Rebuttal testimony of James Vander Weidie on behalf of Northern Natural Gas Co under RP03-398.

Jnofflclal FERC-Generated PDF of 20040224-0321 Received by FERC OSEC 02/20/2004 in D o c k e t # : R P 0 3 - 3 9 8 - 0 0 0 Exhibit No. NNG-86 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Northern Natural Gas Company Docket No. RP03-398-000 REBUTTAL TESTIIYIONY SUMMARY OF JAMES H. VANDER WEIDE Dr. Vander Weide responds in his rebuttal testimony to the December 9, 2003 prepared direct testimony of Federal Energy Regulatory Commission (Commission) Staff witness Franklin D. Knight, Exhibit No. S-13, Northern Municipal Distributors Group and the Midwest Region Gas Task Force Association witness Matthew I. Kahal, Exhibit No. SDG-35, Canadian Association of Petroleum Producers and the Indicated Shippers wimess David C. Parcell, Exhibit No. CIS-I, and American Iron and Steel Institute, ALCOA Inc., Archer Daniels Midland Company, United States Gypsum Company and USG Interiors, Inc. witness Elizabeth H. Crowe, Exhibit No. IND-I. Dr. Vandvr Weide's rebuttal testimony discusses issues related to (1) the appropriate set of proxy companies; (2) the appropriate growth rates to use in the Commission's DCF model; (3) the use of Merrill Lynch DCF results to corroborate cost of equity estimates; and (4) the use of the capital asset pricing model (CAPM) to estimate the cost of equity. Dr. Vander Weide also updates his cost of equity analysis that he presented in his direct testimony. Dr. Vander Weide has prepared and included in his rebuttal testimony Exhibit No. NNG-87, where he has compared the proxy companies employed by the Commission Jnofflclal FERC-Generated P D F o f 20040224-0321 Received by FERC OSEC 02/20/2004 in D o c k e t # : RP03-398-000 1 Canadian Association of Petroleum Producers and the Indicated Shippers, Mr. 2 Kahal's testimony is on behalf of Northern Municipal Distributors Group and the 3 Midwest Region Gas Task Force Association, and Ms. Crowe's testimony is on 4 behalf of the American Iron and Steel Institute, ALCOA Inc., Archer Dauiels 5 Midland Company, United States Gypsum Company, and USG Interiors, Inc. I have 6 also been asked to update my estimate o f Northem's cost of equity through 7 September 2003, the same period as analyzed by the witnesses I am rebutting. 8 Q. What issues will you discuss in your rebuttal testimony?. 9 A. I will discuss issues related to: (1)the appropriate set of proxy companies; (2)the 10 appropriate growth rates in the DCF model; (3) the use o f Merrill Lynch DCF results 11 to verify cost o f equity estimates; and (4) the use of the capital asset pricing model 12 (CAPM) to ...