00
-- -- -- -- -- -- 3.03 3.39 4.02 4.14 3.71 3.98 4.13 4.10 3.71 4.30 4.80 5.00 Earnings per sh A 5.50
-- -- -- -- -- -- 2.70 2.82 2.91 2.97 3.03 3.09 3.15 3.24 3.36 3.49 3.64 3.80 Div’d Decl’d per sh B ■ 4.40
-- -- -- -- -- - - 10.35 9.85 10.84 9.80 7.81 7.83 7.62 9.83 11.29 13.45 15.35 15.25 Cap’l Spending per sh 12.75
-- -- -- -- -- - - 49.51 49.85 50.84 51.14 58.04 58.54 57.81 57.74 58.62 59.35 60.45 61.60 Book Value per sh C 65.00
-- -- -- -- -- - - 423.96 436.29 442.96 445.29 704.00 706.00 707.00 688.00 700.00 701.00 702.00 703.00 Common Shs Outst’g D 706.00
-- -- -- -- -- -- 17.3 13.3 12.7 13.8 17.5 17.4 17.9 18.2 21.3 19.6 Bold figures are Avg Ann’l P/E Ratio 18.0
-- -- -- -- -- -- 1.04 .89 .81 .87 1.11 .98 .94 .92 1.12 .95 Value Line Relative P/E Ratio 1.00
estimates
-- -- -- -- -- -- 5.2% 6.2% 5.7% 5.2% 4.7% 4.4% 4.3% 4.3% 4.3% 4.2% Avg Ann’l Div’d Yield 4.5%
Total Debt $53313 mill. Due in 5 Yrs $18876 mill. 1279.0 1461.0 1765.0 1839.0 2136.0 2813.0 2934.0 2854.0 2560.0 3005 3385 3515 Net Profit ($mill) 3970
38.7% 42.6% 44.3% 45.1% 47.0% 48.0% 47.7% 48.6% 52.6% 54.0% 54.5% 55.5% Long-Term Debt Ratio 57.0%
Oblig $8006 mill. 34036 37950 40344 42661 68558 69490 70046 75709 82520 87850 94325 100525 Net Plant ($mill) 112900
Pfd Stock None
MARKET CAP: $52 billion (Large Cap) .6% 1.1% 2.1% 2.2% .9% 1.5% 1.7% 1.5% .6% 1.5% 2.0% 2.0% Retained to Com Eq 2.0%
2014 2015 2016 BUSINESS: Duke Energy Corporation is a holding company for util-
% Change Retail Sales (KWH) +2.2 +.6 -.3 residential, 43%; commercial, 29%; industrial, 14%; other, 14%.
Avg. Indust. Use (MWH) 2876 2883 3486 ities with 7.4 mill. elec. customers in NC, FL, IN, SC, Oh, & KY, and Generating sources: coal, 27%; nuclear, 27%; gas, 23%; other, 1%;
Avg. Indust. Revs. per KWH (¢) 6.15 NA NA 1.5 mill. gas customers in OH, KY, NC, SC, and TN. Owns inde- purchased, 22%. Fuel costs: 30% of revs. ’16 reported deprec. rate:
Capacity at Peak (Mw) NA NA NA pendent power plants & has 25% stake in National Methanol in 2.8%. Has 28,800 employees. Chairman, President & CEO: Lynn J.
Annual Load Factor (%) NA NA NA Saudi Arabia. Acq’d Progress Energy 7/12; Piedmont Natural Gas Good. Inc.: DE. Address: 550 South Tryon St., Charlotte, NC
% Change Customers (avg.) +1.0 +1.2 +1.4 10/16; discontinued most int’l ops. in ’16. Elec. rev. breakdown: 28202-1803. Tel.: 704-382-3853. Internet: www.duke-energy.com.
Fixed Charge Cov. (%) 315 317 264 One of Duke Energy’s utilities has third-period tally was weakened by unfa-
reached a partial settlement of its vorable weather conditions, an $0.08-a-
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 rate case. Duke Energy Progress filed for share write-off of a nonregulated wind-
Revenues 3.0% 1.5% 1.5% an increase of $477 million (14.9%), based farm, and a $0.12-a-share charge for the
‘‘Cash Flow’’ 1.5% 2.5% 5.0% on a 10.75% return on a 53% common- cancelation of a nuclear project that was
Earnings 3.5% .5% 4.5%
Dividends -- 2.5% 4.5% equity ratio. The settlement with the staff under consideration in Florida. Rate relief
Book Value -.5% 3.0% 1.5% of the North Carolina Utilities Commis- should be a positive factor for the bottom
QUARTERLY REVENUES ($ mill.) sion (NCUC) would provide for a hike (be- line each year. All told, we estimate share
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year fore the pass-through of reduced federal earnings of $4.80 this year and $5.00 in
income taxes) of $127 million (4.0%), based 2019.
2015 6065 5589 6483 5322 23459
2016 5377 5213 6576 5577 22743 on a return of 9.9% on a common-equity Some significant capital projects are
2017 5729 5555 6482 5734 23500 ratio of 52%. The treatment of deferred under way. Duke is building gas-fired
2018 5750 5600 6600 5800 23750 costs associated with storms and coal ash plants in South Carolina and Florida and
2019 5900 5700 6950 5900 24450 basin remediation has not been resolved, modernizing the electric system in Indiana
EARNINGS PER SHARE A so far. and the western Carolinas. This will ex-
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year Other rate cases are pending. Duke pand the company’s rate base, and thus,
2015 1.09 .87 1.44 .70 4.10 Energy Carolinas asked the NCUC for an its earning power. Duke also intends to ex-
2016 .83 .90 1.44 .53 3.71 increase of $647 million (13.6%), based on pand its gas pipeline infrastructure. The
2017 1.02 .98 1.36 .94 4.30 a 10.75% return on a 53% common-equity company’s goal for average annual profit
2018 1.05 1.05 1.65 1.05 4.80 ratio. New tariffs should take effect in the growth is 4%-6%.
2019 1.10 1.10 1.70 1.10 5.00 second quarter. Duke asked the Kentucky This stock is ranked unfavorably for
commission for a boost of $48.6 million Timeliness, but offers a dividend yield
endar Mar.31 Jun.30 Sep.30 Dec.31 Year (15%), based on a 10.3% return on a 49% that is well above the utility average.
common-equity ratio. New rates are likely The yield is about a percentage point
2014 .78 .78 .795 .795 3.15
2015 .795 .795 .825 .825 3.24 to take effect in April. above the norm for this industry. Total re-
2016 .825 .825 .855 .855 3.36 We estimate a sharp earnings in- turn potential over the 3- to 5-year period
2017 .855 .855 .89 .89 3.49 crease in 2018, followed by a more is attractive.
2018 moderate rise in 2019. Last year, the Paul E. Debbas, CFA February 16, 2018
(A) Dil. EPS. Excl. nonrec. losses: ’12, 70¢; report due early May. (B) Div’ds paid mid-Mar., Rates all’d on com. eq. in ’13 in NC: 10.2%; in Company’s Financial Strength A
’13, 24¢; ’14, 67¢; gains (losses) on disc. ops.: June, Sept., & Dec. ■ Div’d reinv. plan avail. ’17 in SC: 10.1%; in ’09 in OH: 10.63%; in ’04 Stock’s Price Stability 100
’12, 6¢; ’13, 2¢; ’14, (80¢); ’15, 5¢; ’16, (60¢). (C) Incl. intang. In ’16: $46.17/sh. (D) In mill., in IN: 10.3%; earn. on avg. com. eq., ’16: 6.3%. Price Growth Persistence 40
’16 EPS don’t sum due to rounding. Next egs. adj. for rev. split. (E) Rate base: Net orig. cost. Reg. Clim.: NC Avg.; SC, OH, IN Above Avg. Earnings Predictability 85
Exhibit No. JC-3
Page 37 of 141
ENTERGY CORP. NYSE-ETR RECENT

LINE
Low:
125.0
89.6
127.5
61.9
86.6
59.9
84.3
68.7
74.5
57.6
74.5
61.6
72.6
60.2
92.0
60.4
90.3
61.3
82.1
65.4
87.9
69.6
83.0
71.9
Target Price Range
2021 2022 2023
200
160
BETA .65 (1.00 = Market) Options: Yes
Ann’l Total 80
Price Gain Return
High 100 (+30%) 10% 60
Low 65 (-15%) 1% 50
M J J A S O N D J 30
to Buy 0 0 0 0 0 0 0 0 0
Options 0 10 0 0 8 6 4 8 15 20
to Sell 2 0 0 4 0 6 5 0 0
% TOT. RETURN 2/18
Percent 30 1 yr. 3.5 10.1
to Buy 235 241 227 shares 20
to Sell 264 245 225 3 yr. 9.6 24.2
traded 10
Hld’s(000) 167258 165036 154275 5 yr. 53.6 76.2
37.34 40.17 46.69 46.61 53.94 59.47 69.15 56.82 64.27 63.67 57.94 63.86 69.71 64.54 60.55 61.35 59.00 55.95 Revenues per sh 55.00
7.62 7.43 8.33 8.18 10.69 11.73 12.89 13.29 16.54 17.53 15.98 16.25 17.68 17.71 18.72 16.70 16.55 17.15 ‘‘Cash Flow’’ per sh 20.25
3.68 3.69 3.93 4.40 5.36 5.60 6.20 6.30 6.66 7.55 6.02 4.96 5.77 5.81 6.88 5.19 4.25 5.20 Earnings per sh A 6.75
1.34 1.60 1.89 2.16 2.16 2.58 3.00 3.00 3.24 3.32 3.32 3.32 3.32 3.34 3.42 3.50 3.58 3.66 Div’d Decl’d per sh B ■ † 3.90
.63 .79 .80 .87 .77 1.02 1.00 .80 .74 .57 .71 .74 .68 .63 .57 .75 Value Line Relative P/E Ratio .70
estimates
Total Debt $16677 mill. Due in 5 Yrs $6367.2 mill. 1240.5 1251.1 1270.3 1367.4 1091.9 904.5 1060.0 1061.2 1249.8 950.7 7915 995 Net Profit ($mill) 1320
LT Debt $14337 mill. LT Interest $659.5 mill. 32.7% 33.6% 32.7% 17.3% 13.0% 26.7% 37.8% 2.2% 11.3% 1.8% 25.5% 25.5% Income Tax Rate 25.5%
Incl. $551.5 mill. of securitization bonds.
Leases, Uncapitalized Annual rentals $80.4 mill. 58.2% 55.3% 56.3% 52.2% 55.8% 55.1% 54.9% 57.8% 63.6% 63.6% 63.0% 61.0% Long-Term Debt Ratio 59.0%
Pension Assets-12/17 $6071.3 mill. 40.2% 43.1% 42.1% 46.4% 42.9% 43.6% 43.8% 40.8% 35.5% 35.5% 36.0% 38.5% Common Equity Ratio 40.5%
Oblig $7987.1 mill. 19795 19985 20166 19324 21432 22109 22842 22714 22777 22528 23200 24500 Total Capital ($mill) 27000
Pfd Stock $197.8 mill. Pfd Div’d $13.6 mill. 22429 23389 23848 25609 27299 27882 28723 27824 27921 29664 31400 32750 Net Plant ($mill) 35500
642,307 sh. 4.32%-7.5%, $100 par; 250,000 sh.
8.75%, all without sinking fund. 7.5% 7.6% 7.7% 8.5% 6.4% 5.4% 6.0% 6.0% 6.9% 5.7% 5.0% 5.5% Return on Total Cap’l 6.5%
2015 2016 2017 BUSINESS: Entergy Corporation supplies electricity to 2.9 million
% Change Retail Sales (KWH) +1.3 +.3 +.2 dustrial, 28%; other, 9%. Generating sources: gas, 35%; nuclear,
Avg. Indust. Use (MWH) 957 NA NA customers through subsidiaries in Arkansas, Louisiana, Mississippi, 31%; coal, 7%; purchased, 27%. Fuel costs: 31% of revenues. ’17
Avg. Indust. Revs. per KWH(¢) 5.55 5.09 NA Texas, and New Orleans (regulated separately from Louisiana). reported depreciation rate: 3.0%. Has 13,500 employees. Chairman
Capacity at Peak (Mw) 24504 NA NA Distributes gas to 199,000 customers in Louisiana. Has a nonutility & CEO: Leo P. Denault. Incorporated: Delaware. Address: 639 Loy-
Peak Load, Summer (Mw) 21730 21387 NA
Annual Load Factor (%) 61 NA NA subsidiary that owns six nuclear units (two no longer operating). ola Avenue, P.O. Box 61000, New Orleans, Louisiana 70161. Tele-
% Change Customers (yr-end) +1.0 +.8 +.6 Electric revenue breakdown: residential, 36%; commercial, 27%; in- phone: 504-576-4000. Internet: www.entergy.com.
Fixed Charge Cov. (%) 223 258 169 Entergy’s utilities have some sig- nuclear units by 2022. This business has
nificant capital projects in various become less profitable as wholesale electri-
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 stages of development. Entergy Louisi- city prices have declined. These plants
Revenues 1.5% -- -2.0% ana is building two gas-fired plants: a 980- have also experienced cost increases and
‘‘Cash Flow’’ 5.5% 1.0% 3.0% megawatt facility scheduled for completion operating problems. Even so, the company
Earnings 1.5% -2.5% 5.0%
Dividends 4.0% 1.0% 2.0% next year at a cost of $869 million and a expects this business’ cash flow to be
Book Value 2.0% -1.0% 3.0% 994-mw plant scheduled for completion in neutral to positive through 2022. Note
QUARTERLY REVENUES ($ mill.) 2020 at a cost of $872 million. Entergy that our earnings presentation includes all
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year Texas intends to construct a 993-mw plant costs associated with these facilities, even
scheduled for commercial operation in though management excludes these from
2015 2920 2713 3371 2509 11513
2016 2610 2463 3125 2648 10846 2021 at a cost of $937 million. Finally, its definition of operating earnings.
2017 2588 2619 3243 2624 11074 each of Entergy’s regulatory jurisdictions Income tax items can make earnings
2018 2550 2550 3150 2550 10800 has granted the utility permission to in- more volatile from year to year. In
2019 2550 2550 3150 2550 10800 stall an advanced metering system, which 2017, a tax benefit lifted June-quarter
EARNINGS PER SHARE A is expected to cost about $900 million. share net by $2.07. On the other hand, the
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year These projects illustrate the healthy revaluation of deferred taxes (due to the
2015 1.65 .83 1.90 1.43 5.81 demand for electricity in the compa- new federal tax law) caused a nonrecur-
2016 1.28 3.16 2.16 .28 6.88 ny’s service area. Unlike many utilities, ring charge of $2.91 a share in the fourth
2017 .46 2.27 2.21 .25 5.19 which are seeing little or no load growth, period. In 2018, Entergy expects to book a
2018 .80 1.30 1.35 .80 4.25 Entergy expects volume increases in a low tax benefit (now estimated at $100 mil-
2019 1.00 1.55 1.65 1.00 5.20 single-digit range. Other strong points are lion) related to its nonutility subsidiary.
Cal- QUARTERLY DIVIDENDS PAID B ■ † Full
the formula rate plans in a few states (En- This stock has one of the highest divi-
endar Mar.31 Jun.30 Sep.30 Dec.31 Year tergy Louisiana is trying to extend its dend yields of any electric utility. This
plan), which provide the utility with an- is about a percentage point above the in-
2014 .83 .83 .83 .83 3.32
2015 .83 .83 .83 .85 3.34 nual rate relief. dustry average. However, total return po-
2016 .85 .85 .85 .87 3.42 The company is exiting the nonregu- tential to 2021-2023 does not stand out
2017 .87 .87 .87 .89 3.50 lated power-generating business. En- among utilities.
2018 .89 tergy plans to close its four nonutility Paul E. Debbas, CFA March 16, 2018
(A) Diluted EPS. Excl. nonrec. gain (losses): early May. (B) Div’ds historically paid in early Rate base: Net original cost. Allowed ROE Company’s Financial Strength B++
’02, ($1.04); ’03, 33¢; ’05, (21¢); ’12, ($1.26); Mar., June, Sept., & Dec. ■ Div’d reinvest. plan (blended): 9.95%; earned on avg. com. eq., Stock’s Price Stability 95
’13, ($1.14); ’14, (56¢); ’15, ($6.99); ’16, avail. † Shareholder invest. plan avail. (C) Incl. ’17: 5.1%. Regulatory Climate: Average. Price Growth Persistence 10
($10.14); ’17, ($2.91). Next earnings report due def’d charges. In ’17: $30.76/sh. (D) In mill. (E) Earnings Predictability 60
Exhibit No. JC-3
Page 38 of 141
FORTIS INC. TSE-FTS.TO A

RECENT
LINE
Low:
29.8
24.5
29.9
20.7
29.2
21.5
34.5
21.6
35.4
28.2
40.7
30.5
35.1
29.6
40.5
29.8
42.1
34.5
45.1
36.0
48.7
40.6
45.9
39.4
Target Price Range
2021 2022 2023
100
80
BETA .70 (1.00 = Market) 4-for-1 split 10/05
Options: Yes 64
Ann’l Total
Price Gain Return
High 55 (+30%) 10% 32
Low 40 (-5%) 3% 24
M J J A S O N D J 16
to Buy 0 0 0 0 0 0 0 0 0 12
Options 0 0 0 0 0 0 0 0 0
to Sell 0 0 0 0 0 0 0 0 0
% TOT. RETURN 2/18 8
Percent 12 1 yr. 3.3 10.1
to Buy 108 114 103 shares 8
to Sell 98 90 83 3 yr. 18.6 24.2
traded 4
Hld’s(000) 219146 214658 223132 5 yr. 50.5 76.2
10.40 12.13 11.99 13.86 14.14 17.48 23.07 21.24 21.01 19.84 19.07 18.99 19.57 23.89 17.03 19.71 19.80 20.15 Revenues per sh 21.25
1.83 1.92 2.23 2.73 3.05 2.96 3.51 3.66 3.99 3.90 4.10 4.10 3.62 5.21 3.91 5.43 5.65 5.95 ‘‘Cash Flow’’ per sh 7.00
.96 1.03 1.01 1.19 1.36 1.29 1.52 1.51 1.62 1.74 1.65 1.63 1.38 2.11 1.89 2.66 2.70 2.85 Earnings per sh B 3.25
.50 .52 .54 .59 .67 .82 1.00 1.04 1.12 1.17 1.21 1.25 1.30 1.43 1.55 1.65 1.75 1.85 Div’d Decl’d per sh C ■ 2.20
8.50 8.84 10.47 11.76 12.26 16.72 18.00 18.57 18.95 20.53 20.84 22.39 24.90 28.63 32.32 31.77 33.60 35.45 Book Value per sh D 41.50
68.77 69.52 95.53 103.20 104.09 155.52 169.19 171.26 174.39 188.83 191.57 213.17 276.00 281.56 401.49 421.10 429.00 437.00 Common Shs Outst’g E 450.00
.69 .78 .81 .92 .96 1.12 1.05 1.09 1.16 1.18 1.28 1.12 1.28 .91 1.13 .84 Value Line Relative P/E Ratio .85
estimates
(LT interest earned: 2.8x) 5.0% -- 4.2% 5.5% 5.0% 5.9% 7.2% 7.4% 10.0% 9.5% 9.0% 9.0% AFUDC % to Net Profit 8.0%
8597.0 9136.0 9868.0 10513 11358 12892 19235 21151 35874 36108 37500 38500 Total Capital ($mill) 42800
Pension Assets-12/17 $2841 mill. 7969.0 8246.0 8762.0 9281.0 10249 12267 17816 19595 29337 29668 31600 33050 Net Plant ($mill) 36800
Oblig $3215 mill.
Pfd Stock $1623 mill. Pfd Div’d $67 mill. 4.9% 5.0% 5.0% 5.0% 4.8% 4.6% 3.4% 4.5% 2.8% 4.5% 5.0% 5.0% Return on Total Cap’l 5.0%
7.0% 7.9% 8.0% 7.8% 7.1% 6.5% 4.3% 6.8% 4.5% 7.8% 8.0% 8.0% Return on Shr. Equity 8.0%
Common Stock 419,449,000 shs. 8.0% 8.2% 8.6% 8.2% 7.9% 7.0% 4.5% 7.4% 4.5% 8.3% 8.0% 8.0% Return on Com Equity F 8.0%
2015 2016 2017 BUSINESS: Fortis Inc.’s main focus is electricity, hydroelectric, and
% Change Retail Sales (KWH) NA NA NA mercial real estate and hotel property assets in 2015. Acquired ITC
Avg. Indust. Use (MWH) NA NA NA gas utility operations (both regulated and nonregulated) in the Holdings 10/16. Fuel costs: 28% of revenues. ’17 reported deprec.
Avg. Indust. Revs. per KWH (¢) NA NA NA United States, Canada, and the Caribbean. Has 2 mill. electric, 1.2 rate: 2.6%. Has 8,500 employees. Chairman: Douglas J. Haughey.
Capacity at Peak (Mw) NA NA NA mill. gas customers. Owns UNS Energy (Arizona), Central Hudson President & CEO: Barry V. Perry. Inc.: Canada. Address: Fortis
Peak Load, Summer (Mw) 9705 NA NA
Annual Load Factor (%) NA NA NA (New York), FortisBC Energy (British Columbia), FortisAlberta Place, Suite 1100, 5 Springdale St., PO Box 8837, St. John’s, NL,
% Change Customers (yr-end) +.9 NA NA (Central Alberta), and Eastern Canada (Newfoundland). Sold com- Canada, A1B 3T2. Tel.: 709-737-2800. Internet: www.fortisinc.com.
Fixed Charge Cov. (%) 195 173 We estimate that Fortis’ earnings will
231 in the rate from 35% to 21%. The new tax
ANNUAL RATES Past
advance modestly in 2018 and 2019.
law will reduce cash flow, as well. (If
of change (per sh) 10 Yrs. 5 Yrs. We believe the company will benefit from
to ’21-’23 needed, Fortis may use its $500 million at-
Revenues 3.0% -- rate relief and growth in the rate base of
1.0% the-market stock-issuance program.)
‘‘Cash Flow’’ 5.0% 4.0% 6.5%its utilities. In particular, its ITC Holdings Eventually, however, because deferred
Earnings 5.5% 6.0% 7.5%
Dividends 8.5% 6.0% subsidiary in the United States benefits
6.0% taxes (which are an offset to rate base) will
Book Value 8.5% 9.0% from a forward-looking regulatory me-
5.0% be lower, the company’s U.S. utilities will
QUARTERLY REVENUES ($ mill.) chanism that provides a return on its likely see a slight rise in annual rate-base
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year yearly capital spending and recovery of growth, from 4.5% to 5.0%.
most kinds of expenses. There is some up- Central Hudson Gas & Electric is
2015 1915 1538 1566 1708 6727.0
2016 1772 1485 1528 2053 6838.0 side potential to earnings if the refunds of awaiting an order on its general rate
2017 2274 2015 1901 2111 8301.0 previously collected revenues that ITC case. The utility is seeking electric and
2018 2300 2050 2000 2150 8500 winds up making are lower than the gas increases of US$43 million and US$18
2019 2400 2100 2050 2250 8800 amounts the utility reserved for, but this million, respectively. Central Hudson is
EARNINGS PER SHARE B is not reflected in our estimates. Note that also asking for raises in its allowed return
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year our earnings presentation excludes a on equity from 9.0% to 9.5% and in its
2015 .71 .43 .50 .48 2.11 charge of $0.35 a share for the revaluation common-equity ratio from 48% to 50%.
2016 .57 .38 .45 .49 1.89 of deferred taxes in the United States, New tariffs will be retroactive to mid-2018
2017 .72 .62 .66 .66 2.66 which was necessary due to the new feder- if the order comes after midyear.
2018 .75 .65 .65 .65 2.70 al tax law. Untimely Fortis stock has a dividend
2019 .80 .65 .70 .70 2.85 The new U.S. tax law is negative in yield that is above the utility mean.
Cal- QUARTERLY DIVIDENDS PAID C ■ Full
the short term but positive in the long The company has established a goal of 6%
endar Mar.31 Jun.30 Sep.30 Dec.31 Year term. Besides the aforementioned effect annual dividend growth through 2022. If
on fourth-quarter income, earnings in Fortis attains this target, this should pro-
2014 .32 .32 .32 .32 1.28
2015 .34 .34 .34 .375 1.40 2018 will be 3% lower than they otherwise duce total returns over that time frame
2016 .375 .375 .375 .40 1.53 would have been because ITC Holdings that are also superior to the industry aver-
2017 .40 .40 .40 .425 1.63 has a lot of parent-level debt that will age.
2018 .425 have a lower tax shield with the reduction Paul E. Debbas, CFA March 16, 2018
(A) Also trades on NYSE under the symbol rounding. Next earnings report due early May. (E) In mill., adj. for split. (F) Rate base: varies. Company’s Financial Strength B++
FTS. All data in Canadian dollars. (B) Dil. earn- (C) Div’ds historically paid in early Mar., June, Rates all’d on com. eq.: 8.3%-10.32%; earned Stock’s Price Stability 100
ings. Excl. nonrec. gains (loss): ’07, 3¢; ’14, 2¢; Sept., and Dec. ■ Div’d reinvest. plan avail. on avg. com. eq., ’16: 6.2%. Regulat. Climate: Price Growth Persistence 30
’15, 48¢; ’17, (35¢). ’15 EPS don’t sum due to (2% disc.). (D) Incl. intang. In ’17: $36.73/sh. FERC, Above Avg.; AZ, Avg.; NY, Below Avg. Earnings Predictability 70
Exhibit No. JC-3
Page 39 of 141
NEXTERA ENERGY NYSE-NEE RECENT

LINE
Low:
72.8
53.7
73.8
33.8
60.6
41.5
56.3
45.3
61.2
49.0
72.2
58.6
89.8
69.8
110.8
84.0
112.6
93.7
132.0
102.2
159.4
117.3
159.6
147.1
Target Price Range
2021 2022 2023
Options: Yes
Ann’l Total 120
High 175 (+15%) 7%
Low 145 (-5%) 3% 80
A M J J A S O N D
to Buy 0 0 0 0 0 0 0 0 0 40
Options 1 1 0 0 0 1 0 0 1
to Sell 1 3 0 0 1 2 1 1 1
% TOT. RETURN 1/18
1Q2017 2Q2017 3Q2017 STOCK INDEX 18
Percent 15 1 yr. 31.6 17.3
to Buy 506 520 489 shares 10
to Sell 539 507 534 3 yr. 58.2 38.0
traded 5
Hld’s(000) 403694 394716 390847 5 yr. 155.6 85.6
22.74 26.13 28.27 30.00 38.75 37.47 40.13 37.82 36.39 36.88 33.62 34.80 38.42 37.93 34.52 36.50 36.00 35.15 Revenues per sh 40.00
4.51 5.36 5.60 6.18 6.77 6.85 8.03 8.75 9.62 9.29 8.69 10.54 12.10 12.92 12.97 16.10 15.15 15.65 ‘‘Cash Flow’’ per sh 19.25
2.01 2.45 2.46 2.32 3.23 3.27 4.07 3.97 4.74 4.82 4.56 4.83 5.60 6.06 5.78 10.47 7.65 8.30 Earnings per sh A 10.25
1.16 1.20 1.30 1.42 1.50 1.64 1.78 1.89 2.00 2.20 2.40 2.64 2.90 3.08 3.48 3.93 4.48 4.82 Div’d Decl’d per sh B ■ † 5.90
.78 .72 .72 .95 .74 1.00 .87 .89 .69 .72 .92 .93 .91 .85 1.09 .66 Value Line Relative P/E Ratio .85
estimates
LT Debt $30345 mill. LT Interest $1274 mill. 21.5% 16.8% 21.4% 22.4% 26.6% 26.9% 32.3% 30.8% 29.3% NMF 16.0% 16.0% Income Tax Rate 16.0%
Pfd Stock None
2014 2015 2016 BUSINESS: NextEra Energy, Inc. (formerly FPL Group, Inc.) is a
% Change Retail Sales (KWH) +5.2 +5.6 -.8 residential, 55%; commercial, 36%; industrial & other, 9%. Generat-
Avg. Indust. Use (MWH) 294 277 255 holding company for Florida Power & Light Company (FPL), which ing sources: gas, 70%; nuclear, 23%; coal, 4%; purchased, 3%.
Avg. Indust. Revs. per KWH (¢) 6.95 6.69 6.11 provides electricity to 4.9 million customers in a 27,650-sq.-mi. area Fuel costs: 25% of revs. ’16 reported depr. rate (utility): 3.4%. Has
Capacity at Peak (Mw) 27055 26073 NA in eastern & southern Florida. NextEra Energy Resources is a non- 13,800 employees. Chairman, President and CEO: James L. Robo.
Annual Load Factor (%) NA NA NA regulated power generator with nuclear, gas, & wind ownership. Inc.: Florida. Address: 700 Universe Blvd., Juno Beach, FL 33408.
% Change Customers (yr-end) +1.4 +1.4 +1.3 Has a 79.9% stake in NextEra Energy Partners. Rev. breakdown: Tel.: 561-694-4000. Internet: www.nexteraenergy.com.
Fixed Charge Cov. (%) 316 348 339 The new federal tax law is a boon for share. (Note: NextEra’s ‘‘adjusted’’ earn-
NextEra Energy. The revaluation of de- ings, which exclude some items we in-
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 ferred taxes boosted share earnings by al- clude, was $6.70 a share in 2017.) We have
Revenues 1.5% -- 1.0% most $4.00 in the fourth quarter of 2017. raised the company’s Financial Strength
‘‘Cash Flow’’ 7.5% 6.5% 6.0% In addition, the lower tax rate will add rating from A to A+ and the stock’s Safety
Earnings 8.0% 5.0% 8.5%
Dividends 8.5% 9.0% 9.5% $0.45 a share to earnings in 2018. On the rank from 2 to 1 (Highest).
Book Value 8.0% 7.5% 6.5% utility side, Florida Power & Light will use We forecast strong profit growth in
QUARTERLY REVENUES ($ mill.) its tax reduction to compensate for the 2019. FPL is building a 1,750-megawatt
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endar Mar.31 Jun.30 Sep.30 Dec.31 Year $1.3 billion it spent for service restoration gas-fired plant that is scheduled for com-
after extensive hurricane damage last pletion in mid-2019 at a cost of $1.2 bil-
2015 4104 4358 4954 4070 17486
2016 3835 3817 4805 3698 16155 year. FPL might also forgo rate relief it lion. When the facility achieves commer-
2017 3972 4404 4808 4011 17195 would have sought for 2021 and 2022. cial operation, FPL will get another rate
2018 4200 4600 5000 4200 18000 We have raised our 2018 earnings esti- increase. Our 2019 share-net estimate is
2019 4400 4800 5200 4400 18800 mate by $0.60 a share. This is due main- within NextEra’s guidance of $8.00-$8.50.
EARNINGS PER SHARE A ly to the aforementioned tax benefit, but We expect a sizable dividend increase
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endar Mar.31 Jun.30 Sep.30 Dec.31 Year also to the company’s strong performance. at the upcoming board meeting. We es-
2015 1.45 1.59 1.93 1.10 6.06 FPL received a $211 million rate hike at timate a raise of $0.55 a share (14%) in
2016 1.41 .93 1.62 1.82 5.78 the start of the year. The utility’s custom- the annual payout, which is at the top end
2017 1.91 1.68 1.79 5.09 10.47 er growth is above average, at more than of NextEra’s target of 12%-14% growth
2018 1.80 1.85 2.25 1.75 7.65 1% annually. NextEra Energy Resources is through 2018. With this declaration, Next-
2019 2.15 2.20 2.25 1.70 8.30 growing through the acquisition of wind Era will state its goal for beyond 2018.
and solar projects, but this subsidiary is This timely stock was one of the top
endar Mar.31 Jun.30 Sep.30 Dec.31 Year more than just a renewable-energy unit. performers among utility issues in
Two natural gas pipelines began commer- 2017. The share price soared 31% last
2014 .725 .725 .725 .725 2.90
2015 .77 .77 .77 .77 3.08 cial operation last year, and another is year. However, neither the yield nor the 3-
2016 .87 .87 .87 .87 3.48 scheduled for completion in 2018. Our to 5-year total return potential stands out
2017 .9825 .9825 .9825 .9825 3.93 2018 share-profit estimate is within the among utilities.
2018 company’s targeted range of $7.45-$7.95 a Paul E. Debbas, CFA February 16, 2018
(A) Diluted EPS. Excl. nonrecur. gains (losses): ings report due late Apr. (B) Div’ds historically charges. In ’16: $6.56/sh. (D) In mill., adj. for Company’s Financial Strength A+
’02, (60¢); ’03, 5¢; ’11, (24¢); ’13, (80¢); ’16, paid in mid-Mar., mid-June, mid-Sept., & mid- stock split. (E) Rate allowed on com. eq. in ’17: Stock’s Price Stability 100
47¢; ’17, 91¢; gain on discont. ops.: ’13, 44¢. Dec. ■ Div’d reinvestment plan avail. † Share- 9.6%-11.6%; earned on avg. com. eq., ’16: Price Growth Persistence 70
’15 EPS don’t sum due to rounding. Next earn- holder investment plan avail. (C) Incl. deferred 11.5%. Regulatory Climate: Average. Earnings Predictability 60
Exhibit No. JC-3
Page 40 of 141
PNM RESOURCES NYSE-PNM RECENT

LINE
Low:
32.1
22.5
34.3
21.0
21.7
7.6
13.1
5.9
14.0
10.8
19.2
12.8
22.5
17.3
24.5
20.1
31.6
23.5
31.2
24.4
36.2
29.2
46.0
33.3
Target Price Range
2020 2021 2022
TECHNICAL 1 Raised 1/5/18 divided by Interest Rate
80
Ann’l Total
High 40 (+15%) 6% 25
Low 30 (-15%) Nil 20
M A M J J A S O N
to Buy 0 0 0 1 0 0 0 0 0 10
Options 6 0 8 0 0 1 0 0 0
to Sell 2 0 0 0 0 2 0 0 0 7.5
% TOT. RETURN 12/17
Percent 24 1 yr. 20.9 15.8
to Buy 108 124 119 shares 16
to Sell 111 95 103 3 yr. 48.1 30.1
traded 8
Hld’s(000) 84373 83799 82421 5 yr. 126.2 92.5
40.09 19.92 24.11 26.54 30.19 32.25 24.92 22.65 19.01 19.31 21.35 16.85 17.42 18.03 18.07 17.11 18.50 19.15 Revenues per sh 21.00
4.31 2.83 3.05 3.14 3.56 3.57 2.54 1.76 2.32 2.67 3.18 3.39 3.52 4.09 4.28 4.51 5.30 5.40 ‘‘Cash Flow’’ per sh 6.75
2.61 1.07 1.15 1.43 1.56 1.72 .76 .11 .58 .87 1.08 1.31 1.41 1.45 1.48 1.46 1.90 1.70 Earnings per sh A 2.25
.53 .57 .61 .63 .79 .86 .91 .61 .50 .50 .50 .58 .68 .76 .82 .90 .99 1.09 Div’d Decl’d per sh B ■ † 1.40
7.3 15.1 14.7 15.0 17.4 15.6 35.6 NMF 18.1 14.0 14.5 15.0 16.1 18.7 18.7 22.4 20.6 Avg Ann’l P/E Ratio 15.5
.37 .82 .84 .79 .93 .84 1.89 NMF 1.21 .89 .91 .95 .90 .98 .94 1.18 1.00 Relative P/E Ratio .95
2.8% 3.5% 3.6% 2.9% 2.9% 3.2% 3.4% 4.9% 4.8% 4.1% 3.2% 3.0% 3.0% 2.8% 3.0% 2.8% 2.5% Avg Ann’l Div’d Yield 4.0%
Total Debt $2714.2 mill. Due in 5 Yrs $1495.0 mill. 59.9 8.1 54.0 80.5 97.1 106.1 114.0 116.8 118.8 117.4 165 150 Net Profit ($mill) 205
LT Debt $2282.4 mill. LT Interest $113.0 mill. 5.1% 40.4% 30.4% 32.6% 38.8% 31.4% 31.6% 34.8% 36.9% 32.4% 34.0% 20.0% Income Tax Rate 20.0%
Leases, Uncapitalized Annual rentals $27.9 mill. -- -- 6.3% 7.1% 8.7% 7.1% 1.3% 10.7% 17.0% 11.0% 8.0% 9.0% AFUDC % to Net Profit 6.0%
Pension Assets-12/16 $604.2 mill. 42.0% 45.6% 48.7% 50.4% 51.5% 50.9% 50.0% 47.8% 54.1% 55.7% 56.0% 59.0% Long-Term Debt Ratio 58.0%
Oblig $688.8 mill. 57.6% 54.0% 51.0% 49.2% 48.1% 48.7% 49.7% 51.9% 45.5% 44.0% 44.0% 41.0% Common Equity Ratio 40.0%
Pfd Stock $11.5 mill. Pfd Div’d $.5 mill. 2935.8 3025.4 3214.9 3100.3 3245.6 3277.9 3344.0 3437.1 3633.3 3806.8 3970 4360 Total Capital ($mill) 4950
115,293 shs. 4.58%, $100 par without mandatory 2935.4 3192.0 3332.4 3444.4 3627.1 3746.5 3933.9 4270.0 4535.4 4904.7 5160 5380 Net Plant ($mill) 5875
redemption. Sinking fund began 2/1/84.
Common Stock 79,653,624 shs. 3.5% .5% 3.3% 5.2% 6.2% 6.6% 6.8% 6.5% 7.1% 7.0% 8.5% 7.5% Return on Shr. Equity 9.0%
as of 10/20/17 3.5% .5% 3.3% 5.2% 6.2% 6.6% 6.8% 6.5% 7.1% 7.0% 8.5% 7.5% Return on Com Equity E 9.0%
MARKET CAP: $2.8 billion (Mid Cap) NMF NMF .5% 2.2% 3.3% 3.8% 3.8% 3.2% 3.3% 2.8% 4.0% 3.0% Retained to Com Eq 4.0%
ELECTRIC OPERATING STATISTICS 117% NMF 86% 57% 47% 43% 45% 51% 54% 61% 48% 57% All Div’ds to Net Prof 56%
2014 2015 2016 BUSINESS: PNM Resources, Inc. is a holding company with two
% Change Retail Sales (KWH) -2.9 -1.4 -.5 industrial, 18%; other, 22%. Generating sources: coal, 57%;
Avg. Indust. Use (MWH) NA NA NA regulated electric utilities. Public Service Company of New Mexico nuclear, 30%; gas/oil, 12%; solar, 1%. Fuel costs: 49% of reve-
Avg. Indust. Revs. per KWH (¢) NA NA NA (PNM) serves 520,000 customers in north central New Mexico, incl. nues. ’16 depreciation rate: 3.3%. Has 1,800 employees. Chair-
Capacity at Peak (Mw) 2707 2787 2791 Albuquerque and Santa Fe. Texas-New Mexico Power Company man, President & CEO: Patricia K. Collawn. Inc.: New Mexico. Ad-
Annual Load Factor (%) NA NA NA (TNMP) transmits and distributes power to 247,000 customers in dress: 414 Silver Ave. SW, Albuquerque, NM 87102-3289. Tel.:
% Change Customers (yr-end) +.9 +.9 +.9 Texas. Electric rev. breakdown: residential, 29%; commercial, 31%; 505-241-2700. Internet: www.pnmresources.com.
Fixed Charge Cov. (%) 236 231 202 PNM Resources’ utility subsidiary in so PNM will feel the effects of regulatory
New Mexico received a disappointing lag in 2018. Our profit estimate is at the
of change (per sh) 10 Yrs. 5 Yrs. to ’20-’22 rate order. Public Service Company of low end of management’s targeted range of
Revenues -5.0% -2.5% 3.0% New Mexico filed for a rate increase of $1.70-$1.80 a share, which is below its ex-
‘‘Cash Flow’’ 2.5% 9.5% 8.0% $99.2 million, based on a 10.125% return pectation of $1.85-$1.90 for 2017. Because
Earnings -.5% 11.5% 7.5%
Dividends 1.0% 10.5% 9.0% on equity. The utility reached a settlement the full increase will be in effect for all of
Book Value 1.0% 2.5% 2.0% with the commission’s staff, the state’s at- 2019, earnings might well exceed $2.00 a
QUARTERLY REVENUES ($ mill.) torney general, and most intervenors call- share. The company should also benefit
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endar Mar.31 Jun.30 Sep.30 Dec.31 Year ing for a $53.2 million hike (before the ef- from rate relief in Texas, given that its
fects of lower income taxes), based on a utility in the Lone Star State plans to file
2014 328.9 346.2 413.9 346.9 1435.9
2015 332.9 352.9 417.4 335.9 1439.1 9.575% ROE. However, the commission a general rate case in May of 2018. New
2016 311.0 315.4 400.4 336.2 1363.0 took the position of an intervenor that was tariffs are expected to take effect in Janu-
2017 330.2 362.3 419.9 362.6 1475 not part of the settlement and modified ary of 2019.
2018 345 370 440 370 1525 the agreement to exclude costs associated The board of directors raised the an-
EARNINGS PER SHARE A with an environmental upgrade to the nual dividend by $0.09 a share (9.3%).
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endar Mar.31 Jun.30 Sep.30 Dec.31 Year Four Corners coal-fired plant. This might The move is effective with the payment in
2014 .16 .36 .69 .24 1.45 well force the utility to take a nonrecur- the current quarter. PNM’s goal is a pay-
2015 .18 .40 .76 .13 1.48 ring charge (estimated at as much as $60 out ratio of 50%-60%.
2016 .13 .34 .68 .31 1.46 million before taxes, but possibly less). The PNM stock is ranked favorably for
2017 .28 .47 .92 .23 1.90 company asked the regulators to add $4.7 Timeliness. However, the dividend yield
2018 .25 .39 .73 .33 1.70 million to the order to clarify an in- is low, by utility standards, and total re-
consistency with it. The stock price is turn potential to 2020-2022 is also subpar.
endar Mar.31 Jun.30 Sep.30 Dec.31 Year down more than 15% since the ruling And PNM’s New Mexico utility operates in
came out on December 20th. a state with a subpar regulatory climate.
2014 .185 .185 .185 .185 .74
2015 .20 .20 .20 .20 .80 Earnings are likely to decline this Note that its appeal of the commission’s
2016 .22 .22 .22 .22 .88 year, but should improve materially order in the 2015 general rate case is still
2017 .2425 .2425 .2425 .2425 .97 in 2019. The aforementioned rate hike pending before the state supreme court.
2018 .265 will be phased in over a two-year period, Paul E. Debbas, CFA January 26, 2018
(A) Dil. EPS. Excl. nonrec. gains (losses): ’01, EPS don’t sum due to rounding. Next egs. re- ’16: $10.73/sh. (D) In mill., adj. for split. (E) Company’s Financial Strength B+
(15¢); ’03, 67¢; ’05, (56¢); ’08, ($3.77); ’10, port due late Feb. (B) Div’ds paid mid-Feb., Rate base: net orig. cost. Rate all’d on com. Stock’s Price Stability 90
($1.36); ’11, 88¢; ’13, (16¢); ’15, ($1.28). Excl. May, Aug., & Nov. ■ Div’d reinvest. plan avail. eq. in ’18: 9.575%; earn. on avg. com. eq., ’16: Price Growth Persistence 95
gains from disc. ops.: ’08, 42¢; ’09, 78¢. ’15 † Shrhldr. invest. plan avail. (C) Incl. intang. In 7.0%. Reg. Climate: NM, Below Avg.; TX, Avg. Earnings Predictability 70
Exhibit No. JC-3
Page 41 of 141
PPL CORPORATION NYSE-PPL RECENT

LINE
Low:
54.6
34.4
55.2
26.8
34.4
24.3
33.1
23.8
30.3
24.1
30.2
26.7
33.6
28.4
38.1
29.4
36.7
29.2
39.9
32.1
40.2
30.7
32.4
29.2
Target Price Range
2021 2022 2023
80
Options: Yes 50
Ann’l Total
High 45 (+50%) 15% 25
Low 35 (+15%) 9% 20
A M J J A S O N D
to Buy 0 0 0 0 0 0 0 0 0 10
Options 0 0 1 0 2 0 0 0 0
to Sell 0 0 1 1 3 0 0 0 0 7.5
% TOT. RETURN 1/18
Percent 30 1 yr. -4.6 17.3
to Buy 355 364 337 shares 20
to Sell 313 304 329 3 yr. 2.5 38.0
traded 10
Hld’s(000) 539635 537294 539614 5 yr. 31.8 85.6
16.38 15.75 15.37 16.36 17.92 17.41 21.47 20.03 17.63 22.02 21.11 18.82 17.27 11.38 11.06 10.60 10.30 10.40 Revenues per sh 11.00
3.20 3.60 3.59 3.84 4.26 5.10 4.71 3.47 3.66 4.59 4.84 4.64 4.58 3.78 4.28 3.55 3.85 4.00 ‘‘Cash Flow’’ per sh 4.75
1.54 1.84 1.87 1.92 2.29 2.63 2.45 1.19 2.29 2.61 2.61 2.38 2.38 2.37 2.79 2.00 2.25 2.35 Earnings per sh A 2.75
.72 .77 .82 .96 1.10 1.22 1.34 1.38 1.40 1.40 1.44 1.47 1.49 1.50 1.52 1.58 1.64 1.70 Div’d Decl’d per sh B ■ 1.88
.61 .60 .66 .80 .76 .92 1.06 1.71 .76 .66 .69 .72 .74 .70 .67 .90 Value Line Relative P/E Ratio .85
estimates
CAPITAL STRUCTURE as of 9/30/17 8044.0 7556.0 8521.0 12737 12286 11860 11499 7669.0 7517.0 7300 7200 7400 Revenues ($mill) 8100
Incl. 23 mill. units 7.75%, $25 liq. value; 82,000
units 8.23%, $1000 face value. .1% 9.5% 3.5% 4.0% 4.1% 3.7% 2.8% 1.6% 1.6% 2.0% 2.0% 2.0% AFUDC % to Net Profit 1.0%
Leases, Uncapitalized Annual rentals $55 mill. 12529 12940 20621 29071 29205 33058 32484 28482 27707 29200 30625 30925 Total Capital ($mill) 35100
Pension Assets-12/16 $10454 mill. 12416 13174 20858 27266 30032 33087 34597 30382 30074 32425 34675 36725 Net Plant ($mill) 41500
Oblig $11462 mill.
MARKET CAP: $21 billion (Large Cap) 8.5% NMF 5.2% 6.4% 6.7% 5.3% 4.5% 6.0% 8.8% 3.0% 3.5% 4.0% Retained to Com Eq 4.5%
ELECTRIC OPERATING STATISTICS 54% NMF 58% 52% 54% 57% 61% 63% 54% 78% 73% 72% All Div’ds to Net Prof 68%
2014 2015 2016 BUSINESS: PPL Corporation (formerly PP&L Resources, Inc.) is a
% Change Retail Sales (KWH) -1.1 -.5 -.5 bution subsidiary in ’08. Spun off power generating subsidiary in
Avg. Indust. Use (MWH) NA NA NA holding company for PPL Electric Utilities (formerly Pennsylvania ’15. The company no longer breaks out data on electric operating
Avg. Indust. Revs. per KWH (¢) NA NA NA Power & Light Company), which distributes electricity to 1.4 million statistics. Fuel costs: 20% of revs. ’16 reported deprec. rate: 2.7%.
Capacity at Peak (Mw) NA NA NA customers in eastern & central PA. Acq’d Kentucky Utilities and Has 12,700 employees. Chairman, President & CEO: William H.
Peak Load, Winter (Mw) NA NA NA
Annual Load Factor (%) NA NA NA Louisville Gas and Electric (1.2 million customers) 11/10. Has elec- Spence. Inc.: PA. Address: Two North Ninth St., Allentown, PA
% Change Customers (yr-end) NA NA NA tric distribution sub. in U.K. (7.8 million customers). Sold gas distri- 18101-1179. Tel.: 800-345-3085. Internet: www.pplweb.com.
Fixed Charge Cov. (%) 309 321 339 There is no obvious explanation for this year (not as much as the falloff of
the poor performance of PPL Corpo- most utility equities).
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 ration’s stock. The share price declined Currency movements add uncertainty
Revenues -2.0% -8.0% NMF 12% in 2017, which was an excellent year to our earnings estimates. PPL uses
‘‘Cash Flow’’ 1.0% 1.5% NMF for most utility issues. The industry’s lag- hedges due to its exposure to the British
Earnings 2.0% 4.5% NMF
Dividends 4.5% 1.5% 3.5% gards last year had problems with nuclear pound. This led to currency hedging losses
Book Value 3.0% -- NMF construction, troubled nonutility subsidi- in the first nine months of 2017. (Fourth-
QUARTERLY REVENUES ($ mill.) aries, or wildfires in California. PPL quarter results were scheduled to be re-
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endar Mar.31 Jun.30 Sep.30 Dec.31 Year doesn’t fall into any of these categories. leased shortly after this report came out in
We think the market is worried about the print.) Depending on the exchange rate,
2015 2230 1781 1878 1780 7669
2016 2011 1785 1889 1832 7517 possibility of regulatory changes in the there is upside potential to PPL’s earn-
2017 1951 1725 1845 1779 7300 United Kingdom that would hurt the prof- ings, too. We assume no currency gains or
2018 1925 1700 1825 1750 7200 itability of the company’s utilities there. losses in our estimates or projections, but
2019 1975 1750 1875 1800 7400 Speculation that PPL’s dividend might be will include these once they are booked.
EARNINGS PER SHARE A at risk has emerged, as well. PPL’s two utilities in Kentucky have
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endar Mar.31 Jun.30 Sep.30 Dec.31 Year We are sticking with our 2018 earn- requested permission to install an ad-
2015 .82 .37 .59 .60 2.37 ings estimate of $2.25 a share, and see vanced metering system. If the state
2016 .71 .71 .69 .68 2.79 no threat to the dividend. In fact, we commission approves the project, the utili-
2017 .59 .43 .51 .47 2.00 continue to expect an increase of $0.06 a ties would spend $313 million to install 1.3
2018 .65 .50 .57 .53 2.25 share (3.8%) in the annual payout this million meters over a three-year period.
2019 .68 .52 .60 .55 2.35 year. In 2018, PPL’s utilities in Kentucky The companies asked for an order by June
will benefit from a full year’s effect of elec- 1st.
endar Mar.31 Jun.30 Sep.30 Dec.31 Year tric and gas tariff hikes that went into ef- This stock is untimely, but offers an
fect in mid-2017. We assume normal attractive dividend yield. This is al-
2014 .3675 .3725 .3725 .3725 1.49
2015 .3725 .3725 .3725 .3775 1.50 weather conditions; mild weather hurt the most two percentage points above the util-
2016 .3775 .38 .38 .38 1.52 bottom line last year. Perhaps the mar- ity average. Total return potential to 2021-
2017 .38 .395 .395 .395 1.57 ket’s worries about PPL are waning, as the 2023 is also attractive.
2018 .395 stock price has declined just slightly so far Paul E. Debbas, CFA February 16, 2018
(A) Dil. EPS. Excl. nonrec. gain (losses): ’07, ’15 EPS don’t sum to rounding. Next earnings (D) In mill., adj. for split. (E) Rate base: Fair Company’s Financial Strength B++
(12¢); ’10, (8¢); ’11, 8¢; ’13, (62¢); gains report due late Feb. (B) Div’ds historically paid val. Rate all’d on com. eq. in PA in ’16: none Stock’s Price Stability 95
(losses) on disc. ops.: ’07, 19¢; ’08, 3¢; ’09, in early Jan., Apr., July, & Oct. ■ Div’d reinv. spec.; in KY in ’17: 9.7%; earned on avg. com. Price Growth Persistence 15
(10¢); ’10, (4¢); ’12, (1¢); ’14, 23¢; ’15, ($1.36). plan avail. (C) Incl. intang. In ’16: $8.35/sh. eq., ’16: 19.2%. Regul. Climate: Avg. Earnings Predictability 70
Exhibit No. JC-3
Page 42 of 141
P.S. ENTERPRISE GP. NYSE-PEG RECENT

LINE
Low:
49.9
32.2
52.3
22.1
34.1
23.7
34.9
29.0
35.5
28.0
34.1
28.9
37.0
29.7
43.8
31.3
44.4
36.8
47.4
37.8
53.3
41.7
51.9
46.6
Target Price Range
2021 2022 2023
80
Options: Yes 50
Ann’l Total
High 60 (+25%) 9% 25
Low 45 (-5%) 3% 20
A M J J A S O N D
to Buy 0 0 0 0 0 0 0 0 0 10
Options 1 1 1 1 1 0 1 2 0
to Sell 1 3 1 1 2 0 1 2 1 7.5
% TOT. RETURN 1/18
Percent 30 1 yr. 21.6 17.3
to Buy 327 338 318 shares 20
to Sell 305 300 304 3 yr. 36.3 38.0
traded 10
Hld’s(000) 384107 381036 384734 5 yr. 102.6 85.6
18.62 23.54 23.09 24.74 24.07 25.28 27.94 24.57 23.31 22.42 19.33 19.71 21.52 20.61 18.22 18.00 18.40 18.75 Revenues per sh 21.25
3.01 2.92 3.02 3.42 3.91 4.36 4.68 4.98 5.27 5.36 4.87 5.17 5.82 6.15 5.07 7.10 5.95 6.20 ‘‘Cash Flow’’ per sh 7.50
1.88 1.88 1.52 1.79 1.85 2.59 2.90 3.08 3.07 3.11 2.44 2.45 2.99 3.30 2.83 4.40 3.05 3.10 Earnings per sh A 3.50
1.08 1.08 1.10 1.12 1.14 1.17 1.29 1.33 1.37 1.37 1.42 1.44 1.48 1.56 1.64 1.72 1.80 1.90 Div’d Decl’d per sh B ■† 2.20
.55 .60 .76 .88 .96 .88 .82 .67 .66 .65 .81 .76 .66 .62 .80 .50 Value Line Relative P/E Ratio .85
estimates
CAPITAL STRUCTURE as of 9/30/17 14139 12431 11793 11343 9781.0 9968.0 10886 10415 9198.0 9100 9300 9500 Revenues ($mill) 10750
3.2% 3.8% 5.5% 2.7% 4.8% 4.6% 4.5% 5.5% 8.4% 5.0% 4.0% 4.0% AFUDC % to Net Profit 3.0%
Leases, Uncapitalized Annual rentals $29 mill. 50.5% 46.3% 44.8% 42.1% 38.3% 40.4% 40.4% 40.3% 45.3% 45.5% 46.0% 46.5% Long-Term Debt Ratio 49.0%
Pfd Stock None
2014 2015 2016 BUSINESS: Public Service Enterprise Group Incorporated is a
% Change Retail Sales (KWH) -1.3 +2.4 -.3 The company no longer breaks out data on electric and gas operat-
Avg. Indust. Use (MWH) NA NA NA holding company for Public Service Electric and Gas Company ing statistics. Fuel costs: 31% of revenues. ’16 reported deprecia-
Avg. Indust. Revs. per KWH(¢) NA NA NA (PSE&G), which serves 2.2 million electric and 1.8 million gas cus- tion rate (utility): 2.5%. Has 12,700 employees. Chairman, Presi-
Capacity at Peak (Mw) NA NA NA tomers in New Jersey, and PSEG Power LLC, a nonregulated dent & Chief Executive Officer: Dr. Ralph Izzo. Inc.: New Jersey.
Annual Load Factor (%) NA NA NA power generator with nuclear, gas, and coal-fired plants in the Address: 80 Park Plaza, P.O. Box 1171, Newark, New Jersey
% Change Customers (avg.) NA NA NA Northeast. PSEG Energy Holdings is involved in renewable energy. 07101-1171. Telephone: 973-430-7000. Internet: www.pseg.com.
Fixed Charge Cov. (%) 635 705 522 Public Service Enterprise Group’s The utility business is faring better
utility subsidiary has filed a general than the nonregulated operations.
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 rate case. Public Service Electric and Gas PSE&G is benefiting from growth in its
Revenues -1.5% -3.0% 1.0% requested electric and gas rate hikes of federally regulated transmission business,
‘‘Cash Flow’’ 5.0% 2.0% 4.0% $27 million (0.5%) and $68 million (3.0%), which obtains rate relief annually through
Earnings 6.0% -.5% 2.0%
Dividends 3.5% 3.0% 5.0% respectively, based on a return of 10.3% on a forward-looking regulatory mechanism.
Book Value 7.5% 6.0% 4.5% a common-equity ratio of 54%. This is (A $64 million rate increase took effect at
QUARTERLY REVENUES ($ mill.) PSE&G’s first base-rate application since the start of 2018.) Unless the utility re-
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year 2010. Despite regulatory mechanisms al- ceives harsh treatment from the New Jer-
lowing current recovery of certain expendi- sey regulators, the rate order will boost
2015 3135 2314 2688 2278 10415
2016 2616 1905 2587 2090 9198.0 tures for its storm hardening and gas sys- the earning power of PSE&G’s distribution
2017 2592 2133 2263 2112 9100 tem modernization programs, some of business. PSEG Power, the main nonregu-
2018 2700 2050 2400 2150 9300 these costs are still unrecovered. A lack of lated subsidiary, is still experiencing diffi-
2019 2750 2100 2450 2200 9500 volume growth is another problem. cult market conditions, but should benefit
EARNINGS PER SHARE A PSE&G also wants a higher depreciation from a lower federal tax rate. We forecast
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year rate, recovery of storm-related costs that flat earnings in 2019.
2015 1.15 .68 .87 .60 3.30 have been deferred until now, and a regu- We think the board of directors will
2016 .93 .37 .94 .59 2.83 latory mechanism to decouple electric rev- raise the dividend soon. We estimate a
2017 .94 .69 .79 1.98 4.40 enues and volume. The company expects boost of $0.02 a share (4.7%) in the quar-
2018 1.05 .60 .85 .55 3.05 new tariffs and the decoupling mechanism terly payout, the same increase as in each
2019 1.05 .65 .85 .55 3.10 to take effect at the start of October. of the past three years.
Our 2017 earnings estimate requires This high-quality but untimely stock
endar Mar.31 Jun.30 Sep.30 Dec.31 Year an explanation. For the fourth quarter, has a dividend yield that is about
PSEG expects to book a credit of $660 average for a utility. Like most utility
2014 .37 .37 .37 .37 1.48
2015 .39 .39 .39 .39 1.56 million-$850 million for the effect of the equities, the recent price is within our
2016 .41 .41 .41 .41 1.64 new federal tax law on deferred tax 2021-2023 Target Price Range. According-
2017 .43 .43 .43 .43 1.72 balances. This is included in our earnings ly, total return potential is unspectacular.
2018 presentation. Paul E. Debbas, CFA February 16, 2018
(A) Diluted EPS. Excl. nonrecur. gain (losses): ’06, 12¢; ’07, 3¢; ’08, 40¢; ’11, 13¢. Next egs. (C) Incl. intang. In ’16: $6.80/sh. (D) In mill., Company’s Financial Strength A++
’02, ($1.30); ’05, (3¢); ’06, (35¢); ’08, (96¢); report due late Feb. (B) Div’ds histor. paid in adj. for split. (E) Rate base: Net orig. cost. Rate Stock’s Price Stability 95
’09, 6¢; ’11, (34¢); ’12, 7¢; ’16, (30¢); ’17, late Mar., June, Sept., and Dec. ■ Div’d rein- allowed on com. eq. in ’10: 10.3%; earned on Price Growth Persistence 20
($1.20); gains (loss) from disc. ops.: ’05, (33¢); vest. plan avail. † Sharehold. invest. plan avail. avg. com. eq., ’16: 10.8%. Reg. Climate: Avg. Earnings Predictability 65
Exhibit No. JC-3
Page 43 of 141
SOUTHERN COMPANY NYSE-SO RECENT

LINE
Low:
39.3
33.2
40.6
29.8
37.6
26.5
38.6
30.8
46.7
35.7
48.6
41.8
48.7
40.0
51.3
40.3
53.2
41.4
54.6
46.0
53.5
46.7
48.1
42.6
Target Price Range
2021 2022 2023
Ann’l Total 48
High 65 (+50%) 15%
Low 45 (+5%) 7% 32
A M J J A S O N D
to Buy 0 0 0 0 0 0 0 0 0 16
Options 0 1 3 1 1 0 4 2 1 12
to Sell 0 1 3 0 1 0 4 2 0
% TOT. RETURN 1/18
Percent 18 1 yr. -4.4 17.3
to Buy 572 553 498 shares 12
to Sell 482 494 514 3 yr. 2.2 38.0
traded 6
Hld’s(000) 604511 599382 603476 5 yr. 27.1 85.6
14.73 15.31 16.05 18.28 19.24 20.12 22.04 19.21 20.70 20.41 19.06 19.26 20.34 19.18 20.09 22.50 22.45 23.50 Revenues per sh 26.25
3.46 3.53 3.65 4.03 4.01 4.22 4.43 4.43 4.51 4.91 5.18 5.27 5.28 5.47 5.69 6.35 6.50 6.75 ‘‘Cash Flow’’ per sh 7.50
1.85 1.97 2.06 2.13 2.10 2.28 2.25 2.32 2.36 2.55 2.67 2.70 2.77 2.84 2.83 3.00 3.00 3.15 Earnings per sh A 3.75
1.36 1.39 1.42 1.48 1.54 1.60 1.66 1.73 1.80 1.87 1.94 2.01 2.08 2.15 2.22 2.30 2.38 2.46 B
Div’d Decl’d per sh ■ † 2.70
.80 .84 .78 .85 .87 .85 .97 .90 .95 .99 1.08 .91 .84 .80 .93 .80 Value Line Relative P/E Ratio .80
estimates
Leases, Uncapitalized Annual rentals $152 mill. 12.3% 14.9% 13.7% 10.2% 9.4% 11.6% 13.9% 13.2% 11.9% 12.0% 11.0% 11.0% AFUDC % to Net Profit 9.0%
Pension Assets-12/16$11583 mill.Ob $12385 mill. 53.9% 53.2% 51.2% 50.0% 49.9% 51.5% 49.5% 52.8% 61.5% 63.5% 63.5% 63.5% Long-Term Debt Ratio 62.0%
Pfd Stock $2218 mill. Pfd Div’d $45 mill. 42.6% 43.6% 45.7% 47.1% 47.3% 45.8% 47.3% 44.0% 35.7% 33.5% 34.0% 34.0% Common Equity Ratio 35.5%
Incl. 1 mill. shs. 4.2%-5.44% cum. pfd. ($100 par); 31174 34091 35438 37307 38653 41483 42142 46788 69359 71375 72925 75225 Total Capital ($mill) 80600
1.52 mill. shs. 5.2%-5.83% cum. pfd. ($1 par); 2 35878 39230 42002 45010 48390 51208 54868 61114 78446 83950 88625 92600 Net Plant ($mill) 103200
mill. shs. 6.0% noncum. pfd. ($25 par); 4 mill. shs.
5.6%-6.5% noncum. pfd. ($100 par); 8 mill. shs. 7.1% 6.9% 7.0% 7.2% 7.3% 6.8% 7.1% 6.6% 4.9% 5.5% 5.5% 5.5% Return on Total Cap’l 6.0%
5.63%-6.5% noncum. pfd. ($1 par). 12.6% 12.0% 11.8% 12.2% 12.5% 12.1% 12.1% 12.0% 10.3% 12.0% 12.0% 12.0% Return on Shr. Equity 12.5%
Common Stock 1,003,627,691 shs. 13.1% 12.4% 12.2% 12.5% 12.8% 12.5% 12.5% 12.6% 11.0% 12.5% 12.5% 12.5% Return on Com Equity E 13.0%
2014 2015 2016 BUSINESS: The Southern Company, through its subs., supplies
% Change Retail Sales (KWH) +3.3 -.7 +.2 GA, 49%; AL, 35%; FL, 9%; MS, 7%. Generating sources: gas &
Avg. Indust. Use (MWH) 3384 3371 3105 electricity to 4.6 million customers in GA, AL, FL, and MS. Also has oil, 42%; coal, 31%; nuclear, 15%; other, 4%; purchased, 8%. Fuel
Avg. Indust. Revs. per KWH (¢) 6.37 5.88 6.01 a competitive generation business. Acq’d AGL Resources costs: 30% of revs. ’16 reported depr. rate (utility): 3.0%. Has
Capacity at Yearend (Mw) 46549 44223 46291 (renamed Southern Company Gas, 4.5 mill. customers in GA, FL, 32,000 employees. Chairman, President and CEO: Thomas A. Fan-
Peak Load, Summer (Mw) F 37234 36794 35781
Annual Load Factor (%) 59.6 59.9 61.5 NJ, IL, VA, & TN) 7/16. Electric rev. breakdown: residential, 39%; ning. Inc.: DE. Address: 30 Ivan Allen Jr. Blvd., N.W., Atlanta, GA
% Change Customers (yr-end) +.8 +.9 +1.0 commercial, 31%; industrial, 18%; other, 12%. Retail revs. by state: 30308. Tel.: 404-506-0747. Internet: www.southerncompany.com.
Fixed Charge Cov. (%) 417 433 330 Southern Company’s Georgia Power latory matters associated with this project,
subsidiary has received permission and put an end to the nonrecurring
of change (per sh) 10 Yrs. 5 Yrs. to ’21-’23 from the state commission to continue charges.
Revenues 1.0% -- 4.0% its nuclear construction project. The The sale of two gas utilities is pend-
‘‘Cash Flow’’ 3.5% 3.5% 4.5% utility is adding two units at the site of the ing. Southern agreed to sell Elizabeth-
Earnings 3.0% 3.0% 4.0%
Dividends 4.0% 3.5% 3.5% Vogtle station. Delays and cost overruns town Gas and Elkton Gas for $1.7 billion.
Book Value 5.0% 4.0% 2.5% added $1.4 billion to the construction cost, It will use the proceeds to offset some of
QUARTERLY REVENUES (mill.) making it $8.8 billion. The problem led to its equity needs. The sale is expected to be
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year the bankruptcy filing of the former con- completed by the third quarter of 2018.
2015 4183 4337 5401 3568 17489 tractor, Westinghouse, so its parent, We think earnings will advance in
2016 3992 4459 6264 5181 19896 Toshiba, paid Georgia Power $1.7 billion 2019. Southern should benefit from rate
2017 5771 5430 6201 5248 22650 in loan guarantees. Of this amount, $1.5 relief, modest volume growth, and in-
2018 5850 5450 6250 5300 22850 billion will offset the construction work in creased income from its Southern Power
2019 6100 5650 6500 5500 23750 progress, and $188 million will be credited nonutility subsidiary.
Cal- EARNINGS PER SHARE A Full
to customers. The net effect of all of this is A dividend hike is likely in the second
endar Mar.31 Jun.30 Sep.30 Dec.31 Year that Southern’s earning power will be quarter. This is the usual timing of the
2015 .56 .71 1.16 .42 2.84 trimmed by $0.04 a share in 2018. Accord- dividend review. We think Southern will
2016 .57 .71 1.22 .33 2.83 ingly, we have lowered our share-earnings continue the $0.08-a-share annual growth
2017 .73 .73 1.08 .46 3.00 estimate by a nickel, to $3.00. rate it established in 2017. We project the
2018 .70 .75 1.10 .45 3.00 Mississippi Power’s regulatory settle- company will maintain this pace over the
2019 .75 .80 1.15 .45 3.15 ment was approved by the state com- 3- to 5-year period.
mission. The utility’s coal-gasification This stock is untimely, but offers an
endar Mar.31 Jun.30 Sep.30 Dec.31 Year plant had extensive delays and cost over- attractive dividend yield. The yield is
2014 .508 .525 .525 .525 2.08
runs, and is being run as a gas-fired facil- almost two percentage points above the
2015 .525 .5425 .5425 .5425 2.15 ity. In recent years, the problems forced utility mean. Total return potential
2016 .5425 .56 .56 .56 2.22 Mississippi Power to take writedowns, in- through the 2021-2023 period is respect-
2017 .56 .58 .58 .58 2.30 cluding more than $2.2 billion after taxes able.
2018 .58 in 2017. The settlement resolved all regu- Paul E. Debbas, CFA February 16, 2018
(A) Dil. EPS. Excl. nonrec. gain (losses): ’03, (B) Div’ds paid in early Mar., June, Sept., and fair value; FL, GA, orig. cost. All’d return on Company’s Financial Strength A
6¢; ’09, (25¢); ’13, (83¢); ’14, (59¢); ’15, (25¢); Dec. ■ Div’d reinvest. plan avail. † Shrhldr. in- com. eq. (blended): 12.5%; earn. on avg. com. Stock’s Price Stability 100
’16, (28¢); ’17, ($2.20). ’15 EPS don’t sum due vest. plan avail. (C) Incl. def’d chgs. In ’16: eq., ’16: 11.8%. Regul. Climate: GA, AL Above Price Growth Persistence 25
to rounding. Next egs. report due late Feb. $17.26/sh. (D) In mill. (E) Rate base: AL, MS, Avg.; MS, FL Avg. (F) Winter peak in ’14 & ’15. Earnings Predictability 100
Exhibit No. JC-3
Page 44 of 141
Alliant Energy Corporation | Credit Ratings

NYSE: LNT (MI KEY: 4057038; SPCIQ KEY: 312949)
Issuer Credit Rating Long-term Rating
Ratings Details
Credit Ratings
S&P Moody's
Long-Term Rating A- Baa1
Outlook Stable Stable
Watch
As of Date 1/11/2013 7/5/2016
History BBB+ (OS) A3 (ON)

1/24/2012 Affirm
8/27/2015
BBB+ (OP) A3 (OS)

7/23/2010 Upgrade
1/30/2014
BBB+ (OS) Baa1 (WP)

1/5/2006 Affirm
11/8/2013
BBB+ Baa1 (OS)

Downgrade Affirm
12/6/2002 9/27/2012
A- Baa1 (ON)
Downgrade Affirm
10/18/2001 9/30/2011
Credit Ratings Details
S&P Moody's
Long-term Issuer
A- (OS) Baa1 (OS)

Upgrade Downgrade
1/11/2013 7/5/2016
BBB+ (OS) A3 (ON)

1/24/2012 Affirm
8/27/2015
BBB+ (OP) A3 (OS)

7/23/2010 Upgrade
1/30/2014
BBB+ (OS) Baa1 (WP)

1/5/2006 Affirm
11/8/2013
BBB+ Baa1 (OS)
© 2018, S&P Global Market Intelligence | Page 1 of 11

Exhibit No. JC-3
Page 45 of 141
Alliant Energy Corporation | Credit Ratings
S&P Moody's
Downgrade Affirm
12/6/2002 9/27/2012
A- Baa1 (ON)
Downgrade Affirm
10/18/2001 9/30/2011
Senior Unsecured
Baa1
Remove Downgrade
10/16/2014 7/5/2016
BBB+ A3
Upgrade Affirm
1/11/2013 8/27/2015
BBB A3
SNL Start Upgrade
9/1/2009 1/30/2014
Baa1 (WP)
Affirm
11/8/2013
Baa1
SNL Start
9/30/2009
Short-term/Commercial Paper
A-2 P-2
Downgrade Affirm
10/17/2001 7/5/2016
A-1 P-2
SNL Start Affirm
8/27/2015
P-2
Upgrade
2/28/2005
P-3 (WP)
Affirm
12/29/2004
P-3 (WR)
Downgrade
1/13/2003
P-2 (WN)
Affirm
10/17/2002

Exhibit No. JC-3
Page 46 of 141
American Electric Power Company, Inc. | Credit Ratings

NYSE: AEP (MI KEY: 4006321; SPCIQ KEY: 135470)
Ratings Details
Credit Ratings
S&P Moody's
Watch
As of Date 2/2/2017 1/19/2018
History BBB+ (WP) Baa1 (OP)

Upgrade Affirm
9/16/2016 6/5/2017
BBB (OP) Baa1 (OS)

9/29/2014 Upgrade
1/31/2014
BBB (OS) Baa2 (WP)

Downgrade Affirm
3/7/2003 11/8/2013
BBB+ (WN) Baa2 (OS)

1/24/2003 Affirm
9/16/2013
BBB+ Baa2 (OS)

Downgrade Affirm
5/23/2002 3/23/2010
S&P Moody's
Long-term Issuer
A- (OS)
Upgrade
2/2/2017
BBB+ (WP)
Upgrade
9/16/2016
BBB (OP)
9/29/2014
BBB (OS)
Downgrade
3/7/2003
BBB+ (WN)
1/24/2003
BBB+
Downgrade
5/23/2002
Senior Unsecured
BBB+ (WR) Baa1 (OS)

Upgrade Affirm
2/2/2017 1/19/2018
BBB (WP) Baa1 (OP)

Upgrade Affirm
9/16/2016 6/5/2017
BBB- Baa1 (OS)

Downgrade Upgrade
11/28/2012 1/31/2014
BBB (WR) Baa2 (WP)

Downgrade Affirm
3/7/2003 11/8/2013
BBB+ Baa2 (OS)

SNL Start Affirm
9/16/2013
Baa2 (OS)
Affirm
3/23/2010
A-2 (WR) P-2

3/7/2003 Affirm
1/19/2018
A-2 (WN) P-2

1/24/2003 Affirm
6/5/2017
A-2 P-2
SNL Start Affirm
1/31/2014
P-2
Affirm
9/16/2013
P-2
Upgrade
9/14/2005
P-3 (WP)
Affirm
8/26/2005
Subordinated Debt

Exhibit No. JC-3
Page 47 of 141
Ameren Corporation | Credit Ratings

NYSE: AEE (MI KEY: 4007308; SPCIQ KEY: 373264)
Ratings Details
Credit Ratings
S&P Moody's
Long-Term Rating BBB+ Baa1
Outlook Positive Stable
Watch
As of Date 11/22/2017 11/20/2015
History BBB+ (OS) Baa1 (OS)

Upgrade Upgrade
12/4/2013 4/7/2015
BBB (WP) Baa2 (OS)

Upgrade Upgrade
3/14/2013 1/31/2014
BBB- (OS) Baa3 (WP)

4/3/2012 Affirm
11/8/2013
BBB- (OP) Baa3 (OS)

11/22/2011 Downgrade
8/13/2008
BBB- (OS) Baa2 (WN)

8/29/2007 Affirm
5/21/2008
S&P Moody's
Long-term Issuer
BBB+ (OP) Baa1 (OS)

11/22/2017 Affirm
11/20/2015
BBB+ (OS) Baa1 (OS)

Upgrade Upgrade
12/4/2013 4/7/2015
BBB (WP) Baa2 (OS)

Upgrade Upgrade
3/14/2013 1/31/2014
BBB- (OS) Baa3 (WP)

4/3/2012 Affirm
11/8/2013
BBB- (OP) Baa3 (OS)

Exhibit No. JC-3
Page 48 of 141
Ameren Corporation | Credit Ratings
S&P Moody's
8/13/2008
BBB- (OS) Baa2 (WN)

8/29/2007 Affirm
5/21/2008
Senior Unsecured
BBB Baa1
Upgrade Initiate
12/4/2013 11/20/2015
BBB- (WP)
Upgrade Remove
3/14/2013 5/15/2014
BB+ (WR) Baa2

8/29/2007 Upgrade
1/31/2014
BB+ (WN) Baa3 (WP)

Downgrade Affirm
4/23/2007 11/8/2013
BBB- (WN) Baa3

Downgrade Initiate
10/5/2006 5/15/2009
BBB (WN)
Downgrade Remove
10/3/2005 5/15/2007
A-2 P-2
Upgrade Affirm
3/14/2013 11/20/2015
A-3 (WR) P-2

8/29/2007 Affirm
4/7/2015
A-3 (WN) P-2

4/23/2007 Affirm
3/13/2014
A-3 P-2
Downgrade Upgrade
10/5/2006 1/31/2014
A-2 (WN) P-3 (WP)

10/3/2005 Affirm
11/8/2013
A-2 P-3

Exhibit No. JC-3
Page 49 of 141
CenterPoint Energy, Inc. | Credit Ratings

NYSE: CNP (MI KEY: 4074390; SPCIQ KEY: 279513)
Ratings Details
Credit Ratings
S&P Moody's
Watch
As of Date 12/4/2017 1/30/2014
History A- (OP) Baa2 (WP)

8/4/2017 Affirm
11/8/2013
A- (OD) Baa2 (OS)

8/19/2016 Upgrade
8/19/2013
A- (ON) Baa3 (OP)

1/27/2016 Affirm
3/14/2013
A- (OS) Baa3 (OP)

Upgrade Affirm
5/2/2013 7/26/2012
BBB+ (WP) Baa3 (OS)

3/15/2013 Upgrade
6/29/2011
S&P Moody's
Long-term Issuer
A- (OS) Baa1 (OS)

12/4/2017 Upgrade
1/30/2014
A- (OP) Baa2 (WP)

8/4/2017 Affirm
11/8/2013
A- (OD) Baa2 (OS)

8/19/2016 Upgrade
8/19/2013
A- (ON) Baa3 (OP)

1/27/2016 Affirm
3/14/2013
A- (OS) Baa3 (OP)

Upgrade Affirm
5/2/2013 7/26/2012
BBB+ (WP) Baa3 (OS)

3/15/2013 Upgrade
6/29/2011
Senior Unsecured
BBB+ Baa1
Upgrade Upgrade
5/2/2013 1/30/2014
BBB (WP) Baa2 (WP)

3/15/2013 Affirm
11/8/2013
BBB Baa2
Upgrade Upgrade
11/22/2011 8/19/2013
BBB- Baa3
SNL Start Affirm
3/14/2013
Baa3
Upgrade
6/29/2011
Ba1 (WP)
Affirm
3/23/2011
A-2 P-2
Upgrade Affirm
4/27/2010 1/30/2014
A-3 P-2
Downgrade Upgrade
4/30/2009 8/19/2013
A-2 (OS) P-3

4/15/2008 Affirm
3/14/2013
A-2 P-3
Upgrade Upgrade

Exhibit No. JC-3
Page 50 of 141
CMS Energy Corporation | Credit Ratings

NYSE: CMS (MI KEY: 4004172; SPCIQ KEY: 257682)
Ratings Details
Credit Ratings
S&P Moody's
Watch
As of Date 12/3/2014 4/18/2017
History BBB (OP) Baa2 (OP)

3/10/2014 Affirm
3/14/2016
BBB (OS) Baa2 (OS)

Upgrade Upgrade
3/18/2013 1/31/2014
BBB- (OP) Baa3 (WP)

5/18/2012 Affirm
11/8/2013
BBB- (OS) Baa3 (OS)

Upgrade Upgrade
5/9/2007 3/15/2013
BB (WP) Ba1 (OP)

2/12/2007 Affirm
3/9/2012
S&P Moody's
Long-term Issuer
BBB+ (OS)
Upgrade
12/3/2014
BBB (OP)
3/10/2014
BBB (OS)
Upgrade
3/18/2013
BBB- (OP)
5/18/2012
BBB- (OS)

Exhibit No. JC-3
Page 51 of 141
CMS Energy Corporation | Credit Ratings
S&P Moody's
Upgrade
5/9/2007
BB (WP)
2/12/2007
Senior Unsecured
BBB Baa1 (OS)

Upgrade Upgrade
12/3/2014 4/18/2017
BBB- Baa2 (OP)

Upgrade Affirm
3/18/2013 3/14/2016
BB+ Baa2 (OS)

Upgrade Upgrade
5/9/2007 1/31/2014
B+ (WP) Baa3 (WP)

2/12/2007 Affirm
11/8/2013
B+ (WR) Baa3 (OS)

1/30/2006 Upgrade
3/15/2013
B+ (WN) Ba1 (OP)

11/1/2005 Affirm
3/9/2012
A-2
Upgrade
3/18/2013
A-3 (WR)
Upgrade
5/9/2007
B-1 (WP)
2/12/2007
B-1 (WR)
1/30/2006
B-1 (WN)
11/1/2005
B-1

Exhibit No. JC-3
Page 52 of 141
DTE Energy Company | Credit Ratings

NYSE: DTE (MI KEY: 4057044; SPCIQ KEY: 266598)
Ratings Details
Credit Ratings
S&P Moody's
Watch
As of Date 8/21/2015 10/25/2016
History BBB+ (OP) A3 (WN)

8/19/2013 Affirm
9/27/2016
BBB+ (OS) A3 (OS)

Upgrade Upgrade
12/9/2010 1/31/2014
BBB (OP) Baa1 (WP)

6/8/2010 Affirm
11/8/2013
BBB (OS) Baa1 (OS)

1/15/2010 Upgrade
2/8/2013
BBB (ON) Baa2 (OP)

5/22/2009 Affirm
2/27/2012
S&P Moody's
Long-term Issuer
BBB+ (OS)
8/21/2015
BBB+ (OP)
8/19/2013
BBB+ (OS)
Upgrade
12/9/2010
BBB (OP)
6/8/2010
BBB (OS)
1/15/2010
BBB (ON)
5/22/2009
Senior Unsecured
BBB Baa1 (OS)

Upgrade Downgrade
12/9/2010 10/25/2016
BBB- A3 (WN)
SNL Start Affirm
9/27/2016
A3 (OS)
Upgrade
1/31/2014
Baa1 (WP)
Affirm
11/8/2013
Baa1 (OS)
Upgrade
2/8/2013

Exhibit No. JC-3
Page 53 of 141
DTE Energy Company | Credit Ratings
S&P Moody's
Baa2 (OP)
Affirm
2/27/2012
A-2 P-2 (WR)

Upgrade Affirm
1/15/2010 10/25/2016
A-3 P-2 (WN)

Downgrade Affirm
5/22/2009 9/27/2016
A-2 P-2
SNL Start Affirm
1/31/2014
P-2
Affirm
2/8/2013
P-2
Affirm
4/22/2005
P-2
Affirm
1/28/2004
Subordinated Debt
BBB- Baa2 (WR)

Initiate Downgrade
12/2/2011 10/25/2016
Baa1 (WN)
Affirm
9/27/2016
Baa1
Upgrade
1/31/2014
Baa2 (WP)
Affirm
11/8/2013
Baa2
Upgrade
2/8/2013
Baa3
SNL Start
12/2/2011
Trust Preferred
Remove Remove
8/21/2015 2/5/2013
BBB- Baa3 (OP)

Upgrade Affirm
12/9/2010 2/27/2012
BB+ Baa3 (OS)

Downgrade Affirm
12/1/2004 4/22/2005
BBB- Baa3
SNL Start Affirm
1/28/2004
Baa3
Affirm
3/8/2002
Baa3
SNL Start

Exhibit No. JC-3
Page 54 of 141
Duke Energy Corporation | Credit Ratings

NYSE: DUK (MI KEY: 4121470; SPCIQ KEY: 267850)
Ratings Details
Credit Ratings
S&P Moody's
Outlook Stable Negative
Watch
As of Date 1/12/2017 1/19/2018
History A- (ON) Baa1 (OS)

10/27/2015 Affirm
5/12/2017
A- (OS) Baa1 (ON)

Upgrade Affirm
4/2/2015 8/5/2016
BBB+ (OP) Baa1 (ON)

11/5/2014 Downgrade
1/13/2016
BBB+ (OS) A3 (WN)

5/13/2013 Affirm
10/27/2015
BBB+ (ON) A3 (ON)

Downgrade Affirm
7/25/2012 6/5/2015
S&P Moody's
Long-term Issuer
A- (OS) Baa1 (ON)

1/12/2017 Affirm
1/19/2018
A- (ON) Baa1 (OS)

10/27/2015 Affirm
5/12/2017
A- (OS) Baa1 (ON)

Upgrade Affirm
4/2/2015 8/5/2016
BBB+ (OP) Baa1 (ON)

11/5/2014 Downgrade
1/13/2016
BBB+ (OS) A3 (WN)

Exhibit No. JC-3
Page 55 of 141
Duke Energy Corporation | Credit Ratings
S&P Moody's
5/13/2013 Affirm
10/27/2015
BBB+ (ON) A3 (ON)

Downgrade Affirm
7/25/2012 6/5/2015
Senior Unsecured
BBB+ Baa1
Upgrade Affirm
4/2/2015 1/19/2018
BBB (WR) Baa1

Downgrade Affirm
7/25/2012 5/12/2017
BBB+ (WN) Baa1

7/3/2012 Affirm
8/5/2016
BBB+ Baa1 (WR)

SNL Start Downgrade
6/16/2008 1/13/2016
A3 (WN)
Affirm
10/27/2015
A3
Affirm
6/5/2015
A-2 (WR) P-2

7/25/2012 Affirm
1/19/2018
A-2 (WN) P-2

7/3/2012 Affirm
5/12/2017
A-2 P-2
SNL Start Affirm
9/26/2008 8/5/2016
P-2
Affirm
1/13/2016
P-2
Affirm
10/27/2015
P-2

Exhibit No. JC-3
Page 56 of 141
Entergy Corporation | Credit Ratings

NYSE: ETR (MI KEY: 4007889; SPCIQ KEY: 269764)
Ratings Details
Credit Ratings
S&P Moody's
Outlook Positive Negative
Watch
As of Date 1/9/2017 1/19/2018

Upgrade Upgrade
8/4/2016 4/5/2017
BBB (OP) Baa3 (WP)

3/31/2015 Affirm
1/9/2017
BBB (OS) Baa3 (OP)

6/20/2012 Affirm
10/1/2015
BBB (ON) Baa3 (OS)

6/28/2011 Affirm
9/8/2005
BBB (OS) Baa3

6/10/2009 SNL Start
8/25/2004
S&P Moody's
Long-term Issuer
BBB+ (OP) Baa2 (ON)

1/9/2017 Affirm
1/19/2018
BBB+ (OS) Baa2 (OS)

Upgrade Upgrade
8/4/2016 4/5/2017
BBB (OP) Baa3 (WP)

3/31/2015 Affirm
1/9/2017
BBB (OS) Baa3 (OP)

6/20/2012 Affirm
10/1/2015
BBB (ON) Baa3 (OS)

6/28/2011 Affirm
9/8/2005
BBB (OS) Baa3

6/10/2009 SNL Start
8/25/2004
Senior Unsecured
BBB Baa2
Upgrade Affirm
8/4/2016 1/19/2018
BBB- Baa2 (WR)

Downgrade Upgrade
9/15/2010 4/5/2017
BBB (WR) Baa3 (WP)

1/30/2008 Affirm
1/9/2017
BBB (WU) Baa3

Exhibit No. JC-3
Page 57 of 141
Entergy Corporation | Credit Ratings
S&P Moody's
11/5/2007 Affirm
10/1/2015
BBB Baa3
6/4/2007 Initiate
12/22/2005
BBB (WR)
7/20/2006
A-2 P-2
Initiate Affirm
8/3/2012 1/19/2018
P-2 (WR)
Upgrade
4/5/2017
P-3 (WP)
Affirm
1/9/2017
P-3
Affirm
10/1/2015
P-3
Initiate
8/10/2012
Headlines**
Headline Date
Action items: S&P downgrades NRG Yield; Moody's revises outlook on DPL, subsidiary 8/18/2016 10:27:00 AM ET
S&P Global Market Intelligence presents a periodic rundown of selected ratings actions on U.S.- and Canada-based energy companies.
S&P Global Ratings on Aug. 4 upgraded the issuer credit ratings of Entergy Corp. and its subsidiaries to BBB+ from BBB. 8/4/2016 3:45:00 PM ET
S&P upgrades Entergy, subsidiaries
Entergy Mississippi flagged for possible upgrade at Moody's 8/1/2016 7:32:00 AM ET

Entergy Mississippi has been flagged for a possible upgrade at Moody's which revised its rating outlook on the company to positive.
Action items: S&P Global Ratings downgrades Entergy Texas, Natural Resource, CONSOL, GenOn Energy 6/9/2016 12:35:00 PM ET
SNL Energy presents a periodic rundown of selected ratings actions on U.S.- and Canada-based energy companies.
S&P downgrades Entergy Texas credit profile 6/7/2016 12:49:00 PM ET

S&P Global Ratings downgraded the stand-alone credit profile of Entergy Texas based on the expected low financial performance in the next three years.
Ratings Watch Action Legend: (WP) Watch Positive, (WN) Watch Negative, (WU) Watch Uncertain, (WR) Watch Removed, (OP) Outlook Positive, (ON) Outlook Negative, (OS) Outlook
Stable, (OD) Outlook Developing.
Includes credit ratings on or after January 1, 2000. If a listed rating does not have a date, this means that while the rating was available from the ratings agency, the date was not
available as of our data collection starting point. S&P Global Market Intelligence does not publish revised Rating Outlooks independent of the credit rating itself. If there is a revised
outlook where the credit rating stayed the same S&P Global Market Intelligence lists this as a rating affirmation. Ratings history is comprehensive beginning with S&P Global Market
Intelligence's coverage of a company.
Moody's Proprietary Rights Notice: © 2018, Moody's Analytics, Inc., its licensors and affiliates ("Moody's"). All rights reserved. Moody's ratings and other information ("Moody's
Information") are proprietary to Moody's and/or its licensors and are protected by copyright and other intellectual property laws. Moody's Information is licensed to Distributor by
Moody's. MOODY'S INFORMATION MAY NOT BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS
WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. Moody's® is a registered trademark.
Copyright © 2018, Fitch Ratings, Inc., Fitch Ratings, Ltd. and its subsidiaries (“Fitch”). Reproduction of the Fitch credit ratings in any form is prohibited except with the prior written
permission of Fitch. Fitch does not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and is not responsible for any errors or
omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of ratings. FITCH GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Fitch shall not be liable for any direct, indirect,
incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs or losses
caused by negligence) in connection with any use of the Fitch credit ratings. Fitch's ratings are statements of opinions and are not statements of fact or recommendations to purchase,
hold or sell securities. Fitch credit ratings do not address the market value of securities or the suitability of securities for investment purposes, and should not be relied on as
investment advice.
* In accordance with S&P Global Market Intelligence's contract with Fitch Ratings, only Corporate Sector ratings will be displayed for client use. Corporate Sector Includes Financial
Institutions and Sovereigns.

Exhibit No. JC-3
Page 58 of 141
Fortis Inc. | Credit Ratings

TSX: FTS (MI KEY: 4082871; SPCIQ KEY: 875612)
Ratings Details
Credit Ratings
S&P Moody's
Outlook Negative Stable
Watch
As of Date 3/21/2018 9/26/2016
History A- (OS)
10/18/2016
A- (ON)
2/9/2016
A- (OS)
10/28/2014
A- (ON)
12/13/2013
A- (OS)
5/23/2012
S&P Moody's
Long-term Issuer
A- (ON) Baa3 (OS)

3/21/2018 Initiate
9/26/2016
A- (OS)
10/18/2016
A- (ON)
2/9/2016
A- (OS)
10/28/2014
A- (ON)
12/13/2013
A- (OS)
5/23/2012
Senior Unsecured
BBB+ Baa3
10/3/2016 Initiate
9/26/2016
BBB+
Downgrade
2/9/2016
A- (WR)
5/23/2012
A- (WN)
Initiate
2/22/2012
Remove
10/25/2010
A-
SNL Start
6/19/2007
Preferred Stock
BBB (WR)
5/23/2012
BBB (WN)
2/22/2012
BBB
SNL Start

Exhibit No. JC-3
Page 59 of 141
NextEra Energy, Inc. | Credit Ratings

NYSE: NEE (MI KEY: 3010401; SPCIQ KEY: 270586)
Ratings Details
Credit Ratings
S&P Moody's
Watch
As of Date 3/11/2010 7/29/2016
History A (WN) Baa1 (OS)

1/14/2010 Affirm
12/3/2014
A (OS) Baa1 (OS)

10/26/2006 Affirm
5/22/2014
A (WN) Baa1 (OS)

4/9/2010
A A2 (WN)
10/8/2003 Affirm
1/19/2010
A (WR) A2 (OS)
11/12/2002 Affirm
10/31/2006
S&P Moody's
Long-term Issuer
A- (OS) Baa1 (OS)

Downgrade Affirm
3/11/2010 7/29/2016
A (WN) Baa1 (OS)

1/14/2010 Affirm
12/3/2014
A (OS) Baa1 (OS)

10/26/2006 Affirm
5/22/2014
A (WN) Baa1 (OS)

4/9/2010
A A2 (WN)
10/8/2003 Affirm
1/19/2010
A (WR) A2 (OS)
11/12/2002 Affirm
10/31/2006
Senior Unsecured
BBB
Initiate
5/3/2012
Trust Preferred
BBB (WR) Baa2 (OS)

Downgrade Affirm
3/11/2010 12/3/2014
BBB+ (WN) Baa2 (OS)

1/14/2010 Downgrade
4/9/2010

Exhibit No. JC-3
Page 60 of 141
PNM Resources, Inc. | Credit Ratings

NYSE: PNM (MI KEY: 4006880; SPCIQ KEY: 298441)
Ratings Details
Credit Ratings
S&P Moody's
Outlook Negative Positive
Watch
As of Date 1/16/2018 6/22/2017

Upgrade Initiate
12/21/2015 6/22/2015
BBB (OP)
4/30/2014 5/15/2015
Baa3 (OP)
BBB (OS) Upgrade
Upgrade 1/30/2014
4/5/2013
Ba1 (WP)
BBB- (OS) Affirm
Upgrade 11/8/2013
4/13/2012
Ba1 (OP)
BB (OP) Affirm
Upgrade 6/21/2013
9/26/2011
S&P Moody's
Long-term Issuer
BBB+ (ON) Baa3 (OP)

1/16/2018 Affirm
6/22/2017
BBB+ (OS) Baa3 (OS)

Upgrade Initiate
12/21/2015 6/22/2015
BBB (OP)
4/30/2014
BBB (OS)
Upgrade
4/5/2013
BBB- (OS)

Exhibit No. JC-3
Page 61 of 141
PNM Resources, Inc. | Credit Ratings
S&P Moody's
Upgrade
4/13/2012
BB (OP)
Upgrade
9/26/2011
Senior Unsecured
Remove Remove
5/16/2015 5/15/2015
BBB- Baa3 (OP)

Upgrade Upgrade
4/5/2013 1/30/2014
BB+ Ba1 (WP)

Upgrade Affirm
4/13/2012 11/8/2013
BB Ba1 (OP)
Upgrade Affirm
9/26/2011 6/21/2013
BB- Ba1 (OS)

Downgrade Upgrade
5/6/2008 11/1/2011
BB (WN) Ba2 (WP)

Downgrade Affirm
4/18/2008 9/23/2011
Remove Remove
12/9/2009 7/15/2009
B-2 (WR) NP
Downgrade Downgrade
5/6/2008 4/25/2008
B-1 (WN) P-3 (WN)

Downgrade Affirm
4/18/2008 1/15/2008
A-3 (ON) P-3

3/10/2008 Affirm
4/16/2007
A-3 (OS) P-3

12/19/2007 SNL Start
5/10/2005
A-3

Exhibit No. JC-3
Page 62 of 141
PPL Corporation | Credit Ratings

NYSE: PPL (MI KEY: 4057058; SPCIQ KEY: 185508)
Ratings Details
Credit Ratings
S&P Moody's
Watch
As of Date 6/1/2015 5/11/2015
History BBB (WP) Baa3 (OP)

6/10/2014 Affirm
6/10/2014
BBB (OS) Baa3 (OS)

4/15/2011 Affirm
1/31/2014
BBB (WN) Baa3 (WP)

Downgrade Affirm
3/2/2011 11/8/2013
BBB+ (OS) Baa3 (OS)

Upgrade Downgrade
10/27/2010 4/28/2010
BBB (WP) Baa2 (ON)

4/28/2010 Affirm
5/11/2009
S&P Moody's
Long-term Issuer
A- (OS) Baa2 (OS)

Upgrade Upgrade
6/1/2015 5/11/2015
BBB (WP) Baa3 (OP)

6/10/2014 Affirm
6/10/2014
BBB (OS) Baa3 (OS)

4/15/2011 Affirm
1/31/2014
BBB (WN) Baa3 (WP)

Downgrade Affirm
3/2/2011 11/8/2013
BBB+ (OS) Baa3 (OS)

Upgrade Downgrade
10/27/2010 4/28/2010
BBB (WP) Baa2 (ON)

4/28/2010 Affirm
5/11/2009
A-2
Initiate
10/14/2015
Remove
4/25/2002

Exhibit No. JC-3
Page 63 of 141
Public Service Enterprise Group Incorporated | Credit Ratings

NYSE: PEG (MI KEY: 4050911; SPCIQ KEY: 298482)
Ratings Details
Credit Ratings
S&P Moody's
Watch
As of Date 5/5/2015 7/24/2017
History BBB+ (OP) Baa2 (OP)

5/1/2014 Affirm
11/2/2016
BBB+ (OS) (P)Baa2 (OP)

Upgrade Affirm
4/23/2013 9/9/2015
BBB (OP) (P)Baa2 (OS)

4/11/2011 Affirm
7/17/2008
BBB (OS) (P)Baa2

6/22/2007 SNL Start
12/23/2004
BBB (ON)
9/15/2006
S&P Moody's
Long-term Issuer
BBB+ (OS)
5/5/2015
BBB+ (OP)
5/1/2014
BBB+ (OS)
Upgrade
4/23/2013
BBB (OP)
4/11/2011
BBB (OS)

Exhibit No. JC-3
Page 64 of 141
Public Service Enterprise Group Incorporated | Credit Ratings
S&P Moody's
6/22/2007
BBB (ON)
9/15/2006
Senior Unsecured
BBB Baa1 (OS)

Initiate Upgrade
11/3/2016 7/24/2017
Baa2 (OP)
Affirm
11/2/2016
(P)Baa2 (OP)
Affirm
9/9/2015
(P)Baa2 (OS)
Affirm
7/17/2008
(P)Baa2
Initiate
12/23/2004
A-2 P-2
Upgrade Affirm
6/22/2007 7/24/2017
A-3 (WR) P-2

9/15/2006 Affirm
9/9/2015
A-3 (WU) P-2

12/20/2004 Affirm
9/15/2006
A-3 P-2 (WR)

Downgrade Affirm
7/30/2004 9/26/2003
A-2 P-2 (WN)

SNL Start Affirm
9/12/2003
P-2 (WN)
Affirm
6/16/2003

Exhibit No. JC-3
Page 65 of 141
Southern Company | Credit Ratings

NYSE: SO (MI KEY: 4004298; SPCIQ KEY: 120623)
Ratings Details
Credit Ratings
S&P Moody's
Outlook Negative Negative
Watch
As of Date 3/24/2017 1/19/2018
History A- (OS) Baa2 (OS)

1/10/2017 Affirm
1/5/2018
A- (ON) Baa2 (OS)

8/24/2015 Affirm
3/20/2017
A- (OS) Baa2 (OS)

Downgrade Affirm
8/17/2015 7/11/2016
A (WN) Baa2 (OS)

7/8/2015 Downgrade
5/13/2016
A (ON) Baa1 (ON)

5/24/2013 Affirm
11/5/2015
S&P Moody's
Long-term Issuer
A- (ON)
3/24/2017
A- (OS)
1/10/2017
A- (ON)
8/24/2015
A- (OS)
Downgrade
8/17/2015
A (WN)
7/8/2015
A (ON)
5/24/2013
Senior Unsecured
BBB+ (WR) Baa2 (ON)

Downgrade Affirm
8/17/2015 1/19/2018
A- (WN) Baa2 (OS)

7/8/2015 Affirm
1/5/2018
A- Baa2 (OS)
SNL Start Affirm
3/20/2017
Baa2 (OS)
Affirm
7/11/2016
Baa2 (OS)
Downgrade
5/13/2016
Baa1 (ON)
Affirm
11/5/2015
A-2 (WR) P-2

Downgrade Affirm
8/17/2015 1/19/2018
A-1 (WN) P-2

7/8/2015 Affirm
1/5/2018
A-1 P-2
10/9/2003 Affirm
3/20/2017
A-1 (WR) P-2

12/21/2000 Affirm
7/11/2016
A-1 P-2
SNL Start Affirm

Exhibit No. JC-3
Page 66 of 141
Yields for Aug 2011 - March 2018
Moody's Moody's 10-Year

Public Public Constant
Utility Utility Maturity
Bonds Bonds Treasury
Month Moody's A Moody's Baa 10-Yr T
August, 2011 4.69% 5.22% 2.30%

September, 2011 4.48% 5.11% 1.98%
October, 2011 4.52% 5.24% 2.15%
November, 2011 4.25% 4.93% 2.01%
December, 2011 4.33% 5.07% 1.98%
January, 2012 4.34% 5.06% 1.97%
February, 2012 4.36% 5.02% 1.97%
March, 2012 4.48% 5.13% 2.17%
April, 2012 4.40% 5.11% 2.05%
May, 2012 4.20% 4.97% 1.80%
June, 2012 4.08% 4.91% 1.62%
July, 2012 3.93% 4.85% 1.53%
August, 2012 4.00% 4.88% 1.68%
September, 2012 4.02% 4.81% 1.72%
October, 2012 3.93% 4.56% 1.75%
November, 2012 3.84% 4.42% 1.65%
December, 2012 4.00% 4.56% 1.72%
January, 2013 4.15% 4.66% 1.91%
February, 2013 4.18% 4.74% 1.98%
March, 2013 4.20% 4.72% 1.96%
April, 2013 4.00% 4.49% 1.76% Fig. 1 Moody's Public Utility and Treasury Bond Yields
May, 2013 4.17% 4.65% 1.93% 6.00%
June, 2013 4.53% 5.08% 2.30%
Mohthly Average Yields
July, 2013 4.68% 5.21% 2.58% 5.00%
August, 2013 4.73% 5.28% 2.74% 4.00%
September, 2013 4.80% 5.31% 2.81%
October, 2013 4.70% 5.17% 2.62% 3.00%
November, 2013 4.77% 5.24% 2.72% 2.00%
December, 2013 4.81% 5.25% 2.90%
January, 2014 4.63% 5.09% 2.86% 1.00%
February, 2014 4.53% 5.01% 2.71% 0.00%
March, 2014 4.51% 5.00% 2.72%
February, 2012
May, 2012
February, 2013
May, 2013
February, 2014
May, 2014
February, 2015
May, 2015
February, 2016
May, 2016
February, 2017
May, 2017
February, 2018
August, 2011
August, 2012
August, 2013
August, 2014
August, 2015
August, 2016
August, 2017
November, 2011
November, 2012
November, 2013
November, 2014
November, 2015
November, 2016
November, 2017
April, 2014 4.41% 4.85% 2.71%
May, 2014 4.26% 4.69% 2.56%
June, 2014 4.29% 4.73% 2.60%
July, 2014 4.23% 4.66% 2.54%
August, 2014 4.13% 4.65% 2.42%
Moody's A Moody's Baa 10‐Yr T
September, 2014 4.24% 4.79% 2.53%
October, 2014 4.06% 4.67% 2.30%
November, 2014 4.09% 4.75% 2.33%
December, 2014 3.95% 4.70% 2.21%
January, 2015 3.58% 4.39% 1.88%
February, 2015 3.67% 4.44% 1.98%
March, 2015 3.74% 4.51% 2.04%
April, 2015 3.75% 4.51% 1.94%
May, 2015 4.17% 4.91% 2.20%
June, 2015 4.39% 5.13% 2.36%
July, 2015 4.40% 5.22% 2.32%
August, 2015 4.25% 5.23% 2.17%
September, 2015 4.39% 5.42% 2.17%
October, 2015 4.29% 5.47% 2.07%
November, 2015 4.40% 5.57% 2.26%
December, 2015 4.35% 5.55% 2.24%
January, 2016 4.27% 5.49% 2.09%
February, 2016 4.11% 5.28% 1.78%
March, 2016 4.16% 5.12% 1.89%
April, 2016 4.00% 4.75% 1.81%
May, 2016 3.93% 4.60% 1.81%
June, 2016 3.78% 4.47% 1.64%
July, 2016 3.57% 4.16% 1.50%
August, 2016 3.59% 4.20% 1.56%
September, 2016 3.66% 4.27% 1.63%
October, 2016 3.77% 4.34% 1.76%
November, 2016 4.08% 4.64% 2.14%
December, 2016 4.28% 4.80% 2.49%
January, 2017 4.14% 4.62% 2.43%
February, 2017 4.18% 4.58% 2.42%
March, 2017 4.23% 4.62% 2.48%
April, 2017 4.12% 4.51% 2.30%
May, 2017 4.12% 4.50% 2.30%
June, 2017 3.94% 4.32% 2.19%
July, 2017 3.99% 4.36% 2.32%
August, 2017 3.86% 4.23% 2.21%
September, 2017 3.87% 4.24% 2.20%
October, 2017 3.91% 4.26% 2.36%
November, 2017 3.83% 4.16% 2.35%
December, 2017 3.79% 4.14% 2.40%
January, 2018 3.86% 4.18% 2.58%
February, 2018 4.09% 4.42% 2.86%
March, 2018 4.13% 4.52% 2.84%
Aug 11 - Mar 18 Average 4.17% 4.79% 2.18%

80 months
period min 3.57% 4.14% 1.50%
period max 4.81% 5.57% 2.90%
Last 6 Months 3.94% 4.28% 2.57%

Oct 2012 - Mar 2013 4.05% 4.61% 1.83%
Jan - Jun 2015 3.88% 4.65% 2.07%
Exhibit No. JC-3
Page 67 of 141
Title: Civilian Unemployment Rate
Series ID: UNRATE
Source: US. Bureau of Labor Statistics
Release: Employment Situation
Seasonal Adjustment: Seasonally Adjusted
Frequency: Monthly
Units: Percent
Notes: The unemployment rate represents the number of unemployed as a
percentage of the labor force. Labor force data are restricted to
people 16 years of age and older, who currently reside in 1 of the 50
states or the District of Columbia, who do not reside in institutions
(e.g., penal and mental facilities, homes for the aged), and who are
not on active duty in the Armed Forces.

This rate is also defined as the U‐3 measure of labor
underutilization.
The series comes from the 'Current Population Survey (Household
Survey)'
The source code is: LNS14000000
DATE VALUE DATE VALUE

Jul‐09 9.5 Dec‐13 6.7
Aug‐09 9.6 6 Month Jan‐14 6.6
Sep‐09 9.8 Average Feb‐14 6.7
Oct‐09 10.0 Through Mar‐14 6.6
Nov‐09 9.9 Dec‐09 Apr‐14 6.2
Dec‐09 9.9 9.8 May‐14 6.3
Jan‐10 9.8 Jun‐14 6.1
Feb‐10 9.8 Jul‐14 6.2
Mar‐10 9.9 Aug‐14 6.1
Apr‐10 9.9 Sep‐14 5.9
May‐10 9.6 Oct‐14 5.7
Jun‐10 9.4 Nov‐14 5.8
Jul‐10 9.4 Dec‐14 5.6
Aug‐10 9.5 Jan‐15 5.7
Sep‐10 9.5 Feb‐15 5.5
Oct‐10 9.4 Mar‐15 5.5
Nov‐10 9.8 Apr‐15 5.4 6 Month
Dec‐10 9.3 May‐15 5.5 Average
Jan‐11 9.2 Jun‐15 5.3 Through
Feb‐11 9.0 Jul‐15 5.3 Jun‐15
Mar‐11 9.0 Aug‐15 5.1 5.4
Apr‐11 9.1 Sep‐15 5.1
May‐11 9.0 Oct‐15 5.0
Jun‐11 9.1 Nov‐15 5.0
Jul‐11 9.0 Dec‐15 5.0
Aug‐11 9.0 Jan‐16 4.9
Sep‐11 9.0 Feb‐16 4.9
Oct‐11 8.8 Mar‐16 5.0
Nov‐11 8.6 Apr‐16 5.0
Dec‐11 8.5 May‐16 4.7
Jan‐12 8.3 Jun‐16 4.9
Feb‐12 8.3 Jul‐16 4.9
Mar‐12 8.2 Aug‐16 4.9
Apr‐12 8.2 Sep‐16 4.9
May‐12 8.2 Oct‐16 4.8
Jun‐12 8.2 Nov‐16 4.6
Jul‐12 8.2 Dec‐16 4.7
Aug‐12 8.0 Jan‐17 4.8
Sep‐12 7.8 Feb‐17 4.7
Oct‐12 7.8 Mar‐17 4.5
Nov‐12 7.7 6 Month Apr‐17 4.4
Dec‐12 7.9 Average May‐17 4.3
Jan‐13 8.0 Through Jun‐17 4.4
Feb‐13 7.7 Mar‐13 Jul‐17 4.3
Mar‐13 7.5 7.8 Aug‐17 4.4
Apr‐13 7.6 Sep‐17 4.2
May‐13 7.5 Oct‐17 4.1
Jun‐13 7.5 Nov‐17 4.1 6 Month
Jul‐13 7.3 Dec‐17 4.1 Average
Aug‐13 7.2 Jan‐18 4.1 Through
Sep‐13 7.2 Feb‐18 4.1 Dec‐17
Oct‐13 7.2 Mar‐18 4.1 4.1
Nov‐13 7.0
Exhibit No. JC-3
Page 68 of 141
Deal Profile
Great Plains Energy Inc. acquires Westar Energy, Inc.
Deal Overview Deal Summary
Buyer Great Plains Energy Kansas City, Mo.-based Great Plains Energy Inc. has agreed to acquire
Inc. Topeka, Kan.-based Westar Energy Inc. Westar Energy, Inc. is Kansas'
Target Westar Energy, Inc. largest electric utility.
Deal Type Utility

Agreement Date 5/29/2016 Deal Valuation
Announcement Date 5/31/2016
Announced Deal Value ($000) 8,558,819 Total Deal Value Shares 142,646,974
Short-term and Current Long-term Debt 468,642
($000)
Consideration Breakout
Non-current Long-term Debt ($000) 3,150,478
Cash and Cash Equivalents ($000) 3,471 Cash ($000) 7,274,996
Current Inventories ($000) 301,340 Common Stock ($000) 1,283,823
Announced Transaction Value ($000) 11,873,127
Status Pending
Consideration Not Included in Deal Value Calculation
Expected Completion Date 3/20/2017 - 6/19/2017
Announced Deal Value Per Share ($) 60.00
Debt Assumed ($000) 3,314,309
Deal Pricing Ratios
Announcement Completion
Transaction Value/ EBITDA (x) 11.8 NA
Transaction Value/ Energy 4.87 NA

Operating Revenues (x)
Transaction Value/ Assets (%) 109.88 NA
Price/ Adj. Op. Cash Flows (x) 9.56 NA
Deal Value/ Book Value (%) 231.5 NA
Price/ Tangible Book (%) 231.5 NA
Deal Value/ Earnings (x) 27.7 NA
Transaction Value/ Electricity Sold NM NA

($/MWH)
Transaction Value/ Elec. NM NA

Customer Acquired ($/customer)
Transaction Value/ Gas NM NA

Throughput ($/MCF)
Deal Terms
Description of Consideration
Great Plains Energy Inc. will pay $60.00 per share in a combination of
cash and common stock to acquire each outstanding shares of Westar
Energy, Inc. Westar shareholders will receive $60.00 per share of total
consideration for each share comprised of $51.00 per share in cash
and $9.00 per share in Great Plains Energy common stock, subject to a
7.5 percent collar based upon the Great Plains Energy common stock
price at the time of the closing of the transaction, with the exchange
ratio for the stock consideration ranging between 0.2709 to 0.3148
shares of Great Plains Energy common stock for each Westar share of
common stock, representing a consideration mix of 85 percent cash and
15 percent stock. In addition to this, Great Plains Energy Inc. will also
assume $3.3 billion of Westar's net debt.
Minority Interest Deal? No
Accounting Method Acquisition
Merger of Equals? No
Geographic Expansion? In Market
Maximum Termination Fee ($000) 280,000
Source: SNL Financial | Page 1 of 2

Exhibit No. JC-3
Page 69 of 141
Deal Profile
Great Plains Energy Inc. acquires Westar Energy, Inc.
Minimum Termination Fee ($000) 0
Additional Deal Information
Earnings Accretion Earnings Accretion Est. Cost Savings Est. Cost Savings
Post-Completion Year Deal Accretive? (%) ($) (%) ($000)
1 Neutral NA NA NA NA
2 Accretive NA NA NA NA
Regulatory Approval Detail
Filing Date Agency Returned Regulatory Agency Regulatory Application

Regulatory Agency Date Ruling Approved? Waived?
Federal Energy Regulatory NA NA No No

Commission
Federal Trade Commission NA NA No No
Kansas Corporation Commission NA NA No No
Deal Advisers - Financial Advisers
Adviser Fees Fairness Opinion Fee

Party Advised Adviser Hired? Firm Name Adviser Name ($000) ($000)
Buyer Yes Goldman Sachs & Co - - -
Seller Yes Guggenheim Securities LLC - - -
Deal Advisers - Legal Counsel
Adviser Fees Fairness Opinion Fee

Party Advised Adviser Hired? Firm Name Adviser Name ($000) ($000)
Buyer Yes Bracewell LLP John G. Klauberg - -
Frederick J. Lark
Seller Yes Baker Botts LLP William S. Lamb - -
Michael Didriksen
Source: SNL Financial | Page 2 of 2

Exhibit No. JC-3
Page 70 of 141
Great Plains Energy Incorporated | Financial Highlights
NYSE:GXP (SNL Inst Key: 4057005)
Periods Last Five Quarters /Interims
2015 FQ2 2015 FQ3 2015 FQ4 2016 FQ1 2016 FQ2
Fiscal Period Ended 6/30/2015 9/30/2015 12/31/2015 3/31/2016 6/30/2016
Period Restated? No No No No No
Restatement Date NA NA NA NA NA
Spot Exchange Rate 1.000000 1.000000 1.000000 1.000000 1.000000
Average Exchange Rate 1.000000 1.000000 1.000000 1.000000 1.000000
Accounting Principle U.S. GAAP U.S. GAAP U.S. GAAP U.S. GAAP U.S. GAAP
Balance Sheet Highlights ($000)
Current Assets 788,100 824,000 664,200 611,100 741,800
Net PP&E 8,537,900 8,590,100 8,499,000 8,694,600 8,798,700
Total Assets 10,762,200 10,844,100 10,738,600 10,743,100 11,010,300
Non-current Long-term Debt 3,486,700 3,763,500 3,750,200 3,744,400 3,495,000
Total Equity 3,618,800 3,709,900 3,695,500 3,689,900 3,685,400
Total Capitalization, at Book Value 7,909,900 7,815,600 7,856,200 7,913,700 8,019,600
Income Statement Highlights ($000)
Energy Operating Revenue 609,000 781,400 562,700 572,100 670,800
Operating Expense 489,100 524,700 479,300 482,200 483,500
Recurring EBITDA 218,700 358,900 192,500 195,600 295,800
Recurring EBIT 118,900 256,400 87,000 89,300 187,000
Net Income before Taxes 68,900 205,400 36,000 38,100 49,100
Net Income before Extra 44,400 126,800 22,900 26,400 32,000
Net Income 44,400 126,800 22,900 26,400 32,000
Reported Net Operating Income 119,900 256,700 83,400 89,900 182,300
Cash Flow Statement Highlights ($000)
Cash Flow from Operating Activities 117,300 390,600 145,800 127,300 169,300
Cash Flow from Investing Activities (166,100) (165,600) (172,200) (153,700) (188,300)
Cash Flow from Financing Activities 48,800 (226,200) 26,700 22,900 18,400
Other Cash Flow 0 0 0 0 0
Net Increase in Cash and Cash Equivalents 0 (1,200) 300 (3,500) (600)
Operating Free Cash Flow (31,600) 236,500 (10,400) (6,300) 500
Balance Sheet Ratios/ Capital (%)
Source: S&P Global Market Intelligence | Page 1 of 3

Exhibit No. JC-3
Page 71 of 141
2015 FQ2 2015 FQ3 2015 FQ4 2016 FQ1 2016 FQ2
Total Equity/ Total Assets 33.63 34.21 34.41 34.35 33.47
Working Capital ($000) (460,600) 700 (251,500) (288,200) (635,000)
Long-term Debt/ Book Capital 44.08 48.15 47.74 47.32 43.58
Debt/ Book Capitalization 54.25 52.53 52.96 53.37 54.05
Total Debt/ Total Equity 1.19 1.11 1.13 1.14 1.18
Preferred Incl. Mezzanine/ Book-Value Capital 0.49 0.50 0.50 0.49 0.49
Income Statement Ratios (%)
Recurring Revenue Growth (6.70) (0.67) 1.31 3.51 10.33
Net Income Growth (14.78) (13.98) 17.44 39.68 (27.93)
EPS after Extra Growth (17.6) (13.7) 25.0 41.7 (28.6)
Dividend Payout Ratio 87.50 29.88 175.00 154.41 131.25
Electric Revenue/ Operating Revenue 100.00 100.00 100.00 100.00 100.00
Gas Revenue/ Operating Revenue 0.00 0.00 0.00 0.00 0.00
Operations & Maintenance/ Operating Expense 41.65 39.34 44.11 42.08 40.87
Electric Generation/ Operating Expense 30.40 33.66 27.21 28.12 29.47
Gas Cost/ Operating Expense 0.00 0.00 0.00 0.00 0.00
Operating D&A/ Operating Expense 17.07 15.70 17.67 17.67 17.64
Profitability Ratios (%)
ROAA 1.66 4.69 0.85 0.98 1.18
ROAE 4.91 13.84 2.47 2.86 3.47
ROACE 4.92 13.95 2.46 2.85 3.46
Liquidity Ratios (x)
Pre-tax Interest Coverage Excl. AFUDC 2.36 4.97 1.59 1.71 1.35
Pre-tax Interest and Pfd Coverage Excl. AFUDC 2.34 4.93 1.58 1.70 1.35
Adjusted Cash Flow Coverage 4.84 7.79 3.14 3.89 2.69
Recurring EBITDA/ Adjusted Interest & Preferred 4.26 6.89 3.64 3.69 2.19
Rprtd: Fixed Charge Ratio NA NA NA 1.69 NA
Adjusted Operating Cash Flow/ Capital Expenditures (%) 102.29 199.09 42.27 78.88 108.42
Per Share Information ($)
Common Shares Outstanding (actual) 154,326,427 154,364,189 154,403,671 154,710,946 154,754,049
Avg Diluted Shares (actual) 154,500,000 154,800,000 154,900,000 155,000,000 154,800,000
Basic Book Value per Share 23.20 23.78 23.68 23.60 23.56
Basic Tangible Book Value per Share NA NA 21.53 NA NA

Exhibit No. JC-3
Page 72 of 141
2015 FQ2 2015 FQ3 2015 FQ4 2016 FQ1 2016 FQ2
Price/ Operating Cash Flow 8.1 2.7 7.0 9.7 7.1
Common Dividends Declared per Share 0.2450 0.2450 0.2625 0.2625 0.2625
Basic EPS after Extra 0.28 0.82 0.15 0.17 0.20
Diluted EPS after Extraordinary 0.28 0.82 0.15 0.17 0.20
EPS after Extra Growth (%) (17.6) (13.7) 25.0 41.7 (28.6)
S&P Global Market Intelligence uses a variety of sources to retrieve financial information for each company we cover. For Energy
companies, S&P Global Market Intelligence mines data from documents filed by the company, surveys, and other sources of public
information.

Exhibit No. JC-3
Page 73 of 141
Great Plains, Westar Energy to merge in $14B stock-for-

stock deal
Monday, July 10, 2017 9:24 AM ET
By Sania Khan
Westar Energy Inc. and Great Plains Energy Inc. agreed to a stock-for-stock merger of equals to create a new holding
company with a combined equity value of approximately $14 billion, the companies announced July 10.
Under the terms of the revised merger deal, Westar shareholders will get 1 new share in the new entity for each share
they own, while Great Plains Energy shareholders will get 0.5981 share in the new company for each share. The revised
deal involves no premium paid or received with respect to either company, no transaction debt and no exchange of
cash.
At closing, Westar shareholders will own approximately 52.5% and Great Plains shareholders will own approximately
47.5% of the combined company, which will serve approximately 1 million electric customers in Kansas and nearly
600,000 customers in Missouri.
The companies amended the transaction after Kansas regulators on April 19 rejected their earlier merger application,
finding that the deal was too risky and not in the public interest. But Great Plains and Westar refused to give up,
announcing May 4 that they had filed a petition for reconsideration seeking additional time, until May 31, to possibly
negotiate a revised transaction. The Kansas Corporation Commission on May 23 rejected Great Plains Energy's request
for reconsideration of the commission's order rejecting the company's proposed transaction, a move that prompted the
two companies to extend the completion date of their merger by six months, to Nov. 30 from May 31.
"The logic of combining these two companies is compelling. We are confident we have addressed the regulatory
concerns with our originally-proposed transaction," said Mark Ruelle, president and chief executive officer of Westar
Energy. "We appreciate the Commission welcoming a different way to combine these two companies, preserving the
unique value available only through this particular business combination."
The combined entity will have nearly 13,000 MW of generation capacity, almost 10,000 miles of transmission lines and
more than 51,000 miles of distribution lines with operating headquarters in both Topeka, Kan., and Kansas City, Mo.,
and corporate headquarters in Kansas City. The entity will have a new name, yet to be established.
In connection with the new deal, Great Plains will redeem all of its previously issued debt and convertible preferred stock
in contemplation of the previous plan to acquire Westar Energy.
The revised deal also will see the termination a preferred convertible equity commitment between Great Plains and the
Ontario Municipal Employees Retirement System.
Upon completion of these financial transactions, Great Plains Energy will have not less than $1.25 billion in cash on its
balance sheet. After the closing of the merger, the combined company anticipates repurchasing common stock to return
excess cash to shareholders and maintain a balanced consolidated capital structure.
The combination is expected to be accretive to the companies' respective standalone EPS in the first year after closing
and accretive thereafter. Additionally, Westar shareholders will see an approximately 15% increase in the dividend upon
closing of the deal.
The companies expect dividend growth in line with earnings, a pro forma payout ratio of 60% to 70% and a targeted
compounded annual EPS growth of 6% to 8% from 2016 to 2021.
Additionally, the combination is expected to result in cost savings and net operating efficiencies of about $35 million to

Exhibit No. JC-3
Page 74 of 141
$45 million in 2018 as a result of complementary and contiguous service territories, shared generation assets and an
expanded footprint. Those savings will amount to $140 million to $170 million by 2021 and beyond.
Further, upon closing, the new entity will provide a minimum of $50 million in total rate credits for all customers. The
credit, which exceeds the expected net savings in 2018, will be given to customers as a one-time reduction.
The transaction will not result in any layoffs and the companies plan to achieve any employee reductions through
attrition and normal retirements.
Senior management roles will be shared by executives from both companies. Upon closing, Ruelle will become non-
executive chairman, while Terry Bassham, currently chairman, president and CEO of Great Plains Energy, will serve as
president and CEO and a director of the merged entity.
Tony Somma, currently senior vice president and CFO of Westar, will become executive vice president and CFO of the
new company; Kevin Bryant, currently senior vice president of finance and strategy and CFO of Great Plains, will
become executive vice president and COO; and Greg Greenwood, currently senior vice president of strategy of Westar,
will become executive vice president of strategy and chief administrative officer.
The board will consist of an equal number of directors nominated from each company, including Bassham from the
Great Plains board and Ruelle from the Westar board. The lead independent director will be Charles Chandler IV, who
currently serves as independent chairman of Westar.
The transaction is expected to close in the first half of 2018, subject to the satisfaction of customary closing conditions,
including approval by Great Plains Energy's shareholders and Westar Energy's shareholders and the receipt of
regulatory approvals, including the Federal Energy Regulatory Commission, the Missouri Public Service Commission,
the Kansas Corporation Commission, the U.S. Nuclear Regulatory Commission and clearance under the Hart-Scott-
Rodino Act.
The companies said they will continue to work with Kansas regulatory staff and the other parties as well as with
regulatory staff in both Kansas and Missouri and other parties to gain necessary approvals "as expeditiously as
possible."
Goldman Sachs & Co. LLC is serving as lead financial adviser, and Barclays and Lazard as financial advisers to Great
Plains Energy. Bracewell LLP is serving as legal adviser to the company.
Guggenheim Securities LLC is serving as exclusive financial adviser and Baker Botts LLP is serving as legal adviser to
Westar Energy.

Exhibit No. JC-3
Page 75 of 141
Sempra closes Oncor majority acquisition

Friday, March 09, 2018 2:47 PM ET
By Selene Balasta
A day after receiving approval from the Public Utility Commission of Texas, Sempra Energy on March 9 completed its
acquisition of Energy Future Holdings Corp. and its 80% ownership interest in Oncor Electric Delivery Co. LLC.
"The completion of this acquisition — the biggest in our 20-year history — represents an important milestone in the
execution of our growth strategy moving forward," said Sempra Energy Chairman, President and CEO Debra Reed.
Allen Nye, former senior vice president and general counsel, will become Oncor's CEO following the close of the deal.
He succeeds Bob Shapard, who will now take over as Oncor's chairman. Oncor will retain its headquarters in Dallas.
The $9.45 billion transaction announced Aug. 21, 2017, was cleared by the U.S. Bankruptcy Court for the District of
Delaware in February 2018.
Energy Future Holdings filed for Chapter 11 reorganization in April 2014 with more than $49 billion in liabilities.

Exhibit No. JC-3
Page 76 of 141
Vectren Considers Options After Takeover Interest
By Matthew Monks Bloomberg August 22, 2017 1:03 PM August 22, 2017 2:59 PM
 Utility working with financial adviser after takeover interest
 Shares of Vectren jump 9.1 percent after takeover interest
Vectren Corp., a Midwestern gas and electric utility with a market value of almost $5.5 billion, is considering
options including a potential sale after receiving takeover interest, people familiar with the matter said.
The Evansville, Indiana‐based company has been working with a financial adviser after being approached by at
least one potential buyer, said the people, who asked not to be identified because the matter wasn’t public.
Vectren hasn’t formally put itself up for sale and could decide to remain independent, the people said. The
identity of the potential suitor couldn’t immediately be learned.
Vectren rose as much as 9.1 percent in trading in New York Tuesday, the most since November 2008. Shares were
up 8.3 percent to $66.40 at 2:54 p.m.
A representative for Vectren declined to comment.

The U.S. power sector is experiencing a takeover boom as utilities strike deals to counter weak electricity demand
and rising costs. High stock prices and access to relatively cheap debt are also driving the trend.
Utilities deals valued at a total of $88 billion have been agreed to this year, an increase of 40 percent from the
same period in 2016, according to data compiled by Bloomberg.
Potential M&A targets in utilities market: Gadfly
Sempra Energy agreed this month to pay $9.45 billion for Texas power distributor Oncor Electric Delivery Co.,
topping a bid by Berkshire Hathaway Inc. Two other utilities, AltaGas Ltd. and Hydro One Ltd., have announced
acquisitions of more than $5 billion this year.
1

Exhibit No. JC-3
Page 77 of 141
Vectren owns three utilities that provide electricity and natural gas to 1.2 million customers in Indiana and Ohio,
according to an investor presentation in May. It has a non‐utility division that offers underground pipeline
construction and repair services. That unit also helps municipalities and businesses lower their power costs by
outfitting facilities with energy‐efficient equipment.
2

Exhibit No. JC-3
Page 78 of 141
Report: Midwest utility Vectren initiates sale process

Tuesday, February 06, 2018 4:13 PM ET
By Lucas Bifera
Vectren Corp. launched a sale process led by Bank of America Merrill Lynch following earlier takeover interest in the
utility, according to a Feb. 6 report by Bloomberg News, citing DealReporter.
The report by DealReporter follows earlier indications in August 2017 that Vectren had received unsolicited third-party
interest in buying the Midwest natural gas and electric utility from at least one unnamed buyer, according to Bloomberg.
News of the sale process launch pushed Vectren stock up more than 5% to end the day at $61.79 per share on more
than four-times average volume. Vectren's board may be interested in a takeout price above $70 per share, the report
added.
A timeline for the sale process, including bid submissions, has yet to be communicated, though DealReporter suggested
that only a limited number of potential buyers may be invited to bid, Bloomberg reported.
Vectren representatives did not immediately respond to a request for comment Feb. 6.
The utility serves about 900,000 natural gas customers in central and southern Indiana and a neighboring portion of
central-western Ohio and 111,000 electricity customers in southwestern Indiana. Its regulated utility operations are
Indiana Gas Co. Inc., known as Vectren North; Southern Indiana Gas and Electric Co. Inc., known as Vectren South; and
Vectren Energy Delivery of Ohio Inc.

Exhibit No. JC-3
Page 79 of 141
Dominion Energy, SCANA to merge in $14.6B blockbuster

utility deal
Wednesday, January 03, 2018 8:10 AM ET
By Saad A. Sulehri
Dominion Energy Inc. on Jan. 3 said it agreed to acquire SCANA Corp. in a stock-for-stock deal valued at about $7.9
billion. Including the assumption of debt, the transaction is valued at about $14.6 billion.
Under the deal, SCANA shareholders will receive 0.6690 share of Dominion Energy's common stock for each share of
SCANA, the equivalent of $55.35 per share. That represents an approximate 30.6% premium to the volume-weighted
average stock price of SCANA's last 30 trading days ended Jan. 2, 2018. Upon closing of the merger, SCANA
shareholders would own an estimated 13% of the combined company.
Dominion was one of several utilities believed to be interested in acquiring the struggling Cayce, S.C.-based company in
the wake of the failed V.C. Summer nuclear expansion. Other interested parties included NextEra Energy Inc., Duke
Energy Corp. and Southern Co. The same utilities have been reported as interested suitors for South Carolina utility
Santee Cooper, which owns a 45% stake in the V.C. Summer expansion project. Santee Cooper is known legally as
South Carolina Public Service Authority.
"SCANA is a natural fit for Dominion Energy," said Dominion Energy Chairman, President and CEO Thomas Farrell II.
"Our current operations in the Carolinas — the Dominion Energy Carolina Gas Transmission, Dominion Energy North
Carolina and the Atlantic Coast Pipeline — complement SCANA's, [South Carolina Electric & Gas Co.]'s and PSNC
Energy's operations. This combination can open new expansion opportunities as we seek to meet the energy needs of
people and industry in the Southeast."
SCANA's operations include service to about 1.6 million electric and natural gas residential and business accounts in
South Carolina and North Carolina and 5,800 MW of electric generation capacity.
The combined company would operate in 18 states from Connecticut to California, delivering energy to approximately
6.5 million regulated customer accounts in eight states. The combined entity would have an electric generating portfolio
of 31,400 MW and 93,600 miles of electric transmission and distribution lines. It also would have a natural gas pipeline
network totaling 106,400 miles and operate natural gas storage systems with 1 Tcf of capacity.
Dominion said it will fund $1.3 billion of cash payments to all SCE&G electric customers within 90 days after closing and
lower rates by an additional 5% from current levels to offset previous and future costs related to the withdrawn V.C.
Summer units 2 and 3. The cash payments, worth $1,000 for the average residential electric customer, would vary
based on the amount of electricity used in the 12 months prior to the merger closing. The 5% rate cut equates to more
than $7 a month for a typical SCE&G residential customer, resulting from a $575 million refund of amounts previously
collected from customers and savings of lower federal corporate taxes under recently enacted federal tax reform.
"We believe this merger will provide significant benefits to SCE&G's customers, SCANA's shareholders and the
communities SCANA serves. It would lock in significant and immediate savings for SCE&G customers — including what
we believe is the largest utility customer cash refund in history — and guarantee a rapidly declining impact from the V.C.
Summer project," Farrell said.
Further, Dominion agreed to write-off more than $1.7 billion of existing V.C. Summer 2 and 3 capital and regulatory
assets, which would never be collected from customers. This would allow for the elimination of all related customer costs
over 20 years instead of over the previously proposed 50 to 60 years. It also will support the completion of the $180
million acquisition of the 540-MW combined-cycle Columbia Energy Center with no cost to customers to fulfill generation
needs.

Exhibit No. JC-3
Page 80 of 141
The companies expect to close the transaction in 2018, subject approval of SCANA's shareholders, clearance from the
U.S. Federal Trade Commission and the U.S. Department of Justice under the Hart-Scott-Rodino Act, and authorization
of the Nuclear Regulatory Commission and Federal Energy Regulatory Commission. The transaction also will be subject
to review and approval from the public service commissions of South Carolina, North Carolina and Georgia.
At closing, the acquisition would be accretive to Dominion Energy's earnings and increase its compounded annual EPS
target growth rate through 2020 to 8% or higher.
McGuireWoods LLP served as legal counsel and Morgan Lewis & Bockius LLP as tax counsel to Dominion Energy.
Credit Suisse Securities (USA) LLC acted as the company's financial adviser for the transaction.
Mayer Brown LLP acted as legal counsel to SCANA. Morgan Stanley & Co. LLC acted as lead financial adviser and RBC
Capital Markets LLC acted as financial adviser to SCANA.

Exhibit No. JC-3
Page 81 of 141
MARKETS
Wednesday's Energy Stocks: SCANA surges 22% on
Dominion merger
Wednesday, January 03, 2018 5:29 PM ET
By Selene Balasta
After announcing a $14.6 billion blockbuster utility deal, SCANA Corp. stock skyrocketed 22.59% on about eight times
the average volume, closing at $47.65, while Dominion Energy Inc. retreated 3.85% on brisk volume, ending the day at
$77.19.
Meanwhile, broader markets continued their winning streak and closed the Wednesday, Jan. 3, trading session with
gains. The Dow Jones Industrial Average climbed 0.40% to close at 24,922.68, and the S&P 500 advanced 0.64% to
finish at 2,713.06.
Wall Street appears to agree that Dominion's offer is a good step forward at this early stage. However, there is one
sizable yet unique hurdle among the obstacles to closing the deal: the sale of fellow South Carolina utility Santee
Cooper.
"In this case especially, Dominion will have to pull out all the stops to demonstrate that their offer is the best deal for
customers, particularly given the uncertainty facing [SCANA's] rates over the coming months," Height Securities LLC
analyst Katie Bays wrote in a research report.
Moody's changed Dominion's rating outlook to negative from stable, and affirmed its Baa2 senior unsecured rating and
P-2 short-term commercial paper rating. Meanwhile, Fitch affirmed Dominion's issuer default rating at BBB+, with a
stable outlook.
Sempra Energy rose 2.65% on thick volume to finish at $108.14, a trading day after unveiling plans to sell $2.5 billion of
its common shares and $1.5 billion of shares of its mandatory convertible preferred stock, series A, in two separate
public offerings. The proceeds from both offerings will finance costs related to the company's acquisition of Energy
Future Holdings Corp., including its approximately 80% ownership stake in Oncor Electric Delivery Co. LLC.
Among other utilities, NextEra Energy Inc. declined 2.12% on strong volume to close at $151.80, Great Plains Energy
Inc. lost 1.80% in about average trading to end at $31.60 and PG&E Corp. closed down 1.62% in light trading to finish at
$43.77.
In the midstream sector, American Midstream Partners LP climbed 2.93% to settle at $14.05, while Targa Resources
Corp. added 1.71% to finish at $49.93, both in robust trading. The companies started full operations at their joint
venture Cayenne Pipeline LLC, an NGL pipeline on the Gulf of Mexico with an initial capacity of 40,000 barrels per day.
Enterprise Products Partners LP will expand its planned cryogenic natural gas processing facility near Orla, Texas, by
another 300 MMcf/d, through the addition of a third processing train. The partnership moved up 2.79% in active trading
to finish at $27.63.
According to the coal analysts at Seaport Global Securities LLC, several coal companies are well positioned to return
value to shareholders through share buybacks in 2018, including Alliance Resource Partners LP, which ticked up 1.49%
on light volume to $20.40, and Arch Coal Inc., which shed 1.74% in light trading to $93.77.
Amid the coldest weather yet this season and the first major snowstorm of 2018 crossing major heat-consuming regions,
February natural gas futures retreated Wednesday, Jan. 3, as forward-looking market participants see milder weather
and lower demand ahead.

Exhibit No. JC-3
Page 82 of 141
Market prices and index values are current as of the time of publication and are subject to change.

Exhibit No. JC-3
Page 83 of 141
PG&E suspends common stock dividend on potential

wildfire repercussions
Wednesday, December 20, 2017 6:32 PM ET
By Selene Balasta
PG&E Corp.'s board of directors on Dec. 20 suspended a quarterly cash dividend on the company's common stock
starting with the fourth quarter of 2017, citing potential liabilities related to the devastating wildfires in Northern California
last October.
Likewise, Pacific Gas and Electric Co.'s board also suspended the dividend on the utility's preferred stock, beginning
with the three-month period ending Jan. 31, 2018, for the same reason.
"After extensive consideration and in light of the uncertainty associated with the causes and potential liabilities
associated with these wildfires as well as state policy uncertainties, the PG&E boards determined that suspending the
common and preferred stock dividends is prudent with respect to cash conservation and is in the best long-term
interests of the companies, our customers and our shareholders," said PG&E Chair of the Board Richard Kelly.
PG&E stock was down 1.79% to $51.12 in slightly below-average trading on Dec. 20, but dropped steeply in after-hours
trading. About the time the fires began, shares were trading around $68-$69. Its most recent dividend was 53
cents/share. Moody's in October estimated the company's liability for damage caused by the wildfires could be more
than $2 billion.

Exhibit No. JC-3
Page 84 of 141
AVANGRID, INC. NYSE-AGR RECENT

Median: NMF) P/E RATIO 1.05 YLD 3.8%
LINE
Low:
38.9
32.4
46.7
35.4
53.5
37.4
50.9
45.2
Target Price Range
2021 2022 2023
TECHNICAL 1 Raised 1/5/18 Options: Yes
80
BETA .35 (1.00 = Market) 60
50
Ann’l Total
High 50 (+10%) 6% 25
Low 35 (-25%) -2% 20
A M J J A S O N D
to Buy 0 0 1 1 1 1 1 1 2 10
Options 0 0 0 0 0 0 0 1 0
to Sell 0 0 0 0 0 0 0 0 0 7.5
% TOT. RETURN 1/18
Percent 9 1 yr. 30.3 17.3
to Buy 121 119 104 shares 6
to Sell 80 96 95 3 yr. — 38.0
traded 3
Hld’s(000) 43670 42981 44774 5 yr. — 85.6
AVANGRID, Inc. was formed through a 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 © VALUE LINE PUB. LLC 21-23
merger between Iberdrola USA, Inc. and -- -- -- -- -- -- - - 14.14 19.48 19.10 19.60 20.40 Revenues per sh 22.75
UIL Holdings Corporation in December of -- -- -- -- -- -- -- 3.44 4.74 4.90 5.20 5.50 ‘‘Cash Flow’’ per sh 6.50
2015. Iberdrola S.A., a worldwide leader in -- -- -- -- -- -- -- 1.05 1.98 2.15 2.30 2.45 Earnings per sh A 3.00
the energy industry, owns 81.5% of -- -- -- -- -- -- -- -- 1.73 1.73 1.76 1.80 Div’d Decl’d per sh ■B 1.95
AVANGRID. The predecessor company was -- -- -- -- -- -- -- 3.50 5.52 7.10 6.45 5.85 Cap’l Spending per sh 5.75
founded in 1852 and is headquartered in -- -- -- -- -- -- - - 48.74 48.90 49.30 49.90 50.55 Book Value per sh C 53.25
New Gloucester, Maine. It was incorportated -- -- -- -- -- -- - - 308.86 308.99 309.00 309.00 309.00 Common Shs Outst’g D 309.00
in 1997 in New York under the name NGE -- -- -- -- -- -- -- 33.5 20.5 21.2 Bold figures are Avg Ann’l P/E Ratio 14.5
Resources, Inc. AVANGRID began trading -- -- -- -- -- -- -- 1.69 1.08 1.05 Value Line Relative P/E Ratio .80
estimates
on the NYSE on December 17, 2015. -- -- -- -- -- -- -- -- 4.3% 3.8% Avg Ann’l Div’d Yield 4.5%
CAPITAL STRUCTURE as of 9/30/17 -- -- -- -- -- - - 4594.0 4367.0 6018.0 5900 6050 6300 Revenues ($mill) 7050
Total Debt $5765 mill. Due in 5 Yrs $2649 mill. -- -- -- -- -- - - 424.0 267.0 611.0 660 720 765 Net Profit ($mill) 895
LT Debt $4767 mill. LT Interest $233 mill. -- -- -- -- -- - - 39.9% 11.3% 37.4% 30.5% 21.0% 21.0% Income Tax Rate 21.0%
(LT interest earned: 4.5x) -- -- -- -- -- -- 6.8% 12.7% 7.5% 7.0% 7.0% 6.0% AFUDC % to Net Profit 6.0%
Leases, Uncapitalized Annual rentals $106 mill. -- -- -- -- -- - - 16.8% 23.1% 23.0% 24.0% 26.0% 25.0% Long-Term Debt Ratio 26.5%
-- -- -- -- -- - - 83.2% 76.9% 77.0% 76.0% 74.0% 75.0% Common Equity Ratio 73.5%
Pension Assets-12/16 $2672 mill. -- -- -- -- -- - - 14956 19583 19619 20075 20775 20775 Total Capital ($mill) 22300
Oblig $3448 mill. -- -- -- -- -- - - 17099 20711 21548 22900 24000 24875 Net Plant ($mill) 27100
Pfd Stock None
-- -- -- -- -- -- 3.7% 2.1% 3.8% 4.0% 4.0% 4.5% Return on Total Cap’l 4.5%
Common Stock 309,005,272 shs. -- -- -- -- -- -- 3.4% 1.8% 4.0% 4.5% 4.5% 5.0% Return on Shr. Equity 5.5%
as of 11/1/17 -- -- -- -- -- -- 3.4% 1.8% 4.0% 4.5% 4.5% 5.0% Return on Com Equity E 5.5%
MARKET CAP: $14 billion (Large Cap) -- -- -- -- -- -- 3.4% 1.8% 1.4% 1.0% 1.0% 1.5% Retained to Com Eq 2.0%
ELECTRIC OPERATING STATISTICS -- -- -- -- -- -- -- -- 66% 81% 76% 73% All Div’ds to Net Prof 67%
2014 2015 2016 BUSINESS: AVANGRID, Inc., formerly Iberdrola USA, Inc., is a
% Change Retail Sales (KWH) NA NA NA tomer class not available. Generating sources not available. Fuel
Avg. Indust. Use (MWH) NA NA NA diversified energy and utility company that serves 2.2 million elec- costs: 21% of revenues. ’16 depreciation rate: 3.0%. Iberdrola owns
Avg. Indust. Revs. per KWH (¢) NA NA NA tric customers in New York, Connecticut, and Maine and 1 million 81.5% of stock. Has 6,800 employees. Chairman: José Ignacio
Capacity at Peak (Mw) NA NA NA gas customers in New York, Connecticut, Massachusetts and Sanchez Galan. CEO: James P. Torgerson. Incorporated: New
Annual Load Factor (%) NA NA NA Maine. Has a nonregulated generating subsidiary focused on wind York. Address: 180 Marsh Hill Road, Orange, Connecticut 06477.
% Change Customers (yr-end) NA NA +.5 power, with 6.5 gigawatts of capacity. Revenue breakdown by cus- Telephone: 207-629-1200. Internet: www.avangrid.com.
Fixed Charge Cov. (%) 347 One of AVANGRID’s utilities received

183 415 storage and trading businesses. These
ANNUAL RATES Past
a rate increase at the start of 2018.
have been in the red for a while, and the
of change (per sh) 10 Yrs. 5 Yrs. The Connecticut regulators approved a
to ’21-’23 company estimated they lost $0.14-$0.18 a
Revenues -- -- settlement for Southern Connecticut Gas
NMF share in 2017. We have included these
‘‘Cash Flow’’ -- -- NMF
calling for tariff hikes totaling $11 million losses in our earnings presentation. The
Earnings -- -- NMF
Dividends -- -- through the end of 2020. The order was
NMF company has announced the sale of the
Book Value -- -- based on a return of 9.25% on a common-
NMF trading operation for $64.5 million in cash.
QUARTERLY REVENUES ($ mill.) equity ratio of 52%. Also, revenues and The sale is expected to close on March 1st.
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year volume are now decoupled. We expect a dividend increase this
Rate relief should enable the compa- year. AVANGRID has stated its ‘‘commit-
2015 1227 939 1048 1153 4367.0
2016 1670 1439 1418 1491 6018.0 ny’s earnings to increase in 2018 and ment’’ to hike the disbursement in 2018.
2017 1758 1331 1341 1470 5900 2019. Southern Connecticut Gas isn’t the We look for a small boost because the pay-
2018 1800 1375 1375 1500 6050 only utility in the state that is benefiting out ratio is high, even by utility standards.
2019 1875 1425 1425 1575 6300 from rate increases. United Illuminating’s The balance sheet is solid. AVANGRID
EARNINGS PER SHARE A electric tariffs rose at the start of the new has the highest common-equity ratio of
Cal- Full
endar Mar.31 Jun.30 Sep.30 Dec.31 Year year, and will climb again at the start of any company in this industry. Its Finan-
2015 .42 .04 .22 .37 1.05 2019. AVANGRID’s two utilities in New cial Strength rating is B++.
2016 .63 .33 .35 .67 1.98 York will get rate hikes this year and next, This stock was one of the top per-
2017 .77 .39 .32 .67 2.15 on May 1st. But the company’s regulated formers among utility issues in 2017.
2018 .85 .40 .35 .70 2.30 business is not the only source of profit The stock price soared 34%. We attribute
2019 .90 .40 .40 .75 2.45 growth. Its renewable-energy segment is this outperformance to takeover specula-
adding wind and solar projects. What’s tion. Like most utility equities, the quota-
endar Mar.31 Jun.30 Sep.30 Dec.31 Year more, this operation is approaching its tion has retreated in 2018. The dividend
goal of getting 75%-85% of its income from yield is only about average for a utility,
2014 -- -- -- -- --
2015 -- -- -- -- -- projects whose output is either contracted and with the recent price well within our
2016 -- .432 .432 .432 1.30 or hedged. This provides more stability 2021-2023 Target Price Range, total re-
2017 .432 .432 .432 .432 1.73 than merchant (i.e., noncontracted) power. turn potential is low.
2018 .432 AVANGRID has decided to sell its gas- Paul E. Debbas, CFA February 16, 2018
(A) Diluted EPS. Excl. nonrecurring gain: ’16, intangibles. In ’16: $6.8 bill., $21.86/sh. (D) In ME in ’14: 9.45%; earned on avg. common eq., Company’s Financial Strength B++
6¢. Next earnings report due late Feb. (B) millions. (E) Rate base: net original cost. Rate ’16: 4.1%. Regulatory Climate: Below Average. Stock’s Price Stability 90
Div’ds paid in early Jan., April, July, and Oct. ■ allowed on com. eq. in NY in ’16: 9.0%; in CT Price Growth Persistence NMF
Dividend reinvestment plan available. (C) Incl. in ’17: 9.1% elec.; in CT in ’16: 9.36% gas; in Earnings Predictability NMF
Exhibit No. JC-3
Page 85 of 141
Proxy Group Share Turnover Ratio
Avg. 3-mo Avg. No. Shares Shares Available Share TO

No. Company Ticker Beta Float % Daily Vol. Trading Days Outstanding for Public Trading Ratio
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
(i)/(h) (f)*(g)/(h)
1 Alliant Energy LNT 0.70 99.82% 1,957,158 250 231,481,828 231,068,804 2.11

2 Amer. Elec. Power AEP 0.65 99.98% 3,331,619 250 492,290,000 492,181,158 1.69
3 Ameren Corp. AEE 0.65 99.56% 1,835,920 250 243,343,392 242,275,343 1.89
4 CenterPoint Energy CNP 0.85 99.76% 4,634,438 250 431,470,883 430,417,078 2.69
5 CMS Energy CMS 0.65 99.33% 3,186,105 250 282,450,924 280,554,524 2.82
6 DTE Energy DTE 0.65 99.33% 1,282,454 250 179,692,521 178,479,767 1.78
7 Duke Energy DUK 0.60 99.91% 4,168,994 250 743,155,000 742,473,736 1.40
8 Entergy Corp. ETR 0.65 99.69% 1,372,827 250 181,487,012 180,933,360 1.89
9 Fortis, Inc. FTS 0.70 99.31% 1,188,734 250 423,047,800 420,125,177 0.70
10 NextEra Energy NEE 0.65 99.76% 2,256,445 250 471,436,476 470,286,384 1.20
11 PNM Resources, Inc. PNM 0.75 99.09% 603,319 250 84,431,624 83,663,074 1.79
12 PPL Corp. PPL 0.75 99.97% 6,686,675 250 694,276,405 694,068,933 2.41
13 Public Serv. Enterprise PEG 0.70 99.78% 3,273,492 250 504,764,707 503,671,800 1.62
14 Southern Co. SO 0.55 99.91% 6,952,287 250 1,012,547,889 1,011,662,464 1.72
15 Avangrid, Inc. AGR 0.35 18.26% 553,408 250 309,086,480 56,450,479 0.45
Notes:
1) Betas sourced from Value Line reports dated 1/26/2018, 2/16/2018, and 3/16/2018.
2) All other data obtained from S&P Global MI on 4/19/2018.
Exhibit No. JC-3
Page 86 of 141

Release Date: December 16, 2015
For immediate release
Information received since the Federal Open Market Committee met in October suggests that economic
activity has been expanding at a moderate pace. Household spending and business fixed investment
have been increasing at solid rates in recent months, and the housing sector has improved further;
however, net exports have been soft. A range of recent labor market indicators, including ongoing job
gains and declining unemployment, shows further improvement and confirms that underutilization of
labor resources has diminished appreciably since early this year. Inflation has continued to run below
the Committee's 2 percent longer‐run objective, partly reflecting declines in energy prices and in prices
of non‐energy imports. Market‐based measures of inflation compensation remain low; some survey‐
based measures of longer‐term inflation expectations have edged down.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price
stability. The Committee currently expects that, with gradual adjustments in the stance of monetary
policy, economic activity will continue to expand at a moderate pace and labor market indicators will
continue to strengthen. Overall, taking into account domestic and international developments, the
Committee sees the risks to the outlook for both economic activity and the labor market as balanced.
Inflation is expected to rise to 2 percent over the medium term as the transitory effects of declines in
energy and import prices dissipate and the labor market strengthens further. The Committee continues
to monitor inflation developments closely.
The Committee judges that there has been considerable improvement in labor market conditions this
year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent
objective. Given the economic outlook, and recognizing the time it takes for policy actions to affect
future economic outcomes, the Committee decided to raise the target range for the federal funds rate
to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase,
thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate,
the Committee will assess realized and expected economic conditions relative to its objectives of
maximum employment and 2 percent inflation. This assessment will take into account a wide range of
information, including measures of labor market conditions, indicators of inflation pressures and
inflation expectations, and readings on financial and international developments. In light of the current
shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress
toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that
will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for
some time, below levels that are expected to prevail in the longer run. However, the actual path of the
federal funds rate will depend on the economic outlook as informed by incoming data.
1

Exhibit No. JC-3
Page 87 of 141
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of
agency debt and agency mortgage‐backed securities in agency mortgage‐backed securities and of rolling
over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level
of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer‐
term securities at sizable levels, should help maintain accommodative financial conditions.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice
Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome
H. Powell; Daniel K. Tarullo; and John C. Williams.
2

Exhibit No. JC-3
Page 88 of 141
Press Release June 14, 2017

Federal Reserve issues FOMC statement
Information received since the Federal Open Market Committee met in May indicates that the labor
market has continued to strengthen and that economic activity has been rising moderately so far this year.
Job gains have moderated but have been solid, on average, since the beginning of the year, and the
unemployment rate has declined. Household spending has picked up in recent months, and business fixed
investment has continued to expand. On a 12-month basis, inflation has declined recently and, like the
measure excluding food and energy prices, is running somewhat below 2 percent. Market-based measures
of inflation compensation remain low; survey-based measures of longer-term inflation expectations are
little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price
stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary
policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen
somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the
near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term
risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation
developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to raise the
target range for the federal funds rate to 1 to 1-1/4 percent. The stance of monetary policy remains
accommodative, thereby supporting some further strengthening in labor market conditions and a sustained
return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the
Committee will assess realized and expected economic conditions relative to its objectives of maximum
employment and 2 percent inflation. This assessment will take into account a wide range of information,
including measures of labor market conditions, indicators of inflation pressures and inflation expectations,
and readings on financial and international developments. The Committee will carefully monitor actual
and expected inflation developments relative to its symmetric inflation goal. The Committee expects that
economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate;
the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the
longer run. However, the actual path of the federal funds rate will depend on the economic outlook as
informed by incoming data.
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of
agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling
over maturing Treasury securities at auction. The Committee currently expects to begin implementing a
balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.
This program, which would gradually reduce the Federal Reserve's securities holdings by decreasing
reinvestment of principal payments from those securities, is described in the accompanying addendum to
the Committee's Policy Normalization Principles and Plans.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice
Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; and
Jerome H. Powell. Voting against the action was Neel Kashkari, who preferred at this meeting to maintain
the existing target range for the federal funds rate.

Exhibit No. JC-3
Page 89 of 141
For release at 2 p.m. EST December 13, 2017
Information received since the Federal Open Market Committee met in November
indicates that the labor market has continued to strengthen and that economic activity has
been rising at a solid rate. Averaging through hurricane-related fluctuations, job gains
have been solid, and the unemployment rate declined further. Household spending has
been expanding at a moderate rate, and growth in business fixed investment has picked
up in recent quarters. On a 12-month basis, both overall inflation and inflation for items
other than food and energy have declined this year and are running below 2 percent.
Market-based measures of inflation compensation remain low; survey-based measures of
longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. Hurricane-related disruptions and rebuilding have
affected economic activity, employment, and inflation in recent months but have not
materially altered the outlook for the national economy. Consequently, the Committee
continues to expect that, with gradual adjustments in the stance of monetary policy,
economic activity will expand at a moderate pace and labor market conditions will
remain strong. Inflation on a 12-month basis is expected to remain somewhat below
2 percent in the near term but to stabilize around the Committee’s 2 percent objective
over the medium term. Near-term risks to the economic outlook appear roughly
balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the
Committee decided to raise the target range for the federal funds rate to 1-1/4 to
1-1/2 percent. The stance of monetary policy remains accommodative, thereby
supporting strong labor market conditions and a sustained return to 2 percent inflation.
(more)
Exhibit No. JC-3
Page 90 of 141
For release at 2 p.m. EST December 13, 2017

-2 -
In determining the timing and size of future adjustments to the target range for the
federal funds rate, the Committee will assess realized and expected economic conditions
relative to its objectives of maximum employment and 2 percent inflation. This
assessment will take into account a wide range of information, including measures of
labor market conditions, indicators of inflation pressures and inflation expectations, and
readings on financial and international developments. The Committee will carefully
monitor actual and expected inflation developments relative to its symmetric inflation
goal. The Committee expects that economic conditions will evolve in a manner that will
warrant gradual increases in the federal funds rate; the federal funds rate is likely to
remain, for some time, below levels that are expected to prevail in the longer run.
However, the actual path of the federal funds rate will depend on the economic outlook as
Voting for the FOMC monetary policy action were Janet L. Yellen, Chair;
William C. Dudley, Vice Chairman; Lael Brainard; Patrick Harker; Robert S. Kaplan;
Jerome H. Powell; and Randal K. Quarles. Voting against the action were Charles L.
Evans and Neel Kashkari, who preferred at this meeting to maintain the existing target
range for the federal funds rate.
-0 -
Exhibit No. JC-3
Page 91 of 141
For release at 2 p.m. EDT March 21, 2018
Information received since the Federal Open Market Committee met in January
indicates that the labor market has continued to strengthen and that economic activity has
been rising at a moderate rate. Job gains have been strong in recent months, and the
unemployment rate has stayed low. Recent data suggest that growth rates of household
spending and business fixed investment have moderated from their strong fourth-quarter
readings. On a 12-month basis, both overall inflation and inflation for items other than
food and energy have continued to run below 2 percent. Market-based measures of
inflation compensation have increased in recent months but remain low; survey-based
measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The economic outlook has strengthened in recent
months. The Committee expects that, with further gradual adjustments in the stance of
monetary policy, economic activity will expand at a moderate pace in the medium term
and labor market conditions will remain strong. Inflation on a 12‑month basis is
expected to move up in coming months and to stabilize around the Committee’s 2 percent
objective over the medium term. Near-term risks to the economic outlook appear roughly
balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the
Committee decided to raise the target range for the federal funds rate to 1‑1/2 to 1-3/4
percent. The stance of monetary policy remains accommodative, thereby supporting
strong labor market conditions and a sustained return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the
federal funds rate, the Committee will assess realized and expected economic conditions
relative to its objectives of maximum employment and 2 percent inflation. This
(more)
Exhibit No. JC-3
Page 92 of 141

-2-
assessment will take into account a wide range of information, including measures of
labor market conditions, indicators of inflation pressures and inflation expectations, and
readings on financial and international developments. The Committee will carefully
monitor actual and expected inflation developments relative to its symmetric inflation
goal. The Committee expects that economic conditions will evolve in a manner that will
warrant further gradual increases in the federal funds rate; the federal funds rate is likely
to remain, for some time, below levels that are expected to prevail in the longer run.
However, the actual path of the federal funds rate will depend on the economic outlook as
Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman;
William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael
Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.
-0-
Exhibit No. JC-3
Page 93 of 141
Decisions Regarding Monetary Policy Implementation
The Federal Reserve has made the following decisions to implement the monetary policy stance
announced by the Federal Open Market Committee in its statement on March 21, 2018:
• The Board of Governors of the Federal Reserve System voted unanimously to raise the
interest rate paid on required and excess reserve balances to 1.75 percent, effective March
22, 2018.
• As part of its policy decision, the Federal Open Market Committee voted to authorize and
direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed
otherwise, to execute transactions in the System Open Market Account in accordance
with the following domestic policy directive:
“Effective March 22, 2018, the Federal Open Market Committee directs the Desk
to undertake open market operations as necessary to maintain the federal funds
rate in a target range of 1-1/2 to 1-3/4 percent, including overnight reverse
repurchase operations (and reverse repurchase operations with maturities of more
than one day when necessary to accommodate weekend, holiday, or similar
trading conventions) at an offering rate of 1.50 percent, in amounts limited only
by the value of Treasury securities held outright in the System Open Market
Account that are available for such operations and by a per-counterparty limit of
$30 billion per day.
The Committee directs the Desk to continue rolling over at auction the amount of
principal payments from the Federal Reserve’s holdings of Treasury securities
maturing during March that exceeds $12 billion, and to continue reinvesting in
agency mortgage-backed securities the amount of principal payments from the
Federal Reserve’s holdings of agency debt and agency mortgage-backed
securities received during March that exceeds $8 billion. Effective in April, the
Committee directs the Desk to roll over at auction the amount of principal
payments from the Federal Reserve’s holdings of Treasury securities maturing
during each calendar month that exceeds $18 billion, and to reinvest in agency
mortgage-backed securities the amount of principal payments from the Federal
Reserve’s holdings of agency debt and agency mortgage-backed securities
received during each calendar month that exceeds $12 billion. Small deviations
from these amounts for operational reasons are acceptable.
The Committee also directs the Desk to engage in dollar roll and coupon swap
(more)
Exhibit No. JC-3
Page 94 of 141
-2-
transactions as necessary to facilitate settlement of the Federal Reserve’s agency

mortgage-backed securities transactions.”
• In a related action, the Board of Governors of the Federal Reserve System voted
unanimously to approve a 1/4 percentage point increase in the primary credit rate to 2.25
percent, effective March 22, 2018. In taking this action, the Board approved requests to
establish that rate submitted by the Boards of Directors of the Federal Reserve Banks of
Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, Kansas City,
Dallas, and San Francisco.
This information will be updated as appropriate to reflect decisions of the Federal Open Market
Committee or the Board of Governors regarding details of the Federal Reserve’s operational
tools and approach used to implement monetary policy.
More information regarding open market operations and reinvestments may be found on the
Federal Reserve Bank of New York’s website.
Exhibit No. JC-3
Page 95 of 141
Exhibit No. JC-3
Page 96 of 141
Exhibit No. JC-3
Page 97 of 141
Exhibit No. JC-3
Page 98 of 141
Exhibit No. JC-3
Page 99 of 141
Exhibit No. JC-3
Page 100 of 141
Morgan Stanley Wealth Management
“Low and Slow” is the Old Normal
Nov 24, 2015
Even with a rate hike ahead, this low yield era presents a continuing challenge for income investors. How can you
adjust your portfolio to compensate?

Jon MackaySenior Markets Strategist, Morgan Stanley Wealth Management
There have been numerous attempts since we emerged from the Great Recession in mid‐2009 to attach a catchy
moniker to this era of low growth, low rates and low returns.
Two that quickly come to mind are Larry Summer's "Secular Stagnation" and Mohammed El‐Erian's even more
commonly quoted "New Normal”—but we at Morgan Stanley Wealth Management would argue that we have
seen something similar before, it just happened a long time ago—and it speaks to our current environment.
Coming out of World War II, the US economy experienced what some have described as a “golden era” of
expansion, built on the return of the soldiers, the maturing of millions of dollars in war bonds and the birth of the
baby boomers.
However, the numbers provide a different story.
The US economy actually fell into a recession when the war ended in 1945 and suffered four more recessions
between 1948 and 1961. The Federal Reserve intervened in the bond market during the war to keep rates low,
then afterward to help a struggling economy find its footing. The start of the Cold War and isolationist policies in
the 1950s also contributed to a low nominal growth rate. This kept long term interest rates in the 2.0% to 2.5%
range for more than a decade. Yields didn't move above 3% until 1957 as you can see in the chart below.

1

Exhibit No. JC-3
Page 101 of 141
The US Has a History of Low Growth and Low Yields

JavaScript chart by amCharts
UST 10+ Years Composite Yield (left axis)
NY Fed Discount Rate (left axis)
US Nominal GDP Year‐Over‐Year (right axis)
Source: Federal Reserve, Haver Analytics, Bloomberg as of Oct. 28, 2015
Rates Follow Growth
While there are plenty of differences between today and the 1940s and 1950s, the low level of growth and
interest rates is similar and makes an important point: Interest rates follow growth. If we are in an environment of
slower, lower and subpar growth then we should expect interest rates to also remain low.
That's not to say that for brief periods interest rates can’t buck the trend depending on geopolitical developments
or policy mistakes. The "taper tantrum" in 2013 is a great example of this, when the 10‐year US Treasury yield
rose more than 100 basis points due to fear of the Fed tapering its bond purchases.
The reasons for slower US growth are well known: frugal consumers taking on less debt; companies being more
cautious with their capital spending and balance sheets; and less government spending. The global economy has
slower growth, too. In fact, the IMF expects 3% global GDP in 2016, roughly half the rate prior to 2008. In essence,
there is a very low likelihood of either internal or external demand boosting growth above the current trend path
of 2% real GDP.

2

Exhibit No. JC-3
Page 102 of 141
Higher Yields Expected
We expect long‐term rates to move higher during the next 12 months due to a modest pickup in US inflation and
improved growth in Europe. That should narrow the gap between European and US government bond yields.
However, any move higher will likely be limited by the level of growth in the domestic and global economies and
could also be capped by liability‐driven investors, such as pension funds, who will buy bonds at higher yields to
help protect any gains in their portfolios. At some point, the US economy may grow at a more consistently high
level and rates will move higher as well, but that seems unlikely for at least the next couple of years.
As Morgan Stanley Wealth Management's CIO Mike Wilson said at a meeting recently, "This isn't the new normal.
This is the old normal.”
Thus, investors could consider putting money to work in fixed income markets with a more active approach.
Municipals and investment grade taxable bonds may still act as portfolio ballast but likely won't generate much by
way of return.
Morgan Stanley’s Global Investment Committee also likes “equity like” segments of the bond market, such as high
yield and preferred securities. They carry higher credit risk, but also higher return potential for at least the next six
to 12 months.
Note: This article first appeared in the November 2015 edition of “On the Markets,” a publication of Morgan
Stanley Wealth Management, which is available by request.
http://www.morganstanley.com/articles/low‐slow‐old‐normal
3

Exhibit No. JC-3
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Ben S. Bernanke | March 30, 2015 6:01am
Why are interest rates so low?

Interest rates around the world, both short‐term and long‐term, are exceptionally low these days. The U.S.
government can borrow for ten years at a rate of about 1.9 percent, and for thirty years at about 2.5
percent. Rates in other industrial countries are even lower: For example, the yield on ten‐year government
bonds is now around 0.2 percent in Germany, 0.3 percent in Japan, and 1.6 percent in the United Kingdom.
In Switzerland, the ten‐year yield is currently slightly negative, meaning that lenders must pay the Swiss
government to hold their money! The interest rates paid by businesses and households are relatively
higher, primarily because of credit risk, but are still very low on an historical basis.
Low interest rates are not a short‐term aberration, but part of a long‐term trend. As the figure below
shows, ten‐year government bond yields in the United States were relatively low in the 1960s, rose to a
peak above 15 percent in 1981, and have been declining ever since. That pattern is partly explained by the
rise and fall of inflation, also shown in the figure. All else equal, investors demand higher yields when
inflation is high to compensate them for the declining purchasing power of the dollars with which they
expect to be repaid. But yields on inflation‐protected bonds are also very low today; the real or inflation‐
adjusted return on lending to the U.S. government for five years is currently about minus 0.1 percent.

Why are interest rates so low? Will they remain low? What are the implications for the economy of low
interest rates?
If you asked the person in the street, “Why are interest rates so low?”, he or she would likely answer that
the Fed is keeping them low. That’s true only in a very narrow sense. The Fed does, of course, set the
1

Exhibit No. JC-3
Page 104 of 141
benchmark nominal short‐term interest rate. The Fed’s policies are also the primary determinant of
inflation and inflation expectations over the longer term, and inflation trends affect interest rates, as the
figure above shows. But what matters most for the economy is the real, or inflation‐adjusted, interest rate
(the market, or nominal, interest rate minus the inflation rate). The real interest rate is most relevant for
capital investment decisions, for example. The Fed’s ability to affect real rates of return, especially longer‐
term real rates, is transitory and limited. Except in the short run, real interest rates are determined by a
wide range of economic factors, including prospects for economic growth—not by the Fed.
To understand why this is so, it helps to introduce the concept of the equilibrium real interest rate
(sometimes called the Wicksellian interest rate, after the late‐nineteenth‐ and early twentieth‐century
Swedish economist Knut Wicksell). The equilibrium interest rate is the real interest rate consistent with full
employment of labor and capital resources, perhaps after some period of adjustment. Many factors affect
the equilibrium rate, which can and does change over time. In a rapidly growing, dynamic economy, we
would expect the equilibrium interest rate to be high, all else equal, reflecting the high prospective return
on capital investments. In a slowly growing or recessionary economy, the equilibrium real rate is likely to be
low, since investment opportunities are limited and relatively unprofitable. Government spending and
taxation policies also affect the equilibrium real rate: Large deficits will tend to increase the equilibrium real
rate (again, all else equal), because government borrowing diverts savings away from private investment.
If the Fed wants to see full employment of capital and labor resources (which, of course, it does), then its
task amounts to using its influence over market interest rates to push those rates toward levels consistent
with the equilibrium rate, or—more realistically—its best estimate of the equilibrium rate, which is not
directly observable. If the Fed were to try to keep market rates persistently too high, relative to the
equilibrium rate, the economy would slow (perhaps falling into recession), because capital investments
(and other long‐lived purchases, like consumer durables) are unattractive when the cost of borrowing set
by the Fed exceeds the potential return on those investments. Similarly, if the Fed were to push market
rates too low, below the levels consistent with the equilibrium rate, the economy would eventually
overheat, leading to inflation—also an unsustainable and undesirable situation. The bottom line is that the
state of the economy, not the Fed, ultimately determines the real rate of return attainable by savers and
investors. The Fed influences market rates but not in an unconstrained way; if it seeks a healthy economy,
then it must try to push market rates toward levels consistent with the underlying equilibrium rate.
This sounds very textbook‐y, but failure to understand this point has led to some confused critiques of Fed
policy. When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy‐
setting Federal Open Market Committee of “throwing seniors under the bus” (to use the words of one
senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings
and able to obtain only very low rates of return on those savings.
I was concerned about those seniors as well. But if the goal was for retirees to enjoy sustainably higher real
returns, then the Fed’s raising interest rates prematurely would have been exactly the wrong thing to do. In
the weak (but recovering) economy of the past few years, all indications are that the equilibrium real
interest rate has been exceptionally low, probably negative. A premature increase in interest rates
engineered by the Fed would therefore have likely led after a short time to an economic slowdown and,
consequently, lower returns on capital investments. The slowing economy in turn would have forced the
Fed to capitulate and reduce market interest rates again. This is hardly a hypothetical scenario: In recent
years, several major central banks have prematurely raised interest rates, only to be forced by a worsening
economy to backpedal and retract the increases. Ultimately, the best way to improve the returns attainable
2

Exhibit No. JC-3
Page 105 of 141
by savers was to do what the Fed actually did: keep rates low (closer to the low equilibrium rate), so that
the economy could recover and more quickly reach the point of producing healthier investment returns.
A similarly confused criticism often heard is that the Fed is somehow distorting financial markets and
investment decisions by keeping interest rates “artificially low.” Contrary to what sometimes seems to be
alleged, the Fed cannot somehow withdraw and leave interest rates to be determined by “the markets.”
The Fed’s actions determine the money supply and thus short‐term interest rates; it has no choice but to
set the short‐term interest rate somewhere. So where should that be? The best strategy for the Fed I can
think of is to set rates at a level consistent with the healthy operation of the economy over the medium
term, that is, at the (today, low) equilibrium rate. There is absolutely nothing artificial about that! Of
course, it’s legitimate to argue about where the equilibrium rate actually is at a given time, a debate that
Fed policymakers engage in at their every meeting. But that doesn’t seem to be the source of the criticism.
The state of the economy, not the Fed, is the ultimate determinant of the sustainable level of real returns.
This helps explain why real interest rates are low throughout the industrialized world, not just in the United
States. What features of the economic landscape are the ultimate sources of today’s low real rates? I’ll
tackle that in later posts.
http://www.brookings.edu/blogs/ben‐bernanke/posts/2015/03/30‐why‐interest‐rates‐so‐low
3

Exhibit No. JC-3
Page 106 of 141
For release on delivery

10:30 a.m. EDT
October 12, 2017
Rethinking Monetary Policy in a New Normal
Remarks by
Lael Brainard
Member
Board of Governors of the Federal Reserve System
at the
Panel on Monetary Policy

“Rethinking Macroeconomic Policy,” a conference sponsored by
the Peterson Institute for International Economics
Washington, D.C.
October 12, 2017

Exhibit No. JC-3
Page 107 of 141
I enjoyed Ben Bernanke’s paper titled “Monetary Policy in a New Era.” 1 He
presents a compelling diagnosis of the issues facing policymakers and discusses a variety
of policy options. Bernanke proposes an approach to policy that is elegant and
straightforward to communicate. I will focus on those elements that I find particularly
relevant for the challenges faced by policymakers and suggest some implications and
complications. My comments are not intended to address current policy. 2
The New Normal
Policymakers in advanced economies are confronting a different constellation of
challenges today than those that dominated the canon of U.S. monetary policymaking
over the previous half-century, which I refer to as the “new normal.” 3 A key feature of
the new normal is that the neutral interest rate--the level of the federal funds rate that is
consistent with the economy growing close to its potential rate, full employment, and
stable inflation--appears to be much lower than it was in the decades prior to the crisis.
In the Federal Open Market Committee’s (FOMC) most recent Summary of Economic
Projections (SEP), the median FOMC participant expected a longer-run real federal funds
rate, after subtracting inflation, of 3/4 percent, down sharply from the value the first time
the policy projection was published in the January 2012 SEP of 2-1/4 percent--and the
average value in the decades prior to the financial crisis of 2-1/2 percent. 4
1
Bernanke (2017).
2
I am grateful to John Roberts for his assistance in preparing this text. The remarks represent my own
views, which do not necessarily represent those of the Federal Reserve Board or the Federal Open Market
Committee.
3
See Brainard (2015, 2016b).
4
The well-known Laubach-Williams model currently suggests an estimate of the longer-run neutral federal
funds rate that is close to zero. The latest estimates are available on the Federal Reserve Bank of San
Francisco’s website at http://www.frbsf.org/economic-
research/files/Laubach_Williams_updated_estimates.xlsx. Over the 1960-2007 period, the real federal
funds rate--measured as the nominal federal funds rate less trailing four-quarter core PCE (personal
consumption expenditures) inflation--averaged 2-1/2 percent.
Exhibit No. JC-3
Page 108 of 141
-2-
The low level of the neutral rate limits the amount of space available for cutting
the federal funds rate to offset adverse developments and thereby can be expected to
increase the frequency and duration of periods when the policy rate is constrained by the
effective lower bound, unemployment is elevated, and inflation is below target. In this
environment, frequent or extended periods of low inflation run the risk of pulling down
private-sector inflation expectations, which could amplify the degree and persistence of
shortfalls of inflation, thereby making future lower bound episodes even more
challenging in terms of output and employment losses. To the extent it is weighing on
longer-run inflation expectations, the persistently low level of the neutral federal funds
rate may be a factor contributing to the persistent shortfall of U.S. inflation from the
FOMC’s target. 5
Further complicating the ability of central banks to achieve their inflation
objectives in today’s new normal is the very flat Phillips curve observed in the United
States and many other advanced economies, which makes the relationship between labor
market conditions and price inflation more tenuous. For instance, inflation has remained
stubbornly below the FOMC’s 2 percent target for the past five years even as
unemployment has fallen from 8.2 percent to 4.2 percent, a level that most experts
believe is in the vicinity of full employment. 6
Bernanke’s paper provides an excellent review of the Federal Reserve’s efforts to
operate in this new environment and makes some interesting new proposals. Reflecting
on the Fed’s available “policy toolbox,” Bernanke concludes that the available tools are
5
See, for example, Brainard (2017b), Kiley and Roberts (2017), and Nakata and Schmidt (2016).
6
The inflation information refers to core PCE inflation measured on a 12-month average basis.
Exhibit No. JC-3
Page 109 of 141
-3-
not likely to be sufficient and proposes a framework that relies on forward guidance with
commitment to help central banks achieve their inflation and employment objectives.
The Makeup Principle
The academic literature on monetary policy suggests a variety of prescriptions for
preventing a lower neutral rate of interest from eroding longer-run inflation expectations.
The paper argues convincingly that many of these proposals present practical difficulties
that would create a very high bar for their adoption. For instance, raising the inflation
target sufficiently to provide meaningfully greater policy space could engender public
discomfort or, at the other extreme, risk unmooring inflation expectations. The transition
to a notably higher target is likely to be challenging and could heighten uncertainty.
As I have noted previously, the persistence of the shortfall in inflation from our
objective is an important consideration for monetary policy. 7 The makeup principle, in
which policy would make up for past misses of the inflation target, is not reflected in
most standard monetary policy frameworks, although it is an important precept in
theory. 8 Some of the proposals that have been advanced to implement this principle
present some difficulties. For example, while price-level targeting would be helpful in
the aftermath of a recession that puts the economy at the effective lower bound, it could
require tightening into a negative supply shock, which is a very unattractive feature, as
Bernanke points out. 9
7
See Brainard (2017b).
8
See, for example, Eggertsson and Woodford (2003) or Reifschneider and Williams (2000).
9
As Bernanke notes, one way to avoid this feature is to adopt “flexible price-level targeting,” in which
policy takes into account resource utilization as well as the deviation of the price level from its target.
Kiley and Roberts (2017) examine a form of flexible price-level targeting—which they refer to as a
“shadow rate rule”—and find that it performs well.
Exhibit No. JC-3
Page 110 of 141
-4-
Bernanke proposes a framework that avoids this undesirable possibility by
implementing a temporary price-level targeting framework only in periods where
conventional policy is constrained by the lower bound. Bernanke’s proposal thus has the
advantage of maintaining standard practice in normal times while proposing a makeup
policy in periods when the policy rate is limited by the lower bound and inflation is
below target. His proposed temporary price-level target would delay the liftoff of the
policy rate from the lower bound until the average inflation over the entire lower bound
episode has reached 2 percent and full employment is achieved. This type of policy,
which would result in temporary overshooting of the inflation target in order to make up
for the previous period of undershooting, is designed to, in Bernanke’s words, “calibrate
the vigor of the policy response . . . to the severity of the episode.”
The Normalization Bias
The proposed temporary price-level targeting policy is designed to address what I
see as one of the key challenges facing policymakers. Following deep recessions of the
type we experienced in 2008-09, there appears to be an important premium on
“normalization.” This was apparent in 2010, for instance, when there was substantial
pressure among Group of Twenty officials to commit to timelines and targets for
reducing fiscal support and to articulate exit principles for monetary policy. 10 This
inclination proved premature, as was evident from the subsequent intensification of the
euro-area crisis.
10
The 2010 G-20 Toronto communiqué indicated that advanced economies “committed to fiscal plans that
will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016.” The
document is available on the U.S. Department of the Treasury’s website at
https://www.treasury.gov/resource-center/international/Documents/The%20G-
20%20Toronto%20Summit%20Declaration.pdf.
Exhibit No. JC-3
Page 111 of 141
-5-
Moreover, the benchmark for “normal” tends to be defined in terms of pre-crisis
standards that involved policy settings well away from the lower bound, at least initially,
because it may take some time to learn about important changes in underlying financial
and economic relationships. For example, the factors underlying what we now
understand to be the new normal of persistently low interest rates were in many cases
initially viewed as temporary headwinds. In these circumstances, a standard policy
framework calibrated around the pre-crisis or “old” normal may be biased to
underachieving the inflation target in a low neutral rate environment. The kind of policy
framework that Bernanke proposes, which pre-commits to implementing the makeup
principle based on the actual observed performance of inflation during a lower bound
episode, could guard against premature liftoff and help prevent the erosion of longer-term
inflation expectations.
Monetary policymakers operate in an environment of considerable uncertainty
and therefore have to weigh the risks of tightening too little or too late against those of
tightening too much or too soon. While past experience has conditioned U.S.
policymakers to be highly attentive to the risks associated with a breakout of inflation to
the upside, as in the 1970s, they balance these risks against those associated with
undershooting the inflation target persistently, as in Japan in the late 1990s and the 2000s.
In weighing these risks, the standard approach is typically designed to achieve
“convergence from below,” in which inflation gradually rises to its target. Given the lags
in the effects of monetary policy, convergence from below would necessitate raising
interest rates preemptively, well in advance of inflation reaching its target. Moreover,
particularly in the early stage of a recovery, this kind of preemptive approach tends of
Exhibit No. JC-3
Page 112 of 141
-6-
necessity to rely on economic relationships derived from pre-crisis observations, when
policy rates were comfortably above the lower bound.
During a period when the policy rate is limited by the lower bound, Bernanke’s
proposal would represent a substantial departure from the standard approach. While a
standard policy framework would tend to prescribe that tightening should start
preemptively, well before inflation reaches target, Bernanke’s temporary price-level
target proposal would imply maintaining the policy rate at the lower bound well past the
point at which inflation has risen above target. In principle, policymakers would have to
be willing to accept elevated rates of above-target inflation for a period following a
lengthy period of undershooting.
Just as policymakers could run a risk of low inflation becoming entrenched in the
standard preemptive framework, so, too, there are risks in the temporary price-level target
framework. One risk is that the public, seeing elevated rates of inflation, may start to
doubt that the central bank is still serious about its inflation target. It is worth noting that
the policy is motivated by the opposite concern--that convergence from below, following
an extended lower bound episode, may lead to an unanchoring of inflation expectations to
the downside. Still, a conscious policy of overshooting may be difficult to calibrate,
especially since the large confidence intervals around inflation forecasts suggest that the
risks of an undesired overshooting are nontrivial. A related risk is that the central bank
would lose its nerve: Maintaining the interest rate at zero in the face of a strong economy
and inflation notably above its target would place a central bank in uncomfortable
territory.
Exhibit No. JC-3
Page 113 of 141
-7-
One additional challenge of the proposed framework is specifying a path for the
policy rate immediately following liftoff that smoothly and gradually eases inflation back
down to target and facilitates a gradual adjustment of the labor market. In the proposed
framework, once the cumulative average rate of inflation during the lower-bound period
has reached the target of 2 percent, policy would revert to a standard policy rule. 11 This
implies that a standard policy rule would kick in at a point when inflation is above target
and the economy is at or beyond full employment. Even with a smoothing (inertial)
property, a standard policy rule could result in a relatively sharp path of tightening, and
the anticipation of the steep post-liftoff rate path itself could undo some of the benefits
associated with the framework. Thus, there would likely need to be a transitional
framework to guide policy initially post-liftoff that might make both communications and
policy somewhat more complicated.
Integrating the Policy Rate and the Balance Sheet
The temporary price-level targeting framework proposed by Bernanke is
appealing on a conceptual level because it proposes a simple and clear mechanism to help
policymakers deal with the challenges posed by the lower bound on the policy rate in an
environment of uncertainty. The reality is more complicated, however, especially if, as
the paper suggests, many central banks in advanced economies are likely to operate with
an additional tool when the policy rate is constrained. In the paper, Bernanke cites Chair
Yellen’s 2016 Jackson Hole speech, which suggests that in a recession, the FOMC could
be expected to turn to large-scale asset purchases as well as forward guidance after the
federal funds rate is lowered to zero. 12
11
In the paper, this rule is specified as an inertial Taylor rule.
12
See Yellen (2016).
Exhibit No. JC-3
Page 114 of 141
-8-
Today, when many central banks in advanced economies are operating with two
distinct tools, policymakers consider the effects of the balance sheet as well as the policy
rate in their assessment of the extent of accommodation provided by monetary policy. In
the United States, from the time tapering was first discussed to the September 2017
meeting, when the path for balance sheet runoff was adopted, FOMC minutes and
statements suggest that participants considered the degree of accommodation provided by
both policy tools in their discussions of the sequencing and timing of changes to policy
settings. Discussions about the sequencing of “normalization” and the delay of balance
sheet runoff “until normalization of the level of the federal funds rate is well under way”
effectively consider the extent to which maintaining the balance sheet may continue to
provide makeup support for the economy while enabling the policy rate to escape the
lower bound earlier than otherwise in a low neutral rate environment.
As Bernanke acknowledges, now that many central banks have developed
playbooks specifying the operational modalities associated with asset purchases, and
there is some familiarity with their effects on asset prices and financial conditions, there
is a greater likelihood that asset purchases would become a part of the policy reaction
function, along with forward guidance, during lower-bound episodes. Yet, as I have
noted previously in the international context, asset purchases can complicate policy
frameworks and communications, because their deployment and withdrawal has tended
to be discontinuous and discrete and thus may be associated with greater uncertainty
about the policy reaction function. 13 It appears the public closely follows statements
about both the policy rate and asset purchases to glean possible information about the
13
See Brainard (2015).
Exhibit No. JC-3
Page 115 of 141
-9-
future overall stance of monetary policy. This suggests there may be benefits in
communications and predictability of a unified policy framework across the tools that is
more predictable and continuous. Relatedly, one helpful elaboration of the framework
Bernanke proposes might be to incorporate a unified measure, or shadow rate, that would
capture the degree of policy accommodation provided through the combined settings of
both asset purchases and the policy rate. 14
Greater Cross-Border Spillovers
Moving away from the policy proposal in the paper, there are two other aspects of
a low neutral rate world that I want to touch on briefly: cross-border spillovers and
financial imbalances. The new normal appears to be characterized by low neutral rates
and a weak relationship between overall inflation and unemployment not only in the
United States, but also in many other advanced economies with lower-bound episodes
likely to be more prevalent. The current environment appears also to evidence intensified
cross-border feedback into financial conditions. 15 In this kind of environment, it is
conceivable the kind of committed forward guidance associated with the temporary price-
level targeting framework proposed by Bernanke, by helping rule out anticipation of a
standard preemptive tightening, could help avoid unwarranted premature tightening
through the exchange rate.
Given available data, it is difficult to disentangle whether the heightened cross-
border feedback effects are attributable to the low level of neutral rates, particular
features of today’s lower-bound episodes, or the interaction of the policies adopted by
many central banks. In any case, recent Federal Reserve staff analysis suggests that
14
See, for instance, Krippner (2016) and Wu and Xia (2016).
15
See Brainard (2016a, 2016b).
Exhibit No. JC-3
Page 116 of 141
- 10 -
cross-border spillovers have increased notably since the crisis and are quite large. For
instance, European Central Bank policy news that leads to a 10 basis point decrease in the
German 10-year term premium is associated with a roughly 5 basis point decrease in the
U.S. 10-year term premium; by contrast, these spillovers were smaller in the years
leading up to the crisis. 16
Moreover, news about policy rates and term premiums appears to have quite
different effects on exchange rates, such that the ordering of policy normalization can
have important implications for exchange rates and associated financial conditions, as I
discussed earlier this year. 17 Recent staff estimates suggest that news about expected
changes in the policy rate tends to have a large spillover through the exchange rate,
whereas news about changes in term premiums tends to lead to corresponding cross-
border changes in term premiums, as discussed previously, with much smaller effects on
the exchange rate. Moreover, the exchange rate effect of changes in short-term rates is
much greater than it was pre-crisis. For instance, policy news that leads to a 25 basis
point increase in the expected interest rate portion of the 10-year Treasury yield is
associated with a roughly 3 percentage point appreciation in the dollar, which is three
times greater than the response pre-crisis. By contrast, policy news surrounding a change
in U.S. term premiums has a muted effect on the exchange rate both now and pre-crisis.
Financial Imbalances
Finally, a low neutral rate environment may also be associated with a heightened
risk of asset price bubbles, which could exacerbate the tradeoff for monetary policy
between achieving the traditional dual-mandate goals and preventing the kinds of
16
See Kamin, Li, and Rodriguez (forthcoming).
17
See Brainard (2017a).
Exhibit No. JC-3
Page 117 of 141
- 11 -
imbalances that could contribute to financial instability. Standard asset-valuation models
suggest that a persistently low neutral rate, depending on the factors driving it, could lead
to higher ratios of asset prices to underlying income flows--for example, higher ratios of
prices to earnings for stocks or higher prices of buildings relative to rents. If asset
markets were highly efficient and participants had excellent foresight, this would not
necessarily lead to imbalances. However, to the extent that financial markets extrapolate
price movements, markets may not transition smoothly to asset valuations that reflect
underlying fundamentals but may instead evidence periods of overshooting. 18 Such
forces may have played a role in both the stock market boom that ended in the bust of
2001 and the house price bubble that burst in 2007-09.
The risks of such financial imbalances may be greater in the context of the kind of
explicit inflation target overshooting policies proposed in the paper. Again, if market
participants were perfectly rational, overshooting policies would not likely pose financial
stability risks. But the combination of low interest rates and low unemployment that
would prevail during the inflation overshooting period could well spark capital markets to
overextend, leading to financial imbalances.
Macroprudential tools are the preferred first line of defense to address such
financial imbalances, which should in principle enable monetary policy to focus on price
stability and macroeconomic stabilization. But the development and deployment of
macroprudential tools is still relatively untested in the U.S. context, and the toolkit is
limited. Although important research suggests that the situations under which monetary
policy should take financial imbalances into account are likely to be very rare, some
18
See, for example, Case, Shiller, and Thompson (2012) and Greenwood and Schleifer (2014).
Exhibit No. JC-3
Page 118 of 141
- 12 -
recent research has pointed out that the case in favor of taking financial imbalances into
account is strengthened when the consequences of financial crises are long lasting. 19 In
this case, another complication of a persistently low neutral rate may be a sharper
tradeoff between achieving the traditional dual-mandate objectives and avoiding financial
stability risks, which may make it even more difficult to achieve our price-stability
objective.
19
See, for example, Svensson (2016). See Gourio, Kashyap, and Sim (2016) and Gerdrup and others
(2016).
Exhibit No. JC-3
Page 119 of 141
- 13 -
References
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“Rethinking Macroeconomic Policy,” a conference held at the Peterson Institute
for International Economics, Washington, October 12.
Brainard, Lael (2015). “Normalizing Monetary Policy When the Neutral Interest Rate Is
Low,” speech delivered at the Stanford Institute for Economic Policy Research,
Stanford, Calif., December 1,
https://www.federalreserve.gov/newsevents/speech/brainard20151201a.htm.
-------- (2016a). “What Happened to the Great Divergence?” speech delivered at the
2016 U.S. Monetary Policy Forum, New York, February 26,
-------- (2016b). “The ‘New Normal’ and What It Means for Monetary Policy,” speech
delivered at the Chicago Council on Foreign Affairs, Chicago, September 12,
-------- (2017a). “Cross-Border Spillovers of Balance Sheet Normalization,” speech

delivered at the National Bureau of Economic Research’s Monetary Economics
Summer Institute, Cambridge, Mass., July 13,
-------- (2017b). “Understanding the Disconnect between Employment and Inflation with
a Low Neutral Rate,” speech delivered at the Economic Club of New York, New
York, September 5,
Case, Karl E., Robert J. Shiller, and Anne K. Thompson (2012). “What Have They Been
Thinking? Homebuyer Behavior in Hot and Cold Markets,” Brookings Papers on
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Eggertsson, Gauti B., and Michael Woodford (2003). “The Zero Bound on Interest Rates
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rates-and-optimal-monetary-policy.
Gerdrup, Karsten R., Frank Hansen, Tord Krogh, and Junior Maib (2017). “Leaning
against the Wind When Credit Bites Back,” International Journal of Central
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Gourio, Francois, Anil K. Kashyap, and Jae Sim (2016). “The Tradeoffs in Leaning
against the Wind,” paper presented at the 17th Jacques Polak Annual Research
Conference, sponsored by the International Monetary Fund, Washington,
Exhibit No. JC-3
Page 120 of 141
- 14 -
November
3, https://www.imf.org/external/np/res/seminars/2016/arc/pdf/Kashyap_et_al_Ses
sion1.pdf.
Greenwood, Robin, and Andrei Shleifer (2014). “Expectations of Returns and Expected
Returns,” Review of Financial Studies, vol. 27 (March), pp. 714-46.
Kamin, Steven B., Canlin Li, and Marius D. Rodriguez (forthcoming). “International
Spillovers from Conventional and Unconventional Monetary Policy,” IFDP
Notes. Washington: Board of Governors of the Federal Reserve System.
Kiley, Michael T., and John M. Roberts (2017). “Monetary Policy in a Low Interest
Rate World,” Finance and Economics Discussion Series 2017-080. Washington:
Board of Governors of the Federal Reserve System,
August, https://dx.doi.org/10.17016/FEDS.2017.080.
Krippner, Leo (2016). “Documentation for Measures of Monetary Policy,” Reserve Bank
of New Zealand Working Paper. Wellington, New Zealand: Reserve Bank of
New Zealand, July, https://www.rbnz.govt.nz/-
/media/ReserveBank/Files/Publications/Research/Additional%20research/Leo%2
0Krippner/5892888.pdf?la=en.
Nakata, Taisuke, and Sebastian Schmidt (2016). “The Risk-Adjusted Monetary Policy
Rule,” Finance and Economics Discussion Series 2016-061. Washington: Board
of Governors of the Federal Reserve System, July,
https://dx.doi.org/10.17016/FEDS.2016.061.
Reifschneider, David, and John C. Williams (2000). “Three Lessons for Monetary Policy
in a Low-Inflation Era,” Journal of Money, Credit and Banking, vol. 32
(November), pp. 936-66.
Svensson, Lars E. (2016). “Cost-Benefit Analysis of Leaning against the Wind,” NBER
Working Papers Series 21902. Cambridge, Mass.: National Bureau of Economic
Research, January.
Wu, Jing Cynthia, and Fan Dora Xia (2016). “Measuring the Macroeconomic Impact of
Monetary Policy at the Zero Lower Bound,” Journal of Money, Credit and
Banking, vol. 48 (March-April), pp. 253-91.
Yellen, Janet L. (2016). “The Federal Reserve’s Monetary Policy Toolkit: Past, Present,
and Future,” speech at “Designing Resilient Monetary Policy Frameworks for the
Future,” a symposium sponsored by the Federal Reserve Bank of Kansas City,
held in Jackson Hole, Wyoming, August
26, https://www.federalreserve.gov/newsevents/speech/yellen20160826a.htm.
Exhibit No. JC-3
Page 121 of 141
Financial Times August 23, 2015 11:59 pm
The Fed looks set to make a dangerous mistake
Lawrence Summers
Raising rates this year will threaten all of the central bank’s major objectives

Will the Federal Reserve’s September meeting see US interest rates go up for the first
time since 2006? Officials have held out the prospect that it might, and have suggested
that — barring major unforeseen developments — rates will probably be increased by
the end of the year. Conditions could change, and the Fed has been careful to avoid
outright commitments. But a reasonable assessment of current conditions suggest that
raising rates in the near future would be a serious error that would threaten all three of
the Fed’s major objectives — price stability, full employment and financial stability.
Like most major central banks, the Fed has put its price stability objective into practice
by adopting a 2 per cent inflation target. The biggest risk is that inflation will be lower
than this — a risk that would be exacerbated by tightening policy. More than half the
components of the consumer price index have declined in the past six months — the
first time this has happened in more than a decade. CPI inflation, which excludes volatile
energy and food prices and difficult‐to‐measure housing, is less than 1 per cent. Market‐
based measures of expectations suggest that, over the next 10 years, inflation will be
well under 2 per cent. If the currencies of China and other emerging markets depreciate
further, US inflation will be even more subdued.
Tightening policy will adversely affect employment levels because higher interest rates
make holding on to cash more attractive than investing it. Higher interest rates will also
increase the value of the dollar, making US producers less competitive and pressuring
the economies of our trading partners.
This is especially troubling at a time of rising inequality. Studies of periods of tight labour
markets like the late 1990s and 1960s make it clear that the best social programme for
disadvantaged workers is an economy where employers are struggling to fill vacancies.
There may have been a financial stability case for raising rates six or nine months ago, as
low interest rates were encouraging investors to take more risks and businesses to
borrow money and engage in financial engineering. At the time, I believed that the
economic costs of a rate increase exceeded the financial stability benefits, but there
were grounds for concern. That debate is now moot. With credit becoming more
expensive, the outlook for the Chinese economy clouded at best, emerging markets
submerging, the US stock market in a correction, widespread concerns about liquidity,
and expected volatility having increased at a near‐record rate, markets are themselves
1

Exhibit No. JC-3
Page 122 of 141
dampening any euphoria or overconfidence. The Fed does not have to do the job. At
this moment of fragility, raising rates risks tipping some part of the financial system into
crisis, with unpredictable and dangerous results.
Why, then, do so many believe that a rate increase is necessary? I doubt that, if rates
were now 4 per cent, there would be much pressure to raise them. That pressure comes
from a sense that the economy has substantially normalised during six years of
recovery, and so the extraordinary stimulus of zero interest rates should be withdrawn.
There has been much talk of “headwinds” that require low interest rates now but this
will abate before long, allowing for normal growth and normal interest rates.
Whatever merit this view had a few years ago, it is much less plausible as we approach
the seventh anniversary of the collapse of Lehman Brothers. It is no longer easy to think
of economic conditions that can plausibly be seen as temporary headwinds. Fiscal drag
is over. Banks are well capitalised. Corporations are flush with cash. Household balance
sheets are substantially repaired.
Much more plausible is the view that, for reasons rooted in technological and
demographic change and reinforced by greater regulation of the financial sector, the
global economy has difficulty generating demand for all that can be produced. This is
the “secular stagnation” diagnosis, or the very similar idea that Ben Bernanke, former
Fed chairman, has urged of a “savings glut”. Satisfactory growth, if it can be achieved,
requires very low interest rates that historically we have only seen during economic
crises. This is why long term bond markets are telling us that real interest rates are
expected to be close to zero in the industrialised world over the next decade.
New conditions require new policies. There is much that should be done, such as steps
to promote public and private investment so as to raise the level of real interest rates
consistent with full employment. Unless these new policies are implemented, inflation
sharply accelerates, or euphoria in markets breaks out, there is no case for the Fed to
adjust policy interest rates.
The writer is the Charles W Eliot university professor at Harvard and a former US
Treasury secretary

2

Exhibit No. JC-3
Page 123 of 141
The New York Times

Aug 25 10:56 am
One enduring constant of the world economy since 2008 is the chorus of sober‐
sounding people declaring that the Fed must act responsibly and raise rates. A few years
back, rising commodity prices and a flood of money into emerging markets were proof
that low rates were dangerously inflationary and must be hiked. Now we have plunging
commodity prices and a flood of money out of emerging markets; clearly, this shows
that the Fed must do the right thing, and raise rates.
The underlying claim in all such demands is that the low interest rates we’ve had since
2008 are “unnatural” or “artificial”. So it’s probably worth repeating that while very low
rates may seem strange, they also seem fully justified by the economic situation. The
original Wicksellian concept of the natural rate of interest defined that rate as the rate
consistent with stable prices, with an economy that was neither too hot nor too cold. If
we had had an unnaturally low rate these past 7 years, we should have seen
accelerating inflation; we haven’t.
Quantitative easing, by the way, is just more of the same. If you are claiming that the
Fed has created artificially easy credit, you have to explain how it can do that year after
year without producing inflation or an overheating economy. Nobody has ever
produced a coherent story about how Fed policy can drive interest rates below their
natural level without inflationary effects.
So even if you believe that a low‐rate environment is helping to feed a series of bubbles,
you have to ask how it can possibly make sense to raise rates when the underlying
problem is overall economic weakness, which a rate hike would make worse.
One last point: many people have noted the resemblances between current events and
the market instability of 1998. However, few have pointed out that the volatility of 1998
followed a long period in which long‐term interest rates never dropped below 5
percent. Hot money doesn’t need ultra‐low rates to be subject to enthusiasms and
sudden losses of confidence.

1

Exhibit No. JC-3
Page 124 of 141
Aug 25 9:21 am Aug 25 9:21 am 19
It’s Getting Tighter
When thinking about the market madness and its possible real effects, here’s something
you — where by “you” I mean the Fed in particular — really, really need to keep in
mind: the markets have already, in effect, tightened monetary conditions quite a lot.
First of all, if break‐evens (the difference between interest rates on ordinary bonds and
inflation‐protected bonds) are any guide, inflation expectations have fallen sharply:
Photo

Credit
Second, while interest rates on Treasuries are down, rates on private securities viewed
as even moderately risky are up quite a lot:
Photo

2

Exhibit No. JC-3
Page 125 of 141
Credit
So real borrowing costs are up sharply for many private borrowers. This is a significant
headwind for the U.S. economy, which was hardly growing like gangbusters in any case.
A Fed hike now looks like an even worse idea than it did a few days ago.
http://krugman.blogs.nytimes.com/?module=BlogMain&action=Click&region=Header&pgtype=
Blogs&version=Blog Main&contentCollection=Opinion
3

Exhibit No. JC-3
Page 126 of 141
Q2 2013
Rate Case Summary
I. U.S.ofElectric
I. Number Output
Rate Cases Filed(GWh)
(Quarterly)
HIGHLIGHTS
U.S. Shareholder-Owned Electric Utilities
■ Shareholder-owned electric utilities filed 16 rate cases
in Q2 2013, extending the industry’s trend of elevated 25
rate case activity. 20
■ The quarter’s average awarded ROE, at 9.77%, is the 15
lowest in several decades. Both Ameren and Common- 10
wealth Edison submitted filings in Illinois as part of those 5
companies’ ongoing formula rate plan. The ROE re- 0
quested in both filings was 8.72%, thus contributing to a
record low average requested ROE in Q2 as well.
■ In the recent quarter, utilities’ efforts to implement
clauses and trackers have been a relatively strong driver of Source: SNL Financial / Regulatory Research Assoc. and EEIԛ Rate Department
cases compared to other quarters, as were utilities’ efforts

to adjust for slow demand growth.
II. Average Awarded ROE (Quarterly)
■ Eight of the ten cases decided in Q2 incorporated set-
tlements or partial settlements. These are often silent on %
details, but in Q2 enough was revealed to allow for an 14.0
examination of the issues, summarized herein. 13.0
12.0
COMMENTARY
11.0
Shareholder-owned electric utilities filed 16 rate cases in Q2 10.0
2013, continuing the trend since the turn of the century of
9.0
rising rate case activity. The trend largely reflects a construc-
tion cycle driven by the need to replace aging infrastructure
and reduce the environmental impact of power generation.
Capital expenditures, operation and maintenance expenses, Source: SNL Financial / Regulatory Research Assoc. and EEIԛ Rate Department
and efforts by utilities to implement adjustment clauses/
The average awarded return on equity (ROE) in Q2 was
trackers/riders are generally the main drivers of rate case fil-
9.77%, the lowest in the last several decades (a period of
ings, with capital expenditures usually the leading driver. In
steadily declining awarded ROEs). Falling interest rates ac-
the recent quarter, utilities’ efforts to implement clauses and
count for much of this trend. Attempts by state commissions
trackers have been a relatively strong driver of cases com-
to moderate rate increases during times of financial hardship
pared to other quarters, as were utilities’ efforts to adjust for
for many customers have also contributed in recent years.
slow demand growth.
1 EEI Q2 2013 Financial Update
Exhibit No. JC-3
Page 127 of 141
2 RATE CASE SUMMARY
III. Average Requested ROE (Quarterly) IV. Average Regulatory Lag (Quarterly)
% U.S. Shareholder-Owned Electric Utilities Months U.S. Shareholder-Owned Electric Utilities
14.0 25.0
13.0 20.0
12.0 15.0
11.0 10.0
10.0 5.0
Source: SNL Financial / Regulatory Research Assoc. and EEIԛ Rate Department Source: SNL Financial / Regulatory Research Assoc. and EEIԛ Rate Department
V. 10-Year Treasury Yield (1/1980 — 6/2013) needed to prepare for a case. This suggests an average closer
to twice what our definition measures, or close to two years.
U.S. Shareholder-Owned Electric Utilities However it is measured, lag obstructs utilities’ ability to earn
%
16.0 their allowed return when costs are rising and can ultimately
increase their borrowing costs. Electric utilities often fall
12.0 short of achieving their allowed return due to regulatory lag.
Therefore, the decline in allowed ROEs across the industry
8.0
may over-compensate, in some cases, for declining interest
4.0
rates.
Commissions can allow utilities to shorten regulatory lag
0.0 through the use of innovative rate approaches such as in-
terim rate increases, adjustment clauses and other recovery
mechanisms, the use of projected costs in rate cases, and
Source: U.S. Federal Reserve construction work-in-progress (CWIP). CWIP allows a util-
ity to partly recover construction financing costs before a
The average requested ROE, at 10.4% was similarly the low- project comes online. These approaches have the added
est in decades, and for similar reasons. benefit of helping to smooth the introduction of rate in-
creases rather than forcing rates to suddenly jump after a
Regulatory Lag case is decided. Commissions and state legislatures can sup-
Average regulatory lag in Q2 was 11.8 months, the highest in port utilities’ financial health and help curb future rate in-
two years and slightly above the roughly 10-month average creases due to increased borrowing costs by helping utilities
in recent years. During industry restructuring in the late reduce lag.
1990s and early 2000s, the volatility of regulatory lag in-
creased and the average rose to almost 13 months. Outside Filed Cases
of this period, regulatory lag has been fairly consistent at Capital expenditures, as they are in almost every quarter,
about 10 months. were the main driver of rate cases in Q2. Kentucky Utilities,
During times of rapidly rising spending, utilities attempt in its case in Virginia, filed to recover for what it describes as
to recover costs by filing rate cases. However, rate case deci- its “most significant environmental compliance building pro-
sions are based primarily on historical costs, and preparing gram in its history.” Northern States Power in Wisconsin
for and administrating a case takes time. If costs continue to filed for recovery for investment in generation (including
rise, rates may already be outdated by the time the commis- nuclear plants), distribution and transmission. Kentucky
sion decides the case and puts rates into effect. We define Power filed to acquire part of a coal plant.
regulatory lag as the time between a rate case filing and deci- Utility efforts to implement adjustment clauses, trackers
sion because those events are specific and measureable. We and riders strongly influenced filings in Q2 compared to
consider this a rough proxy for the time between when a other quarters. Concerns about slow demand growth also
utility needs recovery and when new rates take effect. appeared in a significant number of cases. Tampa Electric
Some analysts have argued that regulatory lag is actually filed in part to recover for revenue shortfalls associated with
longer when other delays are considered, such as the time sluggish revenue growth in its service territory. Low cus-
EEI Q2 2013 Financial Update

Exhibit No. JC-3
Page 128 of 141
RATE CASE SUMMARY 3
VI. Rate Case Data: From Tables I-V

Number of Average Average Average Average

Quarter Rate Cases Filed Awarded ROE Requested ROE 10-Year Treasury Yield Regulatory Lag
Q4 1988 1 NA 14.30 8.96 NA
Q1 1989 4 NA 15.26 9.21 NA
Q2 1989 4 NA 13.30 8.77 NA
Q3 1989 14 NA 13.65 8.11 NA
Q4 1989 13 NA 13.47 7.91 NA
Q1 1990 6 12.62 13.00 8.42 6.71
Q2 1990 20 12.85 13.51 8.68 9.07
Q3 1990 6 12.54 13.34 8.70 9.90
Q4 1990 8 12.68 13.31 8.40 8.61
Q1 1991 13 12.66 13.29 8.02 11.00
Q2 1991 17 12.67 13.23 8.13 11.00
Q3 1991 15 12.49 12.89 7.94 8.70
Q4 1991 12 12.42 12.90 7.35 10.70
Q1 1992 6 12.38 12.77 7.30 8.90
Q2 1992 15 11.83 12.86 7.38 9.61
Q3 1992 11 12.03 12.81 6.62 9.00
Q4 1992 12 12.14 12.36 6.74 10.10
Q1 1993 6 11.84 12.33 6.28 8.87
Q2 1993 7 11.64 12.39 5.99 8.10
Q3 1993 5 11.15 12.70 5.62 11.20
Q4 1993 9 11.04 12.12 5.61 10.90
Q1 1994 15 11.07 12.15 6.07 13.40
Q2 1994 10 11.13 12.37 7.08 9.28
Q3 1994 11 12.75 12.66 7.33 11.80
Q4 1994 4 11.24 13.36 7.84 9.26
Q1 1995 10 11.96 12.44 7.48 12.00
Q2 1995 10 11.32 12.26 6.62 10.40
Q3 1995 8 11.37 12.19 6.32 9.50
Q4 1995 5 11.58 11.69 5.89 10.60
Q1 1996 3 11.46 12.25 5.91 16.30
Q2 1996 9 11.46 11.96 6.72 9.80
Q3 1996 4 10.76 12.13 6.78 14.00
Q4 1996 4 11.56 12.48 6.34 8.12
Q1 1997 4 11.08 12.50 6.56 13.80
Q2 1997 5 11.62 12.66 6.70 18.70
Q3 1997 3 12.00 12.63 6.24 8.33
Q4 1997 4 11.06 11.93 5.91 12.70
Q1 1998 2 11.31 12.75 5.59 10.20
Q2 1998 7 12.20 11.78 5.60 7.00
Q3 1998 1 11.65 NA 5.20 19.00
Q4 1998 5 12.30 12.11 4.67 9.11
Q1 1999 1 10.40 NA 4.98 17.60
Q2 1999 3 10.94 11.17 5.54 8.33
Q3 1999 3 10.75 11.57 5.88 6.33
Q4 1999 4 11.10 12.00 6.14 23.00
Q1 2000 3 11.08 12.10 6.48 15.10
Q2 2000 1 11.00 12.90 6.18 10.50
Q3 2000 2 11.68 12.13 5.89 10.00
Q4 2000 8 12.50 11.81 5.57 7.50
Q1 2001 3 11.38 11.50 5.05 24.00
Q2 2001 7 10.88 12.24 5.27 8.00
Q3 2001 7 10.78 12.64 4.98 8.62
Q4 2001 6 11.57 12.29 4.77 8.00
Q1 2002 4 10.05 12.22 5.08 10.80
Q2 2002 6 11.41 12.08 5.10 8.16
Q3 2002 4 11.25 12.36 4.26 11.00
Q4 2002 6 11.57 11.92 4.01 8.25

Exhibit No. JC-3
Page 129 of 141
4 RATE CASE SUMMARY
VI. Rate Case Data: From Tables I-V (cont.)


Q1 2003 3 11.49 12.24 3.92 10.20
Q2 2003 10 11.16 11.76 3.62 13.60
Q3 2003 5 9.95 11.69 4.23 8.80
Q4 2003 10 11.09 11.57 4.29 6.83
Q1 2004 5 11.00 11.54 4.02 7.66
Q2 2004 8 10.64 11.81 4.60 10.00
Q3 2004 6 10.75 11.35 4.30 12.50
Q4 2004 5 10.91 11.48 4.17 14.40
Q1 2005 4 10.55 11.41 4.30 8.71
Q2 2005 12 10.13 11.49 4.16 13.70
Q3 2005 8 10.84 11.32 4.21 13.00
Q4 2005 10 10.57 11.14 4.49 8.44
Q1 2006 11 10.38 11.23 4.57 7.33
Q2 2006 18 10.39 11.38 5.07 8.83
Q3 2006 7 10.06 11.64 4.90 8.33
Q4 2006 12 10.38 11.19 4.63 8.11
Q1 2007 11 10.30 11.00 4.68 9.88
Q2 2007 16 10.27 11.44 4.85 9.82
Q3 2007 8 10.02 11.13 4.73 10.80
Q4 2007 11 10.44 11.16 4.26 8.75
Q1 2008 7 10.15 10.98 3.66 7.33
Q2 2008 8 10.41 10.93 3.89 10.80
Q3 2008 21 10.42 11.26 3.86 10.60
Q4 2008 6 10.38 11.21 3.25 11.90
Q1 2009 13 10.31 11.79 2.74 11.10
Q2 2009 22 10.55 11.01 3.31 9.13
Q3 2009 17 10.46 11.43 3.52 10.90
Q4 2009 14 10.54 11.15 3.46 9.69
Q1 2010 16 10.45 11.24 3.72 10.00
Q2 2010 19 10.12 11.12 3.49 9.00
Q3 2010 12 10.27 11.07 2.79 12.40
Q4 2010 8 10.30 11.17 2.86 10.90
Q1 2011 8 10.35 11.11 3.46 10.80
Q2 2011 15 10.24 11.06 3.21 12.00
Q3 2011 17 10.13 10.86 2.43 8.64
Q4 2011 10 10.29 10.66 2.05 7.60
Q1 2012 17 10.84 10.57 2.04 10.50
Q2 2012 16 9.92 10.66 1.82 11.40
Q3 2012 8 9.78 10.68 1.64 8.20
Q4 2012 12 10.05 10.69 1.71 8.65
Q1 2013 19 10.23 10.49 1.95 8.24
Q2 2013 16 9.77 10.40 2.00 11.80
NA = Not available
Source: SNL Financial / Regulatory Research Assoc. and EEIԛ Rate Department
tomer growth in part prompted Baltimore Gas and Electric’s Baltimore Gas and Electric’s filing is, in part, an attempt
filing. to correct for the company’s estimate that its earned overall
Both Ameren and Commonwealth Edison submitted return for the year ending 7/31/2013 will be only 5.68%.
filings in Illinois as part of those companies’ ongoing for- The company also hopes to implement an electric reliability
mula rate plan. The ROE requested in both filings was investment initiative (and an associated tracker mechanism)
8.72%, thus contributing to the record low average requested to be based on guidelines established by the Maryland com-
ROE in Q2. However, while the requested ROE is low for mission, based on its review of Maryland utilities’ reliability
both companies, the certainty of earning that ROE and lack performance and a Maryland Governor’s Task Force’s rec-
of lag that is part of the formula rate plan help to offset any ommendations following a severe wind storm that affected
deleterious effects of the low return. the company’s service territory. The company proposed

Exhibit No. JC-3
Page 130 of 141
RATE CASE SUMMARY 5
measures that could be completed between 2014 and 2018 at approve the rider, finding no substantial evidence that the
an estimated cost of $136 million. The measures are expected reduction in industrial customers and industrial activity was
to improve the company’s reliability by about 10% compared caused by industrial electric rates. The chairman dissented on
to its average performance between 2010 and 2012. this issue, saying that the company’s “industrial rates have
been measurably higher than those of neighboring electric
Decided Cases utilities and even higher than its own industrial rates in South
Eight of the ten cases decided in Q2 incorporated settlements Carolina.”
or partial settlements. Settlements are often silent on details
related to the case, but in Q2 enough details were revealed to Maui Electric in Hawaii
allow for a fairly complete examination of the cases decided Maui Electric (MECO) entered into a settlement in Q2 that
during the quarter. would have awarded the company a 10% ROE. However, the
commission reduced the ROE to 9% because the 10% ROE
Duke Energy Ohio was outside the 9%-9.75% range proposed by the Division of
Duke’s settlement granted the company recovery of an $11 Consumer Advocacy (one of the parties to the settlement).
million vegetation management expense (the amount the The commission said that half the reduction was due to
company spent in the test year) and a $4.4 million baseline “updated economic and financial market conditions” and that
expense for storms, but did not allow the company’s re- the other half of the adjustment reflected “apparent system
quested storm deferral and tracking mechanism or any recov- inefficiencies which negatively impact MECO’s customers.”
ery of incremental expenses associated with 2012 storms. The commission said the company “appears to have failed to
However, the company can request deferral of incremental adequately and sufficiently plan for and implement the neces-
storm costs after 2012. Also, the company noted that under sary modifications to its existing operations to accept a more
pre-existing rates it would earn a return of 4.79% on rate appropriate level of wind energy generation made available to
base. The commission observed that such a rate of return is MECO, negatively impacting ratepayers through higher elec-
“insufficient to provide [the company] with reasonable com- tricity rates.” The commission also disallowed $1.3 million
pensation for the service it renders to customers.” associated with pension costs and other post-retirement-
benefits. To derive the disallowance, the commission relied
San Diego Gas & Electric on a three-year average, rather than the test year estimate
San Diego Gas & Electric’s order allowed attrition rate in- adopted in the settlement for these costs. The commission
creases for 2013-2015 based on the Consumer Price Index – further disallowed some amounts associated with integrated
Urban, with some modification. This resulted in rate in- resource planning and customer information system costs.
creases of 2.65% for 2013 and 2.75% for both 2014 and The commission said this decision is intended to serve notice
2015. The commission also extended the company’s “Z- to MECO and other Hawaiian Electric utilities that they
factor” mechanism that allows utilities to request recovery, “appear to lack movement to a sustainable business model to
under certain circumstances, for significant unforeseen ex- address technological advancements and increasing customer
penses between rate cases, subject to a $5 million deductible. expectations. The commission observes that some mainland
The order also allowed the company recovery of costs associ- electric utilities have begun to define, articulate and imple-
ated with the San Onofre Nuclear Generating Station, subject ment the vision for the ‘electric utility of the future.’ Without
to refund, pending a reasonableness review. such a long-term, customer focused business strategy, it is
difficult to ascertain whether [the Hawaiian Electric utilities’]
Consumers Energy in Michigan increasing capital investments are strategic investments or
Consumers Energy entered into a settlement that was ap- simply a series of unrelated capital projects that effectively
proved without addressing advanced metering infrastructure expand utility rate base and increase profits but appear to
issues, including whether the program should be suspended provide limited or little customer value.”
and whether the customer opt-out fee proposed by the com-
pany would be appropriate. Tucson Electric Power
In Q2, Tucson Electric Power entered into a settlement that
Duke Energy Progress in North Carolina approved the company’s proposed lost fixed-cost recovery
Duke Energy Progress entered into a settlement that was decoupling mechanism, which is targeted at fixed costs lost as
approved with a rider that allows the company to earn a re- a result of the commission’s energy efficiency standard and
turn on coal inventory above that authorized in rates. The distributed generation requirements. The adjustment is
parties to the settlement did not agree, however, on Duke’s capped at 1% with any excess deferred. The settlement also
proposal to implement an experimental rider to reduce rates approved an environmental compliance adjustor to help the
to industrial customers. The commission similarly did not company recover, between rate cases, any costs resulting

Exhibit No. JC-3
Page 131 of 141
6 RATE CASE SUMMARY
from environmental standards established by federal agen- nonetheless, the record before us shows that these programs
cies. Recovery through the adjustor is limited to 0.25% of come with substantial costs. . . . We want to be clear that we
the company’s total retail revenue per year. The settlement support cost effective energy efficiency. However, we believe
increased the monthly residential customer charge from $7 the time has come for us to engage in a full consideration of
to $10, the commercial single-phase service customer charge the issues related to EE/DSM programs and their cost re-
from $8 to $15.50, the commercial three-phase service cus- covery, including whether EE/DSM should be considered as
tomer charge from $14 to $20.50, and the large-customer a resource in integrated resource plans.” The commission
customer charge from $371.88 to $775. The commission opened a new generic docket on the issue. One of the five
said that the $10 residential customer charge was a “small commissioners voted no on the settlement and order with-
part of the overall average bill of over $84” and well less out written dissent.
than the $56 average monthly fixed costs per residential cus-
tomer. The commission disallowed the settlement’s energy Puget Sound Energy in Washington
efficiency resource plan (EERP), which would have given Puget Sound Energy filed an expedited rate case in response
the company a return of and on energy efficiency resource to the commission’s interest in breaking “the current pattern
investments over five years through a demand-side manage- of almost continuous rate cases.” The filing was for delivery
ment surcharge. [The company currently recovers energy services only and excluded power costs and property taxes.
efficiency (EE) program costs, including a performance in- A settlement allowed for the company to establish a rate
centive, through a demand side management (DSM) sur- plan consisting of a series of 3% annual increases intended
charge over one year.] The commission said “Adoption of to avoid the need to file a general rate case over a period of
the EERP . . . would represent a fundamental shift in the years, and a decoupling mechanism with a baseline revenue
way we have addressed cost recovery of EE/DSM. While per customer for the rate plan period. The rate plan period
TEP’s present EE/DSM recovery mechanism classifies EE/ extends at least until March 2016, the next time the company
DSM costs as expenses, the proposed EERP would treat will be allowed to file a new rate case, or until March 2017, if
them as invested capital. . . . Although we are aware that the company decides not to file another case first.■
EE/DSM programs can provide benefits to customers;

Exhibit No. JC-3
Page 132 of 141
Rate Case Summary
Q4 2017
FINANCIAL UPDATE
QUARTERLY REPORT
OF THE U.S. INVESTOR-OWNED
ELECTRIC UTILITY INDUSTRY
Exhibit No. JC-3
Page 133 of 141
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ate Members. Safe, reliable, affordable, and increasingly clean ener-
gy enhances the lives of all Americans and powers the econo- Mark Agnew
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tributes 5 percent to the nation’s GDP. Organized in 1933, EEI
provides public policy leadership, strategic business intelligence, Bill Pfister
and essential conferences and forums. Director, Financial Analysis
(202) 508-5531, bpfister@eei.org
About EEI’s Quarterly Financial Updates
Michael Buckley
EEI’s quarterly financial updates present industry trend analyses
Senior Financial Analyst
and financial data covering 49 U.S. investor-owned electric utility
(202) 508-5614, mbuckley@eei.org
companies. These 49 companies include 43 electric utility holding
companies whose stocks are traded on major U.S. stock exchanges
and six electric utilities who are subsidiaries of non-utility or for-
Future EEI Finance Meetings
eign companies. Financial updates are published for the following
topics: EEI Financial Conference
November 11-14, 2018
Dividends Rate Case Summary Hilton San Francisco Union Square
Stock Performance SEC Financial Statements (Holding Companies) San Francisco, California
Credit Ratings FERC Financial Statements (Regulated Utilities)
EEI Finance Department material can be found online at: For more information about future EEI Finance Meetings,
www.eei.org/QFU. please contact Debra Henry at (202) 508-5496 or dhenry@eei.org,
or Devin James at (202) 508-5057 or djames@eei.org.
For EEI Member Companies
The EEI Finance and Accounting Division maintains current year
and historical data sets that cover a wide range of industry financial
and operating metrics. We look forward to serving as a resource
for member companies who wish to produce customized industry
financial data and trend analyses for use in:
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Exhibit No. JC-3
Page 134 of 141
The 49 U.S. Investor-Owned Electric Utilities

The companies listed below all serve a regulated distribution territory. Other utilities, such as transmission provider ITC Holdings, are not
shown below because they do not serve a regulated distribution territory. However, their financial information is included in relevant EEI data
sets, such as transmission-related construction spending.
ALLETE, Inc. (ALE) IPALCO Enterprises, Inc.

Alliant Energy Corporation (LNT) MDU Resources Group, Inc. (MDU)
Ameren Corporation (AEE) MGE Energy, Inc. (MGEE)
American Electric Power Company, Inc. (AEP) NextEra Energy, Inc. (NEE)
AVANGRID, Inc. (AGR) NiSource Inc. (NI)
Avista Corporation (AVA) NorthWestern Corporation (NWE)
Berkshire Hathaway Energy OGE Energy Corp. (OGE)
Black Hills Corporation (BKH) Oncor Electric Delivery Company
CenterPoint Energy, Inc. (CNP) Otter Tail Corporation (OTTR)
Cleco Corporation PG&E Corporation (PCG)
CMS Energy Corporation (CMS) Pinnacle West Capital Corporation (PNW)
Consolidated Edison, Inc. (ED) PNM Resources, Inc. (PNM)
Dominion Resources, Inc. (D) Portland General Electric Company (POR)
DPL, Inc. PPL Corporation (PPL)
DTE Energy Company (DTE) Public Service Enterprise Group Inc. (PEG)
Duke Energy Corporation (DUK) Puget Energy, Inc.
Edison International (EIX) SCANA Corporation (SCG)
El Paso Electric Company (EE) Sempra Energy (SRE)
Entergy Corporation (ETR) Southern Company (SO)
Eversource Energy (ES) Unitil Corporation (UTL)
Exelon Corporation (EXC) Vectren Corporation (VVC)
FirstEnergy Corp. (FE) WEC Energy Group, Inc. (WEC)
Great Plains Energy Incorporated (GXP) Westar Energy, Inc. (WR)
Hawaiian Electric Industries, Inc. (HE) Xcel Energy, Inc. (XEL)
IDACORP, Inc. (IDA)
Exhibit No. JC-3
Page 135 of 141
Companies Listed by Category

(as of 12/31/2017)
Please refer to the Quarterly Financial Updates webpage for previous years’ lists.
G iven the diversity of utility holding company corporate strat-

egies, no single company categorization approach will be
useful for all EEI members and utility industry analysts. Never-the-
Categorization is based on year-end business segmentation data
presented in SEC 10-K filings, supplemented by discussions with
and information provided by parent company IR departments.
less, we believe the following classification provides an informative The EEI Finance and Accounting Division continues to eval-
framework for tracking financial trends and the capital markets’ uate our approach to company categorization and business seg-
response to business strategies as companies depart from the tradi- mentation. In addition, we can produce customized categorization
tional regulated utility model. and peer group analyses in response to member company requests.
We welcome comments, suggestions and feedback from EEI
Regulated 80% or more of total assets are regulated member companies and the financial community.
Mostly Regulated Less than 80% of total assets are regulated
Regulated (35 of 49) Mostly Regulated (14 of 49)

Alliant Energy Corporation NiSource Inc. ALLETE, Inc.
Ameren Corporation NorthWestern Corporation AVANGRID, Inc.
American Electric Power Company, Inc. OGE Energy Corp. CenterPoint Energy, Inc.
Avista Corporation Oncor Electric Delivery Company Dominion Resources, Inc.
Berkshire Hathaway Energy Otter Tail Corporation DPL Inc.
Black Hills Corporation PG&E Corporation DTE Energy Company
Cleco Corporation Pinnacle West Capital Corporation Exelon Corporation
CMS Energy Corporation PNM Resources, Inc. Hawaiian Electric Industries, Inc.
Consolidated Edison, Inc. Portland General Electric Company MDU Resources Group, Inc.
Duke Energy Corporation PPL Corporation MGE Energy, Inc.
Edison International Puget Energy, Inc. NextEra Energy, Inc.
El Paso Electric Company Southern Company Public Service Enterprise Group
Entergy Corporation Unitil Corporation Incorporated
Eversource Energy Vectren Corporation SCANA Corporation
FirstEnergy Corp. WEC Energy Group, Inc. Sempra Energy
Great Plains Energy Inc. Westar Energy, Inc.
IDACORP, Inc. Xcel Energy Inc.
IPALCO Enterprises, Inc. Note: Based on assets at 12/31/2016
Exhibit No. JC-3
Page 136 of 141
Q4 2017
Rate Case Summary
I. U.S.ofElectric
I. Number Output
Rate Cases Filed(GWh)
(Quarterly)
HIGHLIGHTS
 Electric utilities filed 12 new rate cases in Q4 2017. U.S. Investor-Owned Electric Utilities
30
Along with 23 decided cases, it was a busy quarter for
25
rate regulation.
20
 The average awarded return on equity (ROE) in Q4 15
was 9.73%, a level little changed from recent quarters. 10
The average requested ROE was 10.33%. 5
 Electric utilities’ desire to recover expenses related to 0
customer service and customer experience initiatives was
the most frequently cited broad reason for filings after
recovery for capex. This was followed by expenses relat- Source: S&P Global Market Intelligence / Regulatory Research Assoc. and EEI Rate
ed to the evolution in electric utility business models and Department
utilities’ desire to recover for declining sales.

II. Average Awarded ROE (Quarterly)
 Q4’s low average regulatory lag, at 6.91 months, result-
ed from an unusual number of special cases. %
U.S. Investor-Owned Electric Utilities
14
COMMENTARY
13
Electric utilities filed 12 new rate cases in Q4 2017, a number
consistent with the increased pace of quarterly filings since 12
the industry’s restructuring nearly 20 years ago. Along with 23 11
decided cases, it was a busy quarter for rate regulation, as the 10
fourth quarter often is. The average awarded return on equity
9
(ROE) in Q4 was 9.73%, a level little changed from recent
quarters. The average requested ROE was 10.33%. Declining
interest rates since the early 1980s have resulted in a long-
term secular decline in both requested and approved ROEs. Source: S&P Global Market Intelligence / Regulatory Research Assoc. and EEI
Average regulatory lag, at 6.91 months, was considerably be-
low the industry’s approximate ten-month long-term average Filed Cases in Q4 2017
since restructuring. However, this does not appear to indicate Broadly speaking, the primary reason for rate case filings is
a change in a trend, but instead results from an unusual num- the recovery of capital expenditures (capex), and this was the
ber of special cases. Average regulatory lag will likely contin- case in Q4. The second and third most common reasons for
ue to hold near the ten-month average unless state commis- filings are utilities’ desire to establish rate mechanisms and to
sions accelerate the speed of rate case decisions. recover operation and maintenance (O&M) expenses; this
was not the pattern in Q4. Instead, electric utilities’ desire to
1 EEI Q4 2017 Financial Update
Exhibit No. JC-3
Page 137 of 141
2 RATE CASE SUMMARY
III. Average Requested ROE (Quarterly) IV. Average Regulatory Lag (Quarterly)
% U.S. Investor-Owned Electric Utilities Months U.S. Investor-Owned Electric Utilities

14 25
13 20
12 15
11 10
10 5
Source: S&P Global Market Intelligence / Regulatory Research Assoc. and EEI Rate
Department Source: S&P Global Market Intelligence / Regulatory Research Assoc. and EEI Rate
Department
V. 10-Year Treasury Yield (1/1980 — 12/2017) Air Clean Jobs Act. The Act requires the state’s electric utili-
ties to convert or retrofit coal plants to gas ― or retire them
%
U.S. Investor-Owned Electric Utilities up to the lesser of 900 megawatts or 50% of the utility’s
16
coal assets by January 1, 2018. In Q4, the company filed for
a four-step increase to recover the associated costs, explain-
12 ing the rate increases would “fund investments to better
integrate renewable energy, boost grid reliability, offer cus-
8 tomers more information for greater control over their en-
ergy budget, reduce system fuel and energy costs, and put in
4
place technology to keep costs low over the long term.”
0 Similarly, Narragansett Electric in Rhode Island pro-
posed a Power Sector Transformation Plan (PSTP) con-
sistent with the state’s Power Sector Transformation Initia-
Source: U.S. Federal Reserve
tive (PSTI). The PSTI responds to the state governor’s di-
rective that stakeholders collaborate to create a “more dy-
recover expenses related to customer service and customer namic regulatory framework” that enables a “cleaner, more
experience initiatives was the second most frequently cited affordable, and more reliable energy system for the 21st
broad reason for filings. This was followed by expenses re- century and beyond.” A report issued by stakeholders pro-
lated to the evolution in electric utility business models and poses shifting the traditional electric utility business model
utilities’ desire to recover for declining sales. to a more performance-based model, aligning incentives
These drivers are largely related. While recovery of in- with customer demand and public policy. Recommendations
vestments in generation plants and distribution and trans- included multi-year rate plans and budget and revenue caps
mission infrastructure are mainstay drivers of case filings, to incentivize cost savings. The company’s PSTP has four
growth in the use of renewable generation and other emerg- main components: investments in advanced metering, grid
ing technologies are increasingly driving capex and other modernization, electric vehicle infrastructure, and energy
spending. Some of these new technologies allow customers storage and solar demonstration projects. In its initial com-
to generate electricity and offer greater control over electric- ment on the company’s proposal, the commission said, “As
ity use. This has fostered interest in new industry business Rhode Island navigates the transition from an old one-way
models. Consequently, electric utilities are proposing to energy system to a new one, based as much on information
build and recover for the infrastructure that allows custom- as infrastructure, we need to consider fresh solutions, new
ers to have that control and that creates a better customer partners and bring the best know-how in the world to our
experience. Yet these technologies often allow customers to doorstep.”
use less central-station electricity and therefore reduce utility Maui Electric in Hawaii filed to “Maintain the quality of
electricity sales. electric service to customers, improve customer service and
achieve transformational and State energy policy goals.”
New Electric Utility Business Model Initiatives
Public Service Colorado has embarked upon an Advanced Miscellaneous
Grid and Intelligence Initiative, which includes infrastruc- Emera Maine filed in Q4 to remove a 50-basis-point ROE
ture investments and other costs related to improving reduction ordered in its last rate case for management ineffi-
productivity. These include costs related to Colorado’s Clean ciencies associated with the company’s billing system, cus-

Exhibit No. JC-3
Page 138 of 141
RATE CASE SUMMARY 3
VI. Rate Case Data: From Tables I-V


Q1 1989 4 NA 15.26 9.21 NA
Q2 1989 4 NA 13.30 8.77 NA
Q3 1989 14 NA 13.65 8.11 NA
Q4 1989 13 NA 13.47 7.91 NA
Q1 1990 6 12.62 13.00 8.42 6.71
Q2 1990 20 12.85 13.51 8.68 9.07
Q3 1990 6 12.54 13.34 8.70 9.90
Q4 1990 8 12.68 13.31 8.40 8.61
Q1 1991 13 12.66 13.29 8.02 11.00
Q2 1991 17 12.67 13.23 8.13 11.00
Q3 1991 15 12.49 12.89 7.94 8.70
Q4 1991 12 12.42 12.90 7.35 10.70
Q1 1992 6 12.38 12.77 7.30 8.90
Q2 1992 15 11.83 12.86 7.38 9.61
Q3 1992 11 12.03 12.81 6.62 9.00
Q4 1992 12 12.14 12.36 6.74 10.10
Q1 1993 6 11.84 12.33 6.28 8.87
Q2 1993 7 11.64 12.39 5.99 8.10
Q3 1993 5 11.15 12.70 5.62 11.20
Q4 1993 9 11.04 12.12 5.61 10.90
Q1 1994 15 11.07 12.15 6.07 13.40
Q2 1994 10 11.13 12.37 7.08 9.28
Q3 1994 11 12.75 12.66 7.33 11.80
Q4 1994 4 11.24 13.36 7.84 9.26
Q1 1995 10 11.96 12.44 7.48 12.00
Q2 1995 10 11.32 12.26 6.62 10.40
Q3 1995 8 11.37 12.19 6.32 9.50
Q4 1995 5 11.58 11.69 5.89 10.60
Q1 1996 3 11.46 12.25 5.91 16.30
Q2 1996 9 11.46 11.96 6.72 9.80
Q3 1996 4 10.76 12.13 6.78 14.00
Q4 1996 4 11.56 12.48 6.34 8.12
Q1 1997 4 11.08 12.50 6.56 13.80
Q2 1997 5 11.62 12.66 6.70 18.70
Q3 1997 3 12.00 12.63 6.24 8.33
Q4 1997 4 11.06 11.93 5.91 12.70
Q1 1998 2 11.31 12.75 5.59 10.20
Q2 1998 7 12.20 11.78 5.60 7.00
Q3 1998 1 11.65 NA 5.20 19.00
Q4 1998 5 12.30 12.11 4.67 9.11
Q1 1999 1 10.40 NA 4.98 17.60
Q2 1999 3 10.94 11.17 5.54 8.33
Q3 1999 3 10.75 11.57 5.88 6.33
Q4 1999 4 11.10 12.00 6.14 23.00
Q1 2000 3 11.08 12.10 6.48 15.10
Q2 2000 1 11.00 12.90 6.18 10.50
Q3 2000 2 11.68 12.13 5.89 10.00
Q4 2000 8 12.50 11.81 5.57 7.50
Q1 2001 3 11.38 11.50 5.05 24.00
Q2 2001 7 10.88 12.24 5.27 8.00
Q3 2001 7 10.78 12.64 4.98 8.62
Q4 2001 6 11.57 12.29 4.77 8.00
Q1 2002 4 10.05 12.22 5.08 10.80
Q2 2002 6 11.41 12.08 5.10 8.16
Q3 2002 4 11.25 12.36 4.26 11.00
Q4 2002 6 11.57 11.92 4.01 8.25
Q1 2003 3 11.49 12.24 3.92 10.20
Q2 2003 10 11.16 11.76 3.62 13.60

Exhibit No. JC-3
Page 139 of 141
4 RATE CASE SUMMARY
VI. Rate Case Data: From Tables I-V (cont.)

Q3 2003 5 9.95 11.69 4.23 8.80
Q4 2003 10 11.09 11.57 4.29 6.83
Q1 2004 5 11.00 11.54 4.02 7.66
Q2 2004 8 10.64 11.81 4.60 10.00
Q3 2004 6 10.75 11.35 4.30 12.50
Q4 2004 5 10.91 11.48 4.17 14.40
Q1 2005 4 10.55 11.41 4.30 8.71
Q2 2005 12 10.13 11.49 4.16 13.70
Q3 2005 8 10.84 11.32 4.21 13.00
Q4 2005 10 10.57 11.14 4.49 8.44
Q1 2006 11 10.38 11.23 4.57 7.33
Q2 2006 18 10.39 11.38 5.07 8.83
Q3 2006 7 10.06 11.64 4.90 8.33
Q4 2006 12 10.38 11.19 4.63 8.11
Q1 2007 11 10.30 11.00 4.68 9.88
Q2 2007 16 10.27 11.44 4.85 9.82
Q3 2007 8 10.02 11.13 4.73 10.80
Q4 2007 11 10.44 11.16 4.26 8.75
Q1 2008 7 10.15 10.98 3.66 7.33
Q2 2008 8 10.41 10.93 3.89 10.80
Q3 2008 21 10.42 11.26 3.86 10.60
Q4 2008 6 10.38 11.21 3.25 11.90
Q1 2009 13 10.31 11.79 2.74 11.10
Q2 2009 22 10.55 11.01 3.31 9.13
Q3 2009 17 10.46 11.43 3.52 10.90
Q4 2009 14 10.54 11.15 3.46 9.69
Q1 2010 16 10.45 11.24 3.72 10.00
Q2 2010 19 10.12 11.12 3.49 9.00
Q3 2010 12 10.27 11.07 2.79 12.40
Q4 2010 8 10.30 11.17 2.86 10.90
Q1 2011 8 10.35 11.11 3.46 10.80
Q2 2011 15 10.24 11.06 3.21 12.00
Q3 2011 17 10.13 10.86 2.43 8.64
Q4 2011 10 10.29 10.66 2.05 7.60
Q1 2012 17 10.84 10.57 2.04 10.50
Q2 2012 16 9.92 10.66 1.82 11.40
Q3 2012 8 9.78 10.68 1.64 8.20
Q4 2012 12 10.05 10.69 1.71 8.65
Q1 2013 21 10.23 10.48 1.95 8.24
Q2 2013 16 9.77 10.40 2.00 11.80
Q3 2013 4 10.06 10.85 2.71 6.55
Q4 2013 10 9.90 10.46 2.75 8.14
Q1 2014 9 10.23 10.22 2.76 11.30
Q2 2014 25 9.83 10.48 2.62 7.83
Q3 2014 8 9.89 10.48 2.50 8.67
Q4 2014 16 9.78 10.47 2.28 7.42
Q1 2015 10 10.37 10.29 1.97 11.80
Q2 2015 21 9.73 10.30 2.17 7.74
Q3 2015 6 9.40 10.35 2.22 10.00
Q4 2015 11 9.62 10.33 2.19 9.44
Q1 2016 14 10.26 10.39 1.92 9.45
Q2 2016 27 9.57 10.55 1.75 10.50
Q3 2016 12 9.76 10.57 1.56 9.62
Q4 2016 17 9.57 10.38 2.13 7.54
Q1 2017 10 9.89 10.24 2.44 9.04
Q2 2017 21 9.63 10.32 2.26 8.89
Q3 2017 13 9.66 10.18 2.24 11.30
Q4 2017 12 9.73 10.33 2.37 6.91
NA = Not available / Source: S&P Global Market Intelligence/ Regulatory Research Assoc. and EEI Rate Department
Exhibit No. JC-3
Page 140 of 141
RATE CASE SUMMARY 5
tomer service and reliability. The company says it has made refinancing of its debt at a lower rate in 2018 and 2019 or
improvements to address these issues and is filing partly to from the ‘Tax Cuts and Jobs Act’ recently passed by the
recover for investments made related to customer experience United States Congress.”
and service levels and to recover costs relating to the roll-off
of amortizations of employee medical plan savings. New Technology Investments
Virginia Electric & Power filed to recover expenditures Pepco’s settlement in Maryland requires the company to
associated with universal solar generation plants. Otter Tail build or buy 700 kW of solar generation at a price capped at
Power filed in North Dakota partly to increase the residential $1,650 per kilowatt with recovery to start January 1, 2019 at a
customer charge from $8.00 to $17.70. The company also 10.5% ROE. The settlement allows the company to initiate a
wants to launch a residential time of day rate class. Connecti- 50 megawatt battery storage project at costs capped at
cut Light & Power’s filing included a request to reopen the $2,300 per kilowatt. The company will recover those costs in
case to address changes in federal health care or tax laws. its next rate case. The settlement also requires the company
to deploy a minimum of 530 electric vehicle charging sta-
Decided Cases in Q4 2017 tions at an investment of up to $8 million, to be recovered
Return on Equity over four years after 2021.
In Potomac Electric Power’s case in Maryland, the company Tampa Electric’s settlement allows the company to im-
had requested an ROE of 10.1% and the commission award- plement a solar base rate adjustment mechanism allowing it
ed 9.5%, saying, in each of its previous four cases, the com- to install and receive recovery for 600 megawatts of photo-
pany “requested an ROE of 10.10% or greater. Each time voltaic solar generation at a maximum $122.3 million reve-
we declined to adopt the Company’s recommendation in nue requirement, not to exceed $1,500 per kilowatt, by the
view of the economic and risk factors faced by the Company end of 2021. If the installed cost is less than this amount,
at the time. This time is no different. . . . Interest rates have the company must share 75% of savings with customers.
generally declined over the last decade. Once again, the NSTAR Electric’s decision in Massachusetts allows the
Company predicts that interest rates will increase, however, company to recover $45 million in investments to accelerate
. . . economists have been forecasting that interest rates the development of electric vehicle infrastructure and up to
would increase for the past ten years, and they have been $55 million to construct both a five-megawatt and a 12-
wrong. . . . interest rates went up and down between Case megawatt energy storage facility. The commission said “grid
No. 9418 and this case, and are now somewhat higher. The modernization is vital for maintaining and improving the
resultant increase however cannot be correctly described as reliability of the electric system and offers potential savings
significant. . . . Thus, although market conditions may have to customers. . . . The Department remains committed to
changed, they do not support an increase in authorized ensuring that electric distribution companies implement ap-
ROE. . . . [The 9.5% ROE is] both adequate and appropriate propriate grid modernization technologies and practices to
for Pepco, considering the low level of risk associated with enhance reliability, reduce costs, empower customers to bet-
its electric distribution service in Maryland and the current ter manage usage, and support a cleaner, more efficient elec-
capital market environment.” tric system. . . . These investments should not only enable
In Tampa Electric’s case, a settlement stipulates, but for the market for energy storage in Massachusetts, but also pro-
a few certain circumstances, that the company must freeze vide data that will be critical in evaluating future energy stor-
rates until after 2021. The settlement specifies a range for age deployments as part of Massachusetts’ clean energy
ROE between 9.25% and 11.25%. If the 30-year U.S. Treas- future.”
ury bond yield stays at or above 4.6039% for six months or
more any time before the end of 2021, the range shifts up- Federal Tax Reform
ward to 9.5% to 11.5%. If the ROE falls outside that range, El Paso Electric’s settlement includes a mechanism to adjust
stakeholders can petition to change rates. for changes in corporate income taxes, requiring the compa-
Commonwealth Edison and Ameren Illinois in Q4 com- ny to record as a regulatory liability the difference between
pleted their seventh rate case under their formula rate plans. income taxes reflected in the approved revenue requirement
The commission granted each company an 8.4% ROE, and the taxes calculated using the new rate. The company is
among the lowest ROEs awarded to utilities in the last 35 required to file a tariff within 120 days of the law’s enact-
years. ment for accrued liability refund over a 12-month period.
The order in Nevada Power’s rate case allows the com- Within 90 days of the end of each fiscal year, the company
pany to retain earnings associated with earned ROEs be- must update and file the refund factor to reflect any over- or
tween the allowed 9.4% and 9.7%, and requires the company under-recovery until reconciliation in the next base rate case.
to share equally with customers any earnings greater than Southwestern Electric Power’s order in Texas and Tampa
9.7%. The commission said the 9.4% ROE would keep the Electric’s settlement contain similar conditions.
company financially healthy and “Future financial benefits Duke Energy Florida’s settlement stipulates the compa-
may flow to [the company], such as savings through possible ny is to retain 40% of the impacts of federal tax reform,

Exhibit No. JC-3
Page 141 of 141
6 RATE CASE SUMMARY
which accelerates depreciation of a coal project, and refund Tampa Electric’s settlement freezes rates until the end of
the remaining 60% to customers. If the cumulative liability is 2021, with a few certain exceptions, such as allowing the
less than $200 million, the company must distribute to cus- company to recover storm costs on an expedited basis up to
tomers the excess deferred taxes over five years. If the liabil- $4 per 1,000 kilowatthours. Additional cost recovery would
ity is more, the company must distribute the excess over ten be subject to hearing.
years. NSTAR Electric’s decision in Massachusetts allows the
company to consolidate Western Massachusetts Electric into
Miscellaneous NSTAR Electric. The commission said the proposed merger
The Maryland commission allowed Potomac Electric Power would “provide net savings to ratepayers, long-term strate-
to include post-test-year reliability investments in rate base, gies that will assure a reliable, cost-effective energy delivery
saying “[the commission] adheres to a historic test period system, potential further improvements in customer service
methodology in setting rates. However, in past rate cases, we and service quality, and increased financial integrity of
have recognized an exception to allow recovery of post-test- NSTAR Electric as the surviving entity.”
year reliability plant investments made and placed into ser- A settlement increased El Paso Electric’s residential cus-
vice prior to evidentiary hearings, and generally including no tomer charge from $6.90 to $8.25 per month; the company
more than three months of post-test-year reliability plant had requested $10.85. New customers with an expected load
additions. In order to accept a post-test-year adjustment, the of greater than 400 kilowatts must take service under the
Commission has also required the Company to demonstrate company’s time-of-use rates, with a one-time opportunity to
that such investments meet objective standards for safety opt out after one year. Customers who opt out will pay the
and reliability, have not generated additional utility revenues, lower of time-of-use rates or standard service rates for the
and will provide service to existing rather than new custom- introductory year. Residential customers who generate elec-
ers.” The commission found that improvement in the com- tricity have the choice of a $30 monthly minimum bill, a
pany’s reliability metrics over the past several years supported time-of-use rate or a demand charge. Under the time-of-use
including these investments in rate base. The commission rate option, the customer would pay the greater of total base
rejected post-test-year investments it determined did not rate charges (including the customer charge) or a minimum
meet these criteria. bill of $26.50. Under the demand charge option, the custom-
Duke Energy Florida’s settlement increased rates to re- er would pay the customer charge, a monthly demand charge
flect $1.1 billion in grid modernization investments intended of $3.16 per kilowatthour based on monthly peak and me-
to enhance reliability, reduce outages, shorten restoration tered demand, and time of use energy charges. The settle-
time, support the growth of renewable energy and emerging ment applies similar changes to the rates of generating cus-
technologies, install advanced metering infrastructure, and tomers in the small general service class. The company will
upgrade company systems. The settlement required the com- not be able to change rates for generating customers beyond
pany to discontinue a nuclear project resulting in an impair- those changes applying to all customers for a minimum of
ment charge of $135 million in Q3 2017. The company’s three years. Customers who applied to be generating custom-
court case with the nuclear plant contractor is ongoing. ers before the order date are exempt from minimum bill pro-
visions for 20 years.

Exhibit No. JC-2

Two-Step DCF Analysis
Using Date for Six Months Ending
March 2018
Exhibit No. JC-2
Page 1 of 6
Southern Company
FERC Docket No.
National Electric Utility Proxy Group DCF Analysis Using Two-Step Growth DCF Methodology
Value Line Electrics with S&P CCR of BBB+ to A and Moody's Long-Term Issuer or Senior Unsecured Rating of Baa3 to Baa1
Using Data for the Six Months Ending March 2018
Standard Moody's
& Poor's Long Term Value Long-term
Corporate Issuer or Sr Line Six Month IBES GDP Composite Adjusted DCF Price to
Line Credit Unsecured Safety Average Analysts' Growth Growth Dividend ROE Book
No. Company Ticker Rating Rating Rank Dividend Yld Proj EPS g Rate Rate Yield Ke Value
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l)
1 Alliant Energy LNT A- Baa1 2 3.11% 5.45% 4.22% 5.04% 3.19% 8.23% 2.19
2 Amer. Elec. Power AEP A- Baa1 1 3.47% 5.63% 4.22% 5.16% 3.56% 8.72% 1.84
3 Ameren Corp. AEE BBB+ Baa1 2 3.10% 6.37% 4.22% 5.65% 3.19% 8.84% 1.89
4 CenterPoint Energy CNP A- Baa1 3 3.85% 8.49% 4.22% 7.07% 3.98% 11.05% 2.49
5 CMS Energy CMS BBB+ Baa1 2 2.96% 7.04% 4.22% 6.10% 3.05% 9.15% 2.73
6 DTE Energy DTE BBB+ Baa1 2 3.22% 5.58% 4.22% 5.13% 3.30% 8.43% 1.92
7 Duke Energy DUK A- Baa1 2 4.33% 4.24% 4.22% 4.23% 4.42% 8.65% 1.37
8 Entergy Corp. ETR BBB+ Baa2 3 4.41% -6.67% 4.22% -3.04% 4.34% 1.30% 1.76
9 Fortis, Inc. FTS A- Baa3 2 4.72% 5.27% 4.22% 4.92% 4.83% 9.75% 1.05
10 NextEra Energy NEE A- Baa1 2 2.60% 8.85% 4.22% 7.31% 2.70% 10.00% 2.49
11 PNM Resources, Inc. PNM BBB+ Baa3 3 2.53% 5.80% 4.22% 5.27% 2.60% 7.87% 1.79
12 PPL Corp. PPL A- Baa2 2 4.88% 2.14% 4.22% 2.83% 4.94% 7.78% 2.04
13 Public Serv. Enterprise PEG BBB+ Baa1 1 3.49% 3.39% 4.22% 3.67% 3.55% 7.22% 1.73
14 Southern Co. SO A- Baa2 2 4.89% 2.70% 4.22% 3.21% 4.97% 8.17% 1.95
15 Average 2.1 3.68% 4.59% 4.22% 4.47% 3.76% 8.23% 1.94
16 Low - 14 Companies 1.30%
17 High - 14 Companies 11.05%
18 Median 8.54%
After Adjustment To Remove ETR
19 Low - 13 Companies 7.22%
20 High - 13 Companies 11.05%
21 Median 8.65%
22 Upper Median (75th Percentile Value) 9.15%
23 Midpoint of the Top Half of the Array 10.09%
24 Southern Company A- Baa2
Moody's Public Utility Bond Index Yields

October 2017 - March 2018 Threshold
A Bond Avg Yield: 3.94% 4.94%
Baa Bond Avg Yield: 4.28% 5.28%
Average 4.11% 5.11%
Notes:
(f) - Avg. of the monthly low and high dividend yields for the 6 months ending March 31, 2018. (pp. 2-4)
(g) - Thomson Reuters/IBES reported consensus of analysts' projected "5-year" earnings per share
growth rate from Yahoo! Finance as of March 30, 2018. FTS growth rate directly from Thomson Reuters.
(h) - Average long-term GDP growth rate.
(i) - Composite avg. growth rate with IBES and GDP growth rates weighted 2/3 and 1/3, respectively.
(j) - Dividend yield times (1 + 0.5g), where g = composite average growth rate.
(k) - ROE equals the adjusted dividend yield plus the composite average growth rate.
(l) - Price to book values calculated using October 2017 - March 2018 average market price and
Value Line estimated year end 2018 book values. (p. 5)
Exhibit No. JC-2

Southern Company Page 2 of 6
FERC Docket No.
SIX MONTH AVERAGE DIVIDEND YIELD
Price Dividend Yield

High Low Avg Div Low High Avg
Alliant Energy
Oct-17 $ 43.97 $ 41.05 $ 42.51 $ 1.260 2.87% 3.07% 2.96%
Nov-17 $ 45.55 $ 42.88 $ 44.22 $ 1.260 2.77% 2.94% 2.85%
Dec-17 $ 45.38 $ 42.18 $ 43.78 $ 1.260 2.78% 2.99% 2.88%
Jan-18 $ 42.72 $ 39.07 $ 40.90 $ 1.260 2.95% 3.22% 3.08%
Feb-18 $ 39.90 $ 36.84 $ 38.37 $ 1.340 3.36% 3.64% 3.49%
Mar-18 $ 41.04 $ 37.85 $ 39.44 $ 1.340 3.27% 3.54% 3.40%
Average $ 43.09 $ 39.98 $ 41.54 3.00% 3.23% 3.11%
Amer. Elec. Power

Oct-17 $ 74.90 $ 69.55 $ 72.23 $ 2.360 3.15% 3.39% 3.27%
Nov-17 $ 77.93 $ 73.56 $ 75.74 $ 2.480 3.18% 3.37% 3.27%
Dec-17 $ 78.07 $ 72.94 $ 75.51 $ 2.480 3.18% 3.40% 3.28%
Jan-18 $ 73.42 $ 67.11 $ 70.26 $ 2.480 3.38% 3.70% 3.53%
Feb-18 $ 68.98 $ 63.32 $ 66.15 $ 2.480 3.60% 3.92% 3.75%
Mar-18 $ 69.24 $ 64.60 $ 66.92 $ 2.480 3.58% 3.84% 3.71%
Average $ 73.76 $ 68.51 $ 71.14 3.34% 3.60% 3.47%
Ameren Corp.
Oct-17 $ 62.14 $ 57.67 $ 59.90 $ 1.760 2.83% 3.05% 2.94%
Nov-17 $ 64.89 $ 61.48 $ 63.18 $ 1.760 2.71% 2.86% 2.79%
Dec-17 $ 64.36 $ 58.28 $ 61.32 $ 1.830 2.84% 3.14% 2.98%
Jan-18 $ 59.03 $ 54.83 $ 56.93 $ 1.830 3.10% 3.34% 3.21%
Feb-18 $ 56.85 $ 51.89 $ 54.37 $ 1.830 3.22% 3.53% 3.37%
Mar-18 $ 56.79 $ 53.08 $ 54.94 $ 1.830 3.22% 3.45% 3.33%
Average $ 60.68 $ 56.21 $ 58.44 2.99% 3.23% 3.10%
CenterPoint Energy
Oct-17 $ 29.97 $ 28.60 $ 29.28 $ 1.070 3.57% 3.74% 3.65%
Nov-17 $ 30.07 $ 28.20 $ 29.14 $ 1.070 3.56% 3.79% 3.67%
Dec-17 $ 30.17 $ 27.75 $ 28.96 $ 1.070 3.55% 3.86% 3.69%
Jan-18 $ 28.49 $ 27.11 $ 27.80 $ 1.070 3.76% 3.95% 3.85%
Feb-18 $ 28.32 $ 25.84 $ 27.08 $ 1.110 3.92% 4.30% 4.10%
Mar-18 $ 27.59 $ 26.40 $ 27.00 $ 1.110 4.02% 4.20% 4.11%
Average $ 29.10 $ 27.32 $ 28.21 3.73% 3.97% 3.85%
CMS Energy
Oct-17 $ 48.92 $ 45.82 $ 47.37 $ 1.330 2.72% 2.90% 2.81%
Nov-17 $ 50.85 $ 47.76 $ 49.30 $ 1.330 2.62% 2.78% 2.70%
Dec-17 $ 50.25 $ 46.76 $ 48.50 $ 1.330 2.65% 2.84% 2.74%
Jan-18 $ 47.43 $ 43.74 $ 45.59 $ 1.330 2.80% 3.04% 2.92%
Feb-18 $ 44.98 $ 40.48 $ 42.73 $ 1.430 3.18% 3.53% 3.35%
Mar-18 $ 45.58 $ 41.98 $ 43.78 $ 1.430 3.14% 3.41% 3.27%
Average $ 48.00 $ 44.42 $ 46.21 2.85% 3.09% 2.96%
DTE Energy
Oct-17 $ 113.27 $ 106.21 $ 109.74 $ 3.300 2.91% 3.11% 3.01%
Nov-17 $ 116.21 $ 109.58 $ 112.90 $ 3.300 2.84% 3.01% 2.92%
Dec-17 $ 116.74 $ 107.58 $ 112.16 $ 3.530 3.02% 3.28% 3.15%
Jan-18 $ 110.49 $ 102.84 $ 106.66 $ 3.530 3.19% 3.43% 3.31%
Feb-18 $ 106.35 $ 97.66 $ 102.01 $ 3.530 3.32% 3.61% 3.46%
Mar-18 $ 105.19 $ 99.52 $ 102.35 $ 3.530 3.36% 3.55% 3.45%
Average $ 111.37 $ 103.90 $ 107.64 3.11% 3.33% 3.22%
Exhibit No. JC-2

FERC Docket No.
Duke Energy
Oct-17 $ 88.64 $ 83.52 $ 86.08 $ 3.560 4.02% 4.26% 4.14%
Nov-17 $ 91.80 $ 87.56 $ 89.68 $ 3.560 3.88% 4.07% 3.97%
Dec-17 $ 89.72 $ 83.56 $ 86.64 $ 3.560 3.97% 4.26% 4.11%
Jan-18 $ 84.42 $ 76.64 $ 80.53 $ 3.560 4.22% 4.65% 4.42%
Feb-18 $ 79.63 $ 72.93 $ 76.28 $ 3.560 4.47% 4.88% 4.67%
Mar-18 $ 77.91 $ 74.58 $ 76.25 $ 3.560 4.57% 4.77% 4.67%
Average $ 85.35 $ 79.80 $ 82.58 4.19% 4.48% 4.33%
Entergy Corp.
Oct-17 $ 87.00 $ 75.01 $ 81.01 $ 3.480 4.00% 4.64% 4.30%
Nov-17 $ 87.95 $ 84.85 $ 86.40 $ 3.560 4.05% 4.20% 4.12%
Dec-17 $ 87.09 $ 79.66 $ 83.38 $ 3.560 4.09% 4.47% 4.27%
Jan-18 $ 82.96 $ 76.55 $ 79.76 $ 3.560 4.29% 4.65% 4.46%
Feb-18 $ 78.98 $ 71.95 $ 75.47 $ 3.560 4.51% 4.95% 4.72%
Mar-18 $ 80.15 $ 75.57 $ 77.86 $ 3.560 4.44% 4.71% 4.57%
Average $ 84.02 $ 77.27 $ 80.64 4.23% 4.60% 4.41%
Fortis, Inc.
Oct-17 $ 37.56 $ 35.62 $ 36.59 $ 1.600 4.26% 4.49% 4.37%
Nov-17 $ 38.24 $ 36.13 $ 37.19 $ 1.600 4.18% 4.43% 4.30%
Dec-17 $ 37.64 $ 35.77 $ 36.70 $ 1.700 4.52% 4.75% 4.63%
Jan-18 $ 36.76 $ 34.49 $ 35.63 $ 1.700 4.62% 4.93% 4.77%
Feb-18 $ 35.35 $ 31.41 $ 33.38 $ 1.700 4.81% 5.41% 5.09%
Mar-18 $ 34.03 $ 32.26 $ 33.14 $ 1.700 5.00% 5.27% 5.13%
Average $ 36.60 $ 34.28 $ 35.44 4.56% 4.88% 4.72%
NextEra Energy
Oct-17 $ 156.80 $ 145.62 $ 151.21 $ 3.930 2.51% 2.70% 2.60%
Nov-17 $ 159.28 $ 148.37 $ 153.82 $ 3.930 2.47% 2.65% 2.55%
Dec-17 $ 159.40 $ 152.68 $ 156.04 $ 3.930 2.47% 2.57% 2.52%
Jan-18 $ 159.23 $ 149.07 $ 154.15 $ 3.930 2.47% 2.64% 2.55%
Feb-18 $ 159.64 $ 145.10 $ 152.37 $ 3.930 2.46% 2.71% 2.58%
Mar-18 $ 164.41 $ 151.34 $ 157.88 $ 4.440 2.70% 2.93% 2.81%
Average $ 159.79 $ 148.70 $ 154.24 2.51% 2.70% 2.60%
PNM Resources, Inc.

Oct-17 $ 43.80 $ 40.05 $ 41.92 $ 0.970 2.21% 2.42% 2.31%
Nov-17 $ 45.55 $ 42.20 $ 43.88 $ 0.970 2.13% 2.30% 2.21%
Dec-17 $ 46.00 $ 39.75 $ 42.88 $ 0.970 2.11% 2.44% 2.26%
Jan-18 $ 40.55 $ 35.15 $ 37.85 $ 0.970 2.39% 2.76% 2.56%
Feb-18 $ 38.05 $ 33.75 $ 35.90 $ 1.060 2.79% 3.14% 2.95%
Mar-18 $ 38.70 $ 34.95 $ 36.83 $ 1.060 2.74% 3.03% 2.88%
Average $ 42.11 $ 37.64 $ 39.88 2.39% 2.68% 2.53%
PPL Corp.
Oct-17 $ 38.55 $ 37.09 $ 37.82 $ 1.580 4.10% 4.26% 4.18%
Nov-17 $ 37.35 $ 35.87 $ 36.61 $ 1.580 4.23% 4.40% 4.32%
Dec-17 $ 36.99 $ 30.74 $ 33.87 $ 1.580 4.27% 5.14% 4.67%
Jan-18 $ 32.45 $ 30.44 $ 31.45 $ 1.580 4.87% 5.19% 5.02%
Feb-18 $ 31.93 $ 28.64 $ 30.28 $ 1.580 4.95% 5.52% 5.22%
Mar-18 $ 28.98 $ 27.08 $ 28.03 $ 1.640 5.66% 6.06% 5.85%
Average $ 34.38 $ 31.64 $ 33.01 4.68% 5.09% 4.88%
Exhibit No. JC-2

FERC Docket No.
Public Serv. Enterprise

Oct-17 $ 49.70 $ 46.05 $ 47.88 $ 1.720 3.46% 3.74% 3.59%
Nov-17 $ 53.20 $ 49.17 $ 51.18 $ 1.720 3.23% 3.50% 3.36%
Dec-17 $ 53.28 $ 50.71 $ 51.99 $ 1.720 3.23% 3.39% 3.31%
Jan-18 $ 51.94 $ 48.00 $ 49.97 $ 1.720 3.31% 3.58% 3.44%
Feb-18 $ 51.95 $ 46.20 $ 49.08 $ 1.720 3.31% 3.72% 3.50%
Mar-18 $ 50.41 $ 46.19 $ 48.30 $ 1.800 3.57% 3.90% 3.73%
Average $ 51.75 $ 47.72 $ 49.73 3.35% 3.64% 3.49%
Southern Co.
Oct-17 $ 52.59 $ 48.62 $ 50.60 $ 2.320 4.41% 4.77% 4.58%
Nov-17 $ 53.51 $ 50.80 $ 52.15 $ 2.320 4.34% 4.57% 4.45%
Dec-17 $ 52.00 $ 47.92 $ 49.96 $ 2.320 4.46% 4.84% 4.64%
Jan-18 $ 48.07 $ 43.16 $ 45.62 $ 2.320 4.83% 5.38% 5.09%
Feb-18 $ 45.30 $ 42.38 $ 43.84 $ 2.320 5.12% 5.47% 5.29%
Mar-18 $ 45.10 $ 43.02 $ 44.06 $ 2.320 5.14% 5.39% 5.27%
Average $ 49.43 $ 45.98 $ 47.71 4.72% 5.07% 4.89%
Source: Yahoo! Finance

Exhibit No. JC-2

FERC Docket No.
Market Price to Book Values
Oct 2017
to Mar 2018 2018 Est.
Line Company Ticker Avg Price Book Value M/B
1 Alliant Energy LNT 41.54 19.00 2.19

2 Amer. Elec. Power AEP 71.14 38.70 1.84
3 Ameren Corp. AEE 58.44 31.00 1.89
4 CenterPoint Energy CNP 28.21 11.35 2.49
5 CMS Energy CMS 46.21 16.95 2.73
6 DTE Energy DTE 107.64 55.95 1.92
7 Duke Energy DUK 82.58 60.45 1.37
8 Entergy Corp. ETR 80.64 45.75 1.76
9 Fortis, Inc. FTS 35.44 33.60 1.05
10 NextEra Energy NEE 154.24 61.90 2.49
11 PNM Resources, Inc. PNM 39.88 22.30 1.79
12 PPL Corp. PPL 33.01 16.15 2.04
13 Public Serv. Enterprise PEG 49.73 28.75 1.73
14 Southern Co. SO 47.71 24.50 1.95
Source: October 2017 to March 2018 average price from Yahoo! Finance.
2018 estimated book values from Value Line reports dated
January 26, February 16, and March 16, 2018.
Southern Company Proxy Group Selection Exhibit No. JC-2

FERC Docket No. Page 6 of 6
Line Safety Long-term Issuer Senior Unsecured

No. Company Ticker Industry Name Rank S&P Moody's S&P Moody's Note
Utilities With S&P CCR of A, A-, or BBB+ and Moody's Long-term Issuer or Senior Unsecured Rating of Baa1, Baa2, or Baa3
1 Alliant Energy LNT Electric Util. (Central) 2 A- Baa1 Baa1
2 Amer. Elec. Power AEP Electric Util. (Central) 1 A- BBB+ Baa1
3 Ameren Corp. AEE Electric Util. (Central) 2 BBB+ Baa1 BBB Baa1
4 CenterPoint Energy CNP Electric Util. (Central) 3 A- Baa1 BBB+ Baa1
5 CMS Energy CMS Electric Util. (Central) 2 BBB+ BBB Baa1
6 DTE Energy DTE Electric Util. (Central) 2 BBB+ BBB Baa1
7 Duke Energy DUK Electric Utility (East) 2 A- Baa1 BBB+ Baa1
8 Entergy Corp. ETR Electric Util. (Central) 3 BBB+ Baa2 BBB Baa2
9 Fortis, Inc. FTS Electric Util. (Central) 2 A- Baa3 BBB+ Baa3
10 NextEra Energy NEE Electric Utility (East) 1 A- Baa1 BBB
11 PNM Resources, Inc. PNM Electric Utility (West) 3 BBB+ Baa3
12 PPL Corp. PPL Electric Utility (East) 2 A- Baa2
13 Public Serv. Enterprise PEG Electric Utility (East) 1 BBB+ BBB Baa1
14 Southern Co. SO Electric Utility (East) 2 A- BBB+ Baa2
Utilities Meeting the Ratings Screens But Eliminated For Other Reasons
15 Avangrid, Inc. AGR Electric Utility (East) 2 BBB+ Baa1 BBB Baa1 Foreign control & other
16 Dominion Energy D Electric Utility (East) 2 BBB+ BBB Baa2 M&A activity
17 G't Plains Energy GXP Electric Util. (Central) 3 BBB+ BBB Baa2 M&A activity
18 PG&E Corp. PCG Electric Utility (West) 3 BBB+ Baa1 BBB Baa1 Dividend cut
19 Sempra Energy SRE Electric Utility (West) 2 BBB+ Baa1 BBB+ Baa1 M&A activity
20 Vectren Corp. VVC Electric Util. (Central) 2 A- M&A activity
21 Westar Energy WR Electric Util. (Central) 2 BBB+ Baa1 M&A activity
Utilities Eliminated By the Credit Ratings Screen

22 ALLETE ALE Electric Util. (Central) 2 BBB+ A3
23 Avista Corp. AVA Electric Utility (West) 2 BBB Baa1 M&A activity
24 Black Hills Corp. BKH Electric Utility (West) 2 BBB Baa2 BBB Baa2
25 Consol. Edison ED Electric Utility (East) 1 A- A3 BBB+ A3
26 Edison Int'l EIX Electric Utility (West) 2 BBB+ A3 BBB A3
27 El Paso Electric EE Electric Utility (West) 2 BBB Baa1 BBB Baa1
28 Eversource Energy ES Electric Utility (East) 1 A+ Baa1 A Baa1
29 Exelon Corp. EXC Electric Utility (East) 3 BBB Baa2 BBB- Baa2
30 FirstEnergy Corp. FE Electric Utility (East) 3 BBB- Baa3 BB+ Baa3
31 Hawaiian Elec. HE Electric Utility (West) 2 BBB-
32 IDACORP, Inc. IDA Electric Utility (West) 2 BBB Baa1
33 MGE Energy, Inc. MGEE Electric Util. (Central) 1 No ratings
34 NorthWestern Corp. NWE Electric Utility (West) 3 BBB BBB Baa1
35 OGE Energy Corp. OGE Electric Util. (Central) 2 A- A3
36 Otter Tail Corp. OTTR Electric Util. (Central) 2 BBB Baa2
37 Pinnacle West PNW Electric Utility (West) 1 A- A3 BBB+ A3
38 Portland General POR Electric Utility (West) 2 BBB A3
39 SCANA Corp. SCG Electric Utility (East) 3 BBB Ba1 BBB- Ba1 M&A activity
40 WEC Energy Group WEC Electric Util. (Central) 1 A- A3 BBB+ A3
41 Xcel Energy XEL Electric Utility (West) 1 A- A3 BBB+ A3
42 Southern Co. SO Electric Utility (East) 2 A- BBB+ Baa2

Document Content(s)
Notice of Filing to 5-10-2018-JC Complaint EL18-X.DOCX................1-2
JC Complaint of AlabamaMunElecAuth and CoopEnergy EL18-X.PDF..........3-25
Exhibit JC-1 - Mac Mathuna Testimony re SoCo ROE EL18-X.PDF...........26-89
Exhibit JC-3 - Mac Mathuna Workpapers EL18-X.PDF......................90-230
Exhibit JC-2 - 2-step DCF Analysis_6 mosMar 2018 EL18-X.XLSX..........231-237

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20180510-5233 FERC PDF (Unofficial) 5/10/2018 4:20:14 PM

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Alabama Municipal Electric Authority,

v. Docket No. EL18-__-000

Alabama Power Company,

(May 10, 2018)

The Commission encourages electronic submissions of protests and interventions

This filing is accessible online at http://www.ferc.gov, using the “eLibrary” link

Comment Date: 5:00 pm Eastern Time on __, 2018.

May 10, 2018

VIA ELECTRONIC FILING

Kimberly D. Bose, Secretary

Re: Alabama Municipal Electric Authority, et al. v. Alabama Power Company,

Dear Secretary Bose:

Submitted under cover of this letter is the Complaint of Alabama Municipal

The Complaint is submitted in three parts:

 Part I comprises the Complaint, a form of Notice of Complaint suitable for

 Part II consists of the direct testimony and supporting exhibits of

/s/ David A. Fitzgerald /s/ Matthew R. Rudolphi

SCHIFF HARDIN LLP DUNCAN, WEINBERG, GENZER

UNITED STATES OF AMERICA

Alabama Municipal Electric Authority,

v. Docket No. EL18-__-000

Alabama Power Company,

Procedure, 18 C.F.R. § 385.206 (2018), Alabama Municipal Electrical Authority

an agent for the transmission owning subsidiaries of The Southern Company

(collectively, “Southern Companies” or “Respondents”).

base ROE of Respondents is unjust and unreasonable as measured by Commission

Complainants’ testimony, exhibits, and workpapers filed herein. Further, Joint

base ROE is unjust and unreasonable.

This Complaint is supported by the Direct Testimony, Exhibits, and workpapers

Communications regarding this matter should be addressed to the following

Alabama Municipal Electric Authority

G. Alan Williford David A. Fitzgerald

Nathan Brown Matthew R. Rudolphi

Joint Complainants request that, in order to avoid delays in responding to official

documents and communications, the Commission waive the requirements of Rule

II. THE PARTIES

of Alabama. Each of AMEA’s eleven participating members owns and operates an

power sales contracts. AMEA is a network transmission customer of Respondents

power requirements of AMEA’s members.

2. Cooperative Energy is an incorporated nonprofit cooperative electric

predominantly domestic and include substantial farm loads. Cooperative Energy is an

approximately 950 MW of additional load located in the Southern Companies’ control

utilities operated and wholly-owned by The Southern Company, which is an energy

services holding company. Alabama Power is a regulated operating public utility

utilities operated by The Southern Company. Georgia Power is a regulated operating

in the State of Georgia.

utilities operated by The Southern Company. Mississippi Power is a regulated operating

in the State of Mississippi.

8. The Southern Companies’ current 11.25% base ROE was accepted by

access transmission formula rates and became effective on May 1, 2003.1

B. The Southern Companies’ Current Base ROE Is Unjust and

reasonable.2 When challenging a previously-approved rate under Section 206 of the

Columbia Circuit has explained, however, a complainant is not required to propose or

substantiated testimony, exhibits, and workpapers to demonstrate that the Southern

for the Southern Companies.

overpay for transmission service by millions of dollars each year.

C. Application of the Commission’s DCF Method Shows That the Just

13. Mr. Mac Mathuna’s application of the Commission’s two-step DCF

period ending March 2018.11

using the following criteria:13

 Companies that are included in the Value Line electric utility