depreciation rate study at december 31, 2007

Exhibit A-1 (DAW-1)

CONSUMERS ENERGY COMPANY NATURAL GAS OPERATIONS

DEPRECIATION RATE STUDY

AT DECEMBER 31, 2007

http://www.utilityalliance.com

cmrutz

Typewritten Text

cmrutz

Typewritten Text

Case No. U-15629 Witness: DAWatson

cmrutz

Typewritten Text

Date: July 2008 Page: 1 of 101

rmcgill

Text Box

Case No.: U-15629 Hearing Date: 04/27/2009 Exhibit No.: A-1

CONSUMERS ENERGY COMPANY

NATURAL GAS OPERATIONS

DEPRECIATION RATE STUDY

AT DECEMBER 31, 2007

Table of Contents

PURPOSE ............................................................................................................ 1 STUDY RESULTS................................................................................................ 2 GENERAL DISCUSSION..................................................................................... 3

Definition ......................................................................................................... 3 Basis of Depreciation Estimates ................................................................... 3 Survivor Curves .............................................................................................. 4 Actuarial Analysis ........................................................................................... 6 Judgment......................................................................................................... 7 Average Life Group Depreciation .................................................................. 8 Theoretical Depreciation Reserve ................................................................. 9

DETAILED DISCUSSION .................................................................................. 10 Depreciation Study Process ........................................................................ 10 Depreciation Rate Calculation ..................................................................... 13 Remaining Life Calculation .......................................................................... 13 Life Analysis.................................................................................................. 14 Salvage Analysis........................................................................................... 55

Appendix A – Depreciation Rate Calculations ............................................... 93 Appendix B – Depreciation Expense Comparison ………………………........95 Appendix C – Depreciation Parameter Comparison...................................... 97

1

PURPOSE

The purpose of this study is to develop depreciation rates for the depreciable

property as recorded on Consumers Energy’s books at December 31, 2007. The

account based depreciation rates were designed to recover the total remaining

undepreciated investment, adjusted for net salvage, over the remaining life of

Consumers Energy’s property on a straight-line basis. Non-depreciable property

and property which is amortized such as intangible software were excluded from this

study.

Consumers Energy provides local gas distribution service to 1.7 million

customers in Michigan. Consumers Energy owns transmission mains, distribution

mains, underground storage and various other plant assets. Consumers Energy’s

assets consist of a complex system of high and intermediate pressure transmission,

underground storage, and intermediate and low pressure distribution networks

located across the service area. There are a number of receipt points or city gates,

throughout the system where gas is delivered by the transmission system. Once

gas is delivered to the city gate, the pressure is reduced through regulators in order

to meet system requirements as determined by pressure and volume needs. Then

gas is delivered to customers for burner tip consumption.

3

GENERAL DISCUSSION

Definition

The term "depreciation" as used in this study is considered in the accounting

sense, that is, a system of accounting that distributes the cost of assets, less net

salvage (if any), over the estimated useful life of the assets in a systematic and

rational manner. It is a process of allocation, not valuation. This expense is

systematically allocated to accounting periods over the life of the properties. The

amount allocated to any one accounting period does not necessarily represent the

loss or decrease in value that will occur during that particular period. The Company

accrues depreciation on the basis of the original cost of all depreciable property

included in each functional property group. On retirement the full cost of

depreciable property, less the net salvage value, is charged to the depreciation

reserve.

Basis of Depreciation Estimates

The straight-line, broad (average) life group, remaining-life depreciation

system was employed to calculate annual and accrued depreciation in this study. In

this system, the annual depreciation expense for each group is computed by dividing

the original cost of the asset less allocated depreciation reserve less estimated net

salvage by its respective average life group remaining life. The resulting annual

accrual amounts of all depreciable property within a function were accumulated, and

the total was divided by the original cost of all functional depreciable property to

determine the depreciation rate. The calculated remaining lives and annual

depreciation accrual rates were based on attained ages of plant in service and the

estimated service life and salvage characteristics of each depreciable group. The

computations of the annual depreciation rates are shown in Appendix A.

Actuarial analysis was used with each account within a function where

sufficient data was available, and judgment was used to some degree on all

accounts.

4

Survivor Curves

To fully understand depreciation projections in a regulated utility setting, there

must be a basic understanding of survivor curves. Individual property units within a

group do not normally have identical lives or investment amounts. The average life

of a group can be determined by first constructing a survivor curve which is plotted

as a percentage of the units surviving at each age. A survivor curve represents the

percentage of property remaining in service at various age intervals. The Iowa

Curves are the result of an extensive investigation of life characteristics of physical

property made at Iowa State College Engineering Experiment Station in the first half

of the prior century. Through common usage, revalidation and regulatory

acceptance, these curves have become a descriptive standard for the life

characteristics of industrial property. An example of an Iowa Curve is shown below.

5

There are four families in the Iowa Curves that are distinguished by the relation

of the age at the retirement mode (largest annual retirement frequency) and the

average life. For distributions with the mode age greater than the average life, an

"R" designation (i.e., Right modal) is used. The family of “R” moded curves is shown

below.

Similarly, an "S" designation (i.e., Symmetric modal) is used for the family

whose mode age is symmetric about the average life. An "L" designation (i.e., Left

modal) is used for the family whose mode age is less than the average life. A

special case of left modal dispersion is the "O" or origin modal curve family. Within

each curve family, numerical designations are used to describe the relative

magnitude of the retirement frequencies at the mode. A "6" indicates that the

retirements are not greatly dispersed from the mode (i.e., high mode frequency)

while a "1" indicates a large dispersion about the mode (i.e., low mode frequency).

For example, a curve with an average life of 30 years and an "L3" dispersion is a

6

moderately dispersed, left modal curve that can be designated as a 30 L3 Curve.

An SQ, or square, survivor curve occurs where no dispersion is present (i.e., units of

common age retire simultaneously).

Most property groups can be closely fitted to one Iowa Curve with a unique

average service life. The blending of judgment concerning current conditions and

future trends along with the matching of historical data, permits the depreciation

analyst to make an informed selection of an account's average life and retirement

dispersion pattern.

Actuarial Analysis

Actuarial analysis (retirement rate method) was used in evaluating historical

asset retirement experience where vintage data were available and sufficient

retirement activity was present. In actuarial analysis, interval exposures (total

property subject to retirement at the beginning of the age interval, regardless of

vintage) and age interval retirements are calculated. The complement of the ratio of

interval retirements to interval exposures establishes a survivor ratio. The survivor

ratio is the fraction of property surviving to the end of the selected age interval, given

that it has survived to the beginning of that age interval. Survivor ratios for all of the

available age intervals were chained by successive multiplications to establish a

series of survivor factors, collectively known as an observed life table. The

observed life table shows the experienced mortality characteristic of the account and

may be compared to standard mortality curves such as the Iowa Curves. Where

data was available, accounts were analyzed using this method. Placement bands

were used to illustrate the composite history over a specific era, and experience

bands were used to focus on retirement history for all vintages during a set period.

The results from these analyses for those accounts which had data sufficient to be

analyzed using this method are shown in the Life Analysis section of this report.

7

Judgment

Any depreciation study requires informed judgment by the analyst conducting

the study. A knowledge of the property being studied, company policies and

procedures, general trends in technology and industry practice, and a sound basis of

understanding depreciation theory are needed to apply this informed judgment.

Judgment was used in areas such as survivor curve modeling and selection,

depreciation method selection, simulated plant record method analysis, and

actuarial analysis.

Judgment is not defined as being used in cases where there are specific,

significant pieces of information that influence the choice of a life or curve. Those

cases would simply be a reflection of specific facts into the analysis. Where there

are multiple factors, activities, actions, property characteristics, statistical

inconsistencies, implications of applying certain curves, property mix in accounts or

a multitude of other considerations that impact the analysis (potentially in various

directions), judgment is used to take all of these factors and synthesize them into a

general direction or understanding of the characteristics of the property. Individually,

no one factor in these cases may have a substantial impact on the analysis, but

overall, may shed light on the utilization and characteristics of assets. Judgment

may also be defined as deduction, inference, wisdom, common sense, or the ability

to make sensible decisions. There is no single correct result from statistical

analysis; hence, there is no answer absent judgment. At the very least for example,

any analysis requires choosing which bands to place more emphasis.

The establishment of appropriate average service lives and retirement

dispersions for the Underground Storage, Transmission, Distribution and General

accounts requires judgment to incorporate the understanding of the operation of the

system with the available accounting information analyzed using the Retirement

Rate actuarial methods. The appropriateness of lives and curves depends not only

on statistical analyses, but also on how well future retirement patterns will match

past retirements.

8

Current applications and trends in use of the equipment also need to be

factored into life and survivor curve choices in order for appropriate mortality

characteristics to be chosen.

Average Life Group Depreciation

Consumers Energy was authorized to use the average life group (“ALG”)

depreciation procedure in MPSC Case Number U-12999. At the request of

Consumers Energy, this study continues to use the average life group (ALG)

depreciation procedure to group the assets within each account. After an average

service life and dispersion were selected for each account, those parameters were

used to estimate what portion of the surviving investment of each vintage was

expected to retire. The depreciation of the group continues until all investment in the

vintage group is retired. ALG groups are defined by their respective account

dispersion, life, and salvage estimates. A straight-line rate for each ALG group is

calculated by computing a composite remaining life for each group across all

vintages within the group, dividing the remaining investment to be recovered by the

remaining life to find the annual depreciation expense and dividing the annual

depreciation expense by the surviving investment. The resultant rate for each ALG

group is designed to recover all retirements less net salvage when the last unit

retires. The ALG procedure recovers net book cost over the life of each account by

averaging many components.

9

Theoretical Depreciation Reserve

The book depreciation reserve was derived from Company records where the

provision for depreciation is maintained on a plant account level. As a point of

comparison, a theoretical depreciation reserve model was computed for each

account. This study used a reserve model that relied on a prospective concept

relating future retirement and accrual patterns for property, given current life and

salvage estimates. The theoretical reserve of a group is developed from the

estimated remaining life, total life of the property group, and estimated net salvage.

The theoretical reserve represents the portion of the group cost that would have

been accrued if current forecasts were used throughout the life of the group for

future depreciation accruals. The computation involves multiplying the vintage

balances within the group by the theoretical reserve ratio for each vintage. The

average life group method requires an estimate of dispersion and service life to

establish how much of each vintage is expected to be retired in each year until all

property within the group is retired. Estimated average service lives and dispersion

determine the amount within each average life group. The straight-line remaining-

life theoretical reserve ratio at any given age (RR) is calculated as:

Ratio) SalvageNet-(1* Life) Service(Average

Life) Remaining (Average-1=RR

10

DETAILED DISCUSSION

Depreciation Study Process

This depreciation study encompassed four distinct phases. The first phase

involved data collection and field interviews. The second phase was where the

initial data analysis occurred. The third phase was where the information and

analysis was evaluated. Once the first three stages were complete, the fourth

phase began. This phase involved the calculation of deprecation rates and the

documenting the corresponding recommendations.

During the Phase I data collection process, historical data was compiled from

continuing property records and general ledger systems. Data was validated for

accuracy by extracting and comparing to multiple financial system sources. Audit of

this data was validated against historical data from prior periods, historical general

ledger sources, and field personnel discussions. This data was reviewed

extensively to put in the proper format for a depreciation study. Further discussion

on data review and adjustment is found in the Salvage Considerations Section of

this study. Also as part of the Phase I data collection process, numerous

discussions were conducted with engineers and field operations personnel to obtain

information that would assist in formulating life and salvage recommendations in this

study. One of the most important elements of performing a proper depreciation

study is to understand how the Company utilizes assets and the environment of

those assets. Interviews with engineering and operations personnel are important

ways to allow the analyst to obtain information that is beneficial when evaluating the

output from the life and net salvage programs in relation to the Company’s actual

asset utilization and environment. Information that was gleaned in these

discussions is found both in the Detailed Discussion of this study in the life analysis

and salvage analysis sections and also in workpapers.

11

Phase 2 is where the actuarial analysis is performed. Phase 2 and 3 overlap

to a significant degree. The detailed property records information is used in phase 2

to develop observed life tables for life analysis. These tables are visually compared

to industry standard tables to determine historical life characteristics. It is possible

that the analyst would cycle back to this phase based on the evaluation process

performed in phase 3. Net salvage analysis consists of compiling historical salvage

and removal data by functional group to determine values and trends in gross

salvage and removal cost. This information was then carried forward into phase 3

for the evaluation process.

Phase 3 is the evaluation process which synthesizes analysis, interviews, and

operational characteristics into a final selection of asset lives and net salvage

parameters. The historical analysis from phase 2 is further enhanced by the

incorporation of recent or future changes in the characteristics or operations of

assets that were revealed in phase 1. Phases 2 and 3 allow the depreciation

analyst to validate the asset characteristics as seen in the accounting transactions

with actual Company operational experience.

Finally, Phase 4 involved the calculation of accrual rates, making

recommendations and documenting the conclusions in a final report. The

calculation of accrual rates is found in Appendix A. Recommendations for the

various accounts are contained within the Detailed Discussion of this report. The

depreciation study flow diagram shown as Figure 11 documents the steps used in

conducting this study. Depreciation Systems,2 page 289 documents the same basic

processes in performing a depreciation study which are: Statistical analysis,

evaluation of statistical analysis, discussions with management, forecast

assumptions, write logic supporting forecasts and estimation, and write final report.

1 Public Utility Finance & Accounting, A Reader 2 Wolf & Fitch, 1994 Edition

12

Figure 1

CONSUMERS ENERGY DEPRECIATION STUDY PROCESS

13

Depreciation Rate Calculation

Annual depreciation expense amounts for the depreciable accounts of

Consumers Energy were calculated by the straight line, average life group,

remaining life procedure. With this approach, remaining lives were calculated

according to standard ALG group expectancy techniques, using the Iowa Survivor

Curves noted in the calculation. For each plant account, the difference between the

surviving investment, adjusted for estimated net salvage, and the allocated book

depreciation reserve, was divided by the average remaining life to yield the annual

depreciation expense. These calculations are shown in Appendix A.

Remaining Life Calculation

The establishment of appropriate average service lives and retirement

dispersions for each account within a functional group was based on engineering

judgment that incorporated available accounting information analyzed using the

Retirement Rate actuarial methods. After establishment of appropriate average

service lives and retirement dispersion, remaining life was computed for each

account. Theoretical depreciation reserve with zero net salvage was calculated

using theoretical reserve ratios as defined in the theoretical reserve portion of the

General Discussion section. The difference between plant balance and theoretical

reserve was then spread over the ALG depreciation accruals.

14

Life Analysis

The retirement rate actuarial analysis method was applied to all accounts for

Consumers Energy. For each account, an actuarial retirement rate analysis was

made with placement and experience bands of varying width. The historical

observed life table was plotted and compared with various Iowa Survivor Curves to

obtain the most appropriate match. A selected curve for each account is shown in

the Life Analysis Section of this report. The observed life tables for all analyzed

placement and experience bands are provided in workpapers.

For each account on the overall band (i.e. placement from earliest vintage

year which varied for each account through 2007), approved survivor curves from

MPSC Cases U-12999 & U-13730 were used as a starting point. Then using the

same average life, various dispersion curves were plotted. Frequently, visual

matching would confirm one specific dispersion pattern (i.e. L, S. or R) as an

obviously better match than others. The next step would be to determine the most

appropriate life using that dispersion pattern. Then, after looking at the overall

experience band, different experience bands were plotted and analyzed: in

increments of approximately ten years, for instance 1988-2007, 1978-2007, etc.

Next placement bands of varying width were plotted with each experience band

discussed above. Repeated matching usually pointed to a focus on one dispersion

family and small range of service lives. The goal of visual matching was to minimize

the differential between the observed life table and Iowa curve in top and mid range

of the plots. These results are used in conjunction with all other factors that may

influence asset lives.

15

Account 350.2 Underground Storage Rights of Way

This account includes the cost of land rights used in connection with

underground storage operations. There is approximately $1.4 million in this

account. Currently, the approved life for this account is 65 years with an S2

dispersion. Based on the actuarial analysis, this study recommends retaining the 65

year life and moving to an R4 dispersion.

16

Account 351.2 Compressor Station Structure

This account consists of compressor station structures associated with

underground storage sites. There is approximately $9.1 million in this account.

Currently, the approved life for this account is 45 years with an R3 dispersion.

Based on the actuarial analysis, this study recommends retaining the 45 year life

and moving to an R5 dispersion. An observed life table is graphed for this account

with the recommended curve below.

17

Account 351.3 Measuring and Regulating Station Structure

This account consists of measuring and regulating station structures used in

the underground storage operations. There is approximately $161 thousand in this

account. Currently, the approved life for this account is 45 years with an R3

dispersion. There have been no retirements in this account. This study

recommends retaining the 45 year life and R3 dispersion.

18

Account 351.4 Other Structures

This account consists of small structures and associated assets used in

underground storage operations. There is approximately $3.5 million of investment

in this account. The currently approved life for this account is 50 years with and R4

dispersion. Based on the actuarial analysis, this study recommends retaining the 50

year life and moving to an R3 dispersion. An observed life table is graphed for this

account with the recommended curve below.

19

Account 352.1 Underground Storage Leaseholds and Rights

This account consists of leaseholds and rights used in the underground

storage operations. There is approximately $6.8 million of investment in this

account. The currently approved life for this account is 65 years with an S2

dispersion. There is little retirement activity in this account. This study recommends

retaining the 65 year life and S2 dispersion.

20

Account 352.3 Well Construction

This account consists of assets created in the construction of well sites used

in the underground storage operations. There is approximately $45 million of

investment in this account. The currently approved life for this account is 50 years

with an R4 dispersion. Based on the actuarial analysis, this study recommends

retaining the 50 year life and R4 dispersion. An observed life table is graphed for

this account with the recommended curve below.

21

Account 352.4 Well Equipment

This account consists of well equipment assets used in the underground

storage operations. There is approximately $19 million of investment in this

account. The currently approved life for this account is 50 years with an R2.5

dispersion. As bands become more recent, the life moves from an R2.5 dispersion

to an R2. Based on the actuarial matching of history, this study recommends

moving from the 50 year life to a 48 year life with an R2 dispersion. An observed life

table is graphed for this account with the recommended curve below.

22

Account 353 Lines

This account consists of well lines used in the underground storage

operations. There is approximately $33.5 million of investment in this account. The

currently approved life for this account is 65 years with an S2 dispersion. Both the

65 S2 and the 65 R2 curves match well in this account. The 65 R2 matches the

actual experience of this account better over a larger number of placement and

experience bands than the 65 S2. Based on the actuarial matching of history, this

study recommends retaining the 65 year life and moving to the R2 dispersion. An

observed life table is graphed for this account with the recommended curve below.

23

Account 354 Compressor Station Equipment

This account consists of compressor station equipment used in the

underground storage operations. There is approximately $83 million of investment

in this account. The currently approved curve for this account is 40 years with an

R3 dispersion. Based on the actuarial matching of history, this study recommends

retaining the 40 year life and moving to an R2.5 dispersion. An observed life table is

graphed for this account with the recommended curve below.

24

Account 355 Measuring and Regulating Station Equipment

This account consists of measuring and regulating station equipment used in

the underground storage operations. There is approximately $7.3 million of

investment in this account. The currently approved life for this account is 45 years

with an R2.5 dispersion. The 40 R3 is a significantly better fit for this account than

the 45 R2.5. Based on the actuarial matching of history, this study recommends

moving from the 45 year life and R2.5 dispersion to a 40 year life with an R3

dispersion. An observed life table is graphed for this account with the recommended

curve below.

25

Account 356 Purification Equipment

This account consists of purification equipment used in the underground


account. The currently approved life for this account is 35 years with an R5

dispersion. The 35 R4 is a better fit for this account than the 35 R5. Based on the

actuarial matching of history, this study recommends retaining the 35 year life and

moving to an R4 dispersion. An observed life table is graphed for this account with

the recommended curve below.

26

Account 357 Other Equipment

This account consists of purification equipment used in the underground


account. The currently approved life for this account is 30 years with an R3

dispersion. The 30 R2.5 is a slightly better fit for this account than the 30 R3.

Based on the actuarial matching of history, this study recommends retaining the 30

year life and moving to an R2.5 dispersion. An observed life table is graphed for this

account with the recommended curve below.

27

Account 365.2 Rights of Way


transmission operations. There is approximately $32.5 million in this account.


There have been few retirements in this account. This study recommends retaining

the 75 year life and R3 dispersion.

28

Account 366 Structures and Improvements

This account includes the cost of structures and improvements used in

connection with distribution operations. There is approximately $11.8 million in this


dispersion. There have been relatively few retirements in this account. This study

recommends retaining the 60 year life and R3 dispersion. An observed life table is

graphed for this account below.

29

Account 367 Mains

This account includes the cost of transmission mains primarily coated and

wrapped steel. The currently approved life for this account is 75 years with an R3

dispersion. There is approximately $297.9 million in plant in this account. There is

very little retirement experience reflected in the observed life table. Based on the

limited experience, a 75 R3 continues to fit the limited experience well. The 75 year

average life is slightly on the high side of expectations for the life of transmission

mains but it is still within a reasonable range. This study recommends keeping the

75-year life and R3 dispersion. An observed life table is graphed for this account

with the 75 R3 curve below. An observed life table is graphed for this account

below.

30


This account includes the cost of compressor station equipment used in

connection with transmission operations. There is approximately $41.6 million in

this account. Currently, the approved life for this account is 40 years with an R4

dispersion. The 40 R3 is the best fitting curve across the bands. This study

recommends retaining the approved 40 year life and with a move to an R3

dispersion. An observed life table is graphed for this account below.

31

Account 369 Measuring and Regulating Station Equipment

This account includes the cost of measuring and regulating station equipment

used in connection with transmission operations. There is approximately $38.1

million in this account. Currently, the approved life for this account is 55 years with

an R2 dispersion. The current life expectations for this account have decreased

from the 55 year life. Bands including older activity are reflecting a 43 to 45 year life

with bands in the most recent thirty years showing even shorter indications. The

best fitting life across most of the bands is a 43 R1.5. This study recommends

moving from the approved 55 year life to a 43 year life with the dispersion moving

from and R2 to an R1.5. An observed life table is graphed for this account below.

32

Account 370 Communication Equipment

This account includes the cost of communication equipment used in

connection with transmission operations. There is approximately $8.6 million in this


dispersion. This account is experiencing a slightly shorter life than the current 15

years. The best fitting life is a 13 or 14 year life with an R3 dispersion. Bands over

the most recent thirty years slight shortening of life from 14 to 13 years with an R3

dispersion. This study recommends moving from the approved 15 year life to a 13

year life with a change in dispersion from R4 to R3. An observed life table is


33

Account 371 Other Equipment

This account includes the cost of other equipment used in connection with

transmission operations. There is approximately $4.8 million in this account.

Currently, the approved life for this account is 30 years with an L2 dispersion. The

life of the account is shows a slight increase when examining the more recent thirty

or forty year bands. This study recommends moving from the approved 30 year life

to a 32 year life with a change in dispersion from L2 to L1. An observed life table is


34



distribution operations. There is approximately $9.0 million in this account.


There have been few retirements in this account. This study recommends retaining

the 75 year life and R3 dispersion.

35


This account includes the cost of structures and improvements used in

connection with distribution operations. There is approximately $5.3 million in this

account. Currently, the approved life for this account is 50 years with an S1

dispersion. Viewing the full 100 years of placements, a significantly longer life would

seem to be indicated. However when viewing bands which comprises nearly all of

the investment in the account, a 55 year life with an R4 dispersion is the best fit.

Considering that most of the investment is exhibiting a 55 year life, this study

recommends moving from the approved 50 year life with an S1 dispersion to a 55

year life and R4 dispersion. An observed life table is graphed for this account with

the 55 R4 curve below.

36

Account 376.1 Mains - Bare

This account includes the cost of bare steel mains used in connection with

distribution operations. There is approximately $3.7 million in this account.

Currently, the approved life for this account is 70 years with an R2 dispersion. The

73 year life with an R1.5 dispersion is the best fit across most bands. This study

recommends moving from the approved 70 year life with an R2 dispersion to a 73

year life and R1.5 dispersion. An observed life table is graphed for this account

below.

37

Account 376.2 Mains – Coated and Wrapped

This account consists of coated and wrapped distribution mains. There is

approximately $378.3 Million of investment in this account. The currently approved

life for this account is 75 years with an R3 dispersion. The 80 R3 is a better match

for most of the longer placement and experience bands. Although the 75 R3 is

matching as well or better on the short experience and placement bands, the small

amount of change in the observed life curve for those bands would not recommend

choosing the 75 R3 over the more robust 80 R3 curve. Therefore, this study

recommends moving from the approved 75 year life with an R3 dispersion to an 80

year life with an R3 dispersion for this account. An observed life table is graphed for

this account below.

38

Account 376.3 Mains – Cast Iron

This account consists of cast iron distribution mains. There is approximately

$8.2 Million of investment in this account. The currently approved life for this

account is 65 years with an S3 dispersion. Shorter bands give erratic results, so this

study relies on the full placement and experience band. Therefore, this study

recommends moving from a 65 S3 to 63 year life with a S2 dispersion for this

account. An observed life table is graphed for this account below.

39

Account 376.4 Mains - Copper

This account consists of copper distribution mains. There is approximately

$13 thousand of investment in this account. The currently approved life for this

account is 60 years with an R5 dispersion. The 42 R4 is a significantly better match

than the 60 R5 for this account. Therefore, this study recommends moving from the

approved 60 year life to a 42 year life and retaining the R4 dispersion for this


40

Account 376.5 Mains - Plastic

This account consists of cast iron distribution mains. There is approximately

$661.9 Million of investment in this account. The currently approved life for this

account is 60 years with an R3 dispersion. The stub curves are short and provide

limited information. Indications from various placement and experience bands show

a trend to a shorter life. Due to the limited transactional experience, the selection for

this account remains a 60 year life while moving to a higher mode dispersion R4, as

indicated by the spectrum of placement and experience bands. Therefore, this

study recommends retaining the approved 60 year life and moving from an R3

dispersion to an R4 dispersion for this account. An observed life table is graphed for

this account below.

41

Account 378 Measuring and Regulating Equipment

This account consists of measuring and regulating equipment used in

distribution operations. There is approximately $45.8 Million of investment in this

account. The currently approved life for this account is 50 years with an L0.5

dispersion. The 55 L0.5 is a better match over the longer placement and experience

ands, but the 50 L0.5 is a better match over more recent placement and experience

bands. Therefore, this study recommends retaining the approved 50 year life with

an L0.5 dispersion for this account. An observed life table is graphed for this

account below.

42

Account 380.1 Services - Bare

This account consists of bare services used in distribution operations. There

is approximately $181 thousand of investment in this account. The currently

approved life for this account is 42 years with an L0 dispersion. The 30 L0 is a

significantly better match than the 42 L0 over all placement and experience bands.

Therefore, this study recommends moving from the approved 42 year life to a 30

year life and retaining the approved L0 dispersion for this account. An observed life

table is graphed for this account below.

43

Account 380.2 Services – Coated and Wrapped

This account consists of coated and wrapped services used in distribution

operations. There is approximately $69.4 Million of investment in this account. The

currently approved life for this account is 56 years with an R0.5 dispersion. The

overall band shows a slight increase in life to a 57 R0.5 dispersion for this account.

Therefore, this study recommends moving from the approved 56 year life to a 57

year life and retaining the R0.5 dispersion for this account. An observed life table is


44

Account 380.4 Services - Copper

This account consists of copper services used in distribution operations.

There is approximately $25.4 Million of investment in this account. The currently

approved life for this account is 53 years with an R1 dispersion. The 53 R1 is the

best match in the overall band, but when focusing on the more recent thirty or forty

year bands the life shortens to 46 years with an R1 dispersion. Therefore, this study

recommends moving from the approved 53 R1 to a 46 year life and R1 dispersion

for this account. An observed life table is graphed for this account below.

45

Account 380.5 Services - Plastic

This account consists of measuring and regulating equipment used in

distribution operations. There is approximately $671.4 Million of investment in this

account. The currently approved life for this account is 40 years with an R1.5

dispersion. The 46 R4 is a better match than the 40 R1.5 over all placement and

experience bands. Therefore, this study recommends retaining the moving from the

approved 40 year life and R1.5 dispersion to a 46 year life and R4 dispersion for this


46

Account 381 Meters

This account includes the cost of meters used in measuring gas to residential

customers. There is approximately $195.8 million in plant in this account. The

current approved life of the meter account is 42 years with an S2 dispersion. Visual

matching across many bands also shows that the 41 R2.5 curve is the best fit over

all bands. Based on the visual matching, a 41 R2.5 is recommended for this

account. An observed life table is graphed for this account with the 41 R2.5 curve

below.

47

Account 382 Meter and House Regulator Installation

This account includes the cost of domestic meter and regulator stations

(excluding the meters and regulators). The currently approved life for this account is

52 years with an R2.5 dispersion. There is approximately $189.5 million in plant in

this account. Based on visual matching, the 50 R3 is the best fit over the various

bands. Therefore, this study recommends moving from the 52 R2.5 to the 50 R3 for

this account. An observed life table is graphed for this account below.

48

Account 383 House Regulators

This account includes the cost of domestic regulators. There is

approximately $19.8 million of plant in this account. The currently approved life for

this account is 55 years with an R1 dispersion. For the majority of the bands, the 45

R1 is the best fit. Newer bands reflecting experience in the 1970s and 1980s are

shortening from the 45 year life. The newer bands (reflecting 1987-2007 activity for

1977 and newer regulators) are showing a shorter life of 35 years. This study

recommends moving from the 55 year life to a 45 year life while retaining the R1

dispersion. The expectation is that as older regulators retire, the next study will

recommend moving closer to the 35 year life being experienced by the newer

regulators. An observed life table is graphed for this account below.

49



distribution operations. There is approximately $1,500 in this account. Currently,

the approved life for this account is 50 years with an R3 dispersion. There have

been few retirements in this account. This study recommends retaining the 50 year

life and R3 dispersion.

50


This account includes the cost of general structures and improvements used

for utility service. There is approximately $27.6 million in this account. The current

life for this account is 50 years with an R3 dispersion. A 50 R3 life is indicating in

most bands. Dispersion varies from an R3, R2, to an R1.5 in the most recent twenty

and thirty year bands. Based on the experience, this study recommends retaining

the approved 50 year life and moving to an R1.5 dispersion for this account. An

observed life table is graphed for this account below.

51

Account 391.0 Office Furniture and Equipment

This account consists of miscellaneous office furniture such as desks, chairs,

filing cabinets, and tables used for general utility service. There is approximately $1

million in this account. This account currently has a fixed life for amortization of 15

years. This study recommends retaining the 15 year amortization rate for this

account.

Account 391.2 Computer Equipment

This account consists of computer equipment used for general utility service.

There is approximately $3.8 million in this account. This account currently has a

fixed life for amortization of 7 years. This study recommends moving to a five year

amortization rate for this account.

Account 393.0 Stores Equipment

This account consists of stores equipment used for general utility service.

There is approximately $51 thousand in this account. This account currently has a

fixed life for amortization of 20 years. This study recommends moving to a 25 year


52

Account 394.0 Tools, Shop, and Garage Equipment

This account consists of various items or tools used in shop and garages

such as air compressors, grinders, mixers, hoists, and cranes. There is

approximately $7.2 million in this account. This account currently has a fixed life for

amortization of 20 years. This study recommends retaining the 20 year amortization

rate for this account.

Account 395.0 Laboratory Equipment

This account consists of laboratory equipment used in general utility service.

There is approximately $825 thousand in this account. This account currently has a

fixed life for amortization of 15 years. This study recommends retaining the 15 year


53

Account 396.0 Power Operated Equipment

This account consists of bulldozers, forklifts, trenchers, and other power

operated equipment that cannot be licensed on roadways. The currently approved

life for this account is 10 years with an L1 dispersion. There is approximately $3.6

million in plant in this account. Older bands reflect a life of 10 years. The lives

bands which represent the experience of the last 15 to 25 years have increasingly

shortened. Lives representative of assets in the last 15 years reflect a 7 year life.

Since the last 15 years is over twice the life of the assets the 7 year life is more

representative of the lives of the assets in the future. Based on the above, this study

recommends moving from a 10 year life to a 7 year life moving from an L1 to an L0

dispersion. An observed life table is graphed for this account below.

54

Account 397.0 Communication Equipment

This account consists of miscellaneous communication equipment used in

general utility service. There is approximately $7.9 million in this account. This

account currently has a fixed life for amortization of 15 years. This study

recommends retaining the 15 year amortization rate for this account.

Account 398.0 Miscellaneous Equipment

This account consists of miscellaneous equipment used in general utility

service. There is approximately $404 thousand in this account. This account

currently has a fixed life for amortization of 15 years. This study recommends

retaining the 15 year amortization rate for this account.

55

Salvage Analysis

When a capital asset is retired, physically removed from service and finally

disposed of, terminal retirement is said to have occurred. The residual value of a

terminal retirement is called gross salvage. Net salvage is the difference between

the gross salvage (what the asset was sold for) and the removal cost (cost to

remove and dispose of the asset). Salvage and removal cost percentages are

calculated by dividing the current cost of salvage or removal by the original installed

cost of the asset. Some plant assets can experience significant negative removal

cost percentages due to the timing of the original addition versus the retirement. For

example, a Distribution asset in FERC Account 376 with a current installed cost of

$500 (2007) would have had an installed cost of $38.533 in 1956. A removal cost of

$50 for the asset calculated (incorrectly) on current installed cost would only have a

negative10 percent removal cost ($50/$500). However, a correct removal cost

calculation would show a negative 129.8 percent removal cost for that asset

($50/$38.53). Inflation from the time of installation of the asset until the time of its

removal must be taken into account in the calculation of the removal cost

percentage because the depreciation rate, which includes the removal cost

percentage, will be applied to the original installed cost of assets.

In 2006 and 2007, Consumers Energy made a substantial effort to catch up on

property accounting backlogs in unitization and retirements. These retirements

generally reflected retirements that occurred over the last three to five years. The

retirement backlogs were referenced back to the year the physical retirement

occurred.

3 Using the Handy-Whitman Bulletin No. 167, G-3, line 44, $38.53 = $500 x 46/ 597.

56

The net salvage analysis uses the history of the individual accounts to

estimate the future net salvage that Consumers Energy can expect in its

operations. As a result, the analysis not only looks at the historical experience of

Consumers Energy, but also takes into account recent and expected changes in

operations that could reasonably lead to different future expectations for net

salvage than were experienced in the past. Recent experience is more heavily

weighted in making net salvage recommendations than experience several years

in the past.

Salvage Characteristics

For each function, data for retirements, gross salvage, and cost of removal for

each functional group adjusted as discussed above was derived from 1993-2007.

Moving averages, which remove timing differences between retirement and salvage

and removal cost, were analyzed over periods varying from one to 10 years.

57

Underground Storage Plant


This account includes any salvage and removal cost related to land rights

used in connection with underground storage operations. The currently authorized

net salvage for this account is 0 percent. Generally, little or no removal cost is

incurred and no salvage is received at the retirement of land rights. The historical

data supports a 0% net salvage for these accounts. Therefore, this study

recommends retaining the approved 0% net salvage for this account.

2- yr 3- yr 4- yr 5- yr 6- yr Gross Cost of Net Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Salv. % Account 350.2 Underground Storage Land Rights

1993 0.00 0.00 0.00 0.00 NA 1994 0.00 0.00 0.00 0.00 NA NA 1995 0.00 0.00 0.00 0.00 NA NA NA 1996 0.00 0.00 0.00 0.00 NA NA NA NA 1997 0.00 0.00 0.00 0.00 NA NA NA NA NA 1998 718.50 0.00 0.00 0.00 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%1999 0.00 0.00 0.00 0.00 NA 0.00% 0.00% 0.00% 0.00% 0.00%2000 0.00 0.00 0.00 0.00 NA NA 0.00% 0.00% 0.00% 0.00%2001 0.00 0.00 0.00 0.00 NA NA NA 0.00% 0.00% 0.00%2002 0.00 0.00 0.00 0.00 NA NA NA NA 0.00% 0.00%2003 0.00 0.00 0.00 0.00 NA NA NA NA NA 0.00%2004 2,827.38 0.00 0.00 0.00 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%2005 4.00 0.00 0.00 0.00 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%2006 0.00 0.00 0.00 0.00 NA 0.00% 0.00% 0.00% 0.00% 0.00%2007 0.00 0.00 0.00 0.00 NA NA 0.00% 0.00% 0.00% 0.00%

58

Account 351.2 Compressor Station Structures

This account includes any salvage and removal cost related to structures

used in connection with underground storage compressor operations. The currently

authorized net salvage for this account is negative 6 percent. Retirements in the

years shown are primarily from the 2005-6 retirement of an auxiliary building and the

1998 retirement of a water tank. The small number of retirements in the last three

years relative to the total account balance does not give enough indication of the

future to change net salvage at this point. Therefore, this study recommends

retaining the approved negative 6 percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 351.2 Compressor Station Structures 1993 0.00 0.00 (3,449.00) 3,449.00 NA 1994 0.00 0.00 0.00 0.00 NA NA 1995 0.00 0.00 0.00 0.00 NA NA NA 1996 0.00 0.00 0.00 0.00 NA NA NA NA 1997 0.00 0.00 0.00 0.00 NA NA NA NA NA1998 132,752.20 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%1999 0.00 0.00 3,799.00 (3,799.00) NA -2.9% -2.9% -2.9% -2.9%2000 0.00 0.00 0.00 0.00 NA NA -2.9% -2.9% -2.9%2001 0.00 0.00 1,463.00 (1,463.00) NA NA NA -4.0% -4.0%2002 0.00 0.00 993.00 (993.00) NA NA NA NA -4.7%2003 0.00 0.00 862.16 (862.16) NA NA NA NA NA2004 0.00 0.00 6,888.20 (6,888.20) NA NA NA NA NA2005 33,186.83 0.00 38,792.58 (38,792.58) -116.9% -137.6% -140.2% -143.2% -147.6%2006 31,263.04 0.00 8,495.88 (8,495.88) -27.2% -73.4% -84.1% -85.4% -86.9%2007 3,663.39 0.00 32,415.00 (32,415.00) -884.8% -117.1% -117.0% -127.1% -128.4%

59

Account 351.3 Measuring & Regulating Station Structures


used in connection with underground storage M&R Station operations. The currently

authorized net salvage for this account is negative 6 percent. There has been no

activity in this account for the past several years. Therefore, this study recommends

retaining the approved negative 6 percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 351.3 M & R Station Structures 1993 0.00 0.00 0.00 0.00 NA 1994 0.00 0.00 0.00 0.00 NA NA 1995 0.00 0.00 0.00 0.00 NA NA NA 1996 0.00 0.00 0.00 0.00 NA NA NA NA 1997 0.00 0.00 0.00 0.00 NA NA NA NA NA1998 0.00 0.00 0.00 0.00 NA NA NA NA NA1999 0.00 0.00 0.00 0.00 NA NA NA NA NA2000 0.00 0.00 0.00 0.00 NA NA NA NA NA2001 0.00 0.00 0.00 0.00 NA NA NA NA NA2002 0.00 0.00 0.00 0.00 NA NA NA NA NA2003 0.00 0.00 0.00 0.00 NA NA NA NA NA2004 0.00 0.00 0.00 0.00 NA NA NA NA NA2005 0.00 0.00 0.00 0.00 NA NA NA NA NA2006 0.00 0.00 0.00 0.00 NA NA NA NA NA2007 0.00 0.00 0.00 0.00 NA NA NA NA NA

60

Account 351.4 Other Storage Structures


used in connection with other underground storage activities. The currently

authorized net salvage for this account is negative 28 percent. A recent positive net

salvage for the 2005 sale of a Walker Neer Workover Rig has been excluded from

the analysis as a non-reoccurring event. This sale generated approximately $177

thousand. The average net salvage is significantly negative. However, with the lack

of retirements shown to support the ongoing salvage and removal cost for other

assets, this study recommends retaining the approved negative 28 percent net

salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 351.4 Other Structures 1993 5,075.00 769.00 5,501.00 (4,732.00) -93.2% 1994 1,555.00 0.00 667.00 (667.00) -42.9% -81.4% 1995 0.00 0.00 3,386.00 (3,386.00) NA -260.6% -132.5% 1996 0.00 0.00 0.00 0.00 NA NA -260.6% -132.5% 1997 12,338.20 0.00 25,063.00 (25,063.00) -203.1% -203.1% -230.6% -209.6% -178.4%1998 18,756.20 324.00 3,543.00 (3,219.00) -17.2% -91.0% -91.0% -101.8% -99.0%1999 0.00 0.00 288.00 (288.00) NA -18.7% -91.9% -91.9% -102.8%2000 10,031.10 362.00 1,630.00 (1,268.00) -12.6% -15.5% -16.6% -72.6% -72.6%2001 0.00 0.00 15,306.00 (15,306.00) NA -165.2% -168.1% -69.8% -109.8%2002 2,211.80 312.00 4,460.00 (4,148.00) -187.5% -879.6% -169.3% -171.6% -78.2%2003 0.00 6,528.27 11,402.01 (4,873.74) NA -407.9% -1099.9% -209.1% -211.4%2004 0.00 476.01 13,611.13 (13,135.12) NA NA -1001.8% -1693.8% -316.4%2005 0.00 0.00 14,325.00 (14,325.00) NA NA NA -1649.4% -2341.4%2006 76,064.37 696.31 17,804.15 (17,107.84) -22.5% -41.3% -58.6% -65.0% -68.5%2007 12,209.86 0.00 0.00 0.00 0.0% -19.4% -35.6% -50.5% -56.0%

61

Account 352.1 Leaseholds & Rights

This account includes any salvage and removal cost related to leaseholds

and rights used in connection with underground storage operations. The currently

authorized net salvage rate for this account is 0 percent. No removal cost is

incurred and no salvage is received at the retirement of leaseholds and land rights.

Therefore, this study recommends retaining the approved 0% net salvage for this

account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 352.1 Leaseholds & Rights 1993 0.00 0.00 0.00 0.00 NA 1994 0.00 0.00 0.00 0.00 NA NA 1995 0.00 0.00 0.00 0.00 NA NA NA 1996 0.00 0.00 0.00 0.00 NA NA NA NA 1997 0.00 0.00 0.00 0.00 NA NA NA NA NA1998 0.00 0.00 0.00 0.00 NA NA NA NA NA1999 0.00 0.00 0.00 0.00 NA NA NA NA NA2000 0.00 0.00 0.00 0.00 NA NA NA NA NA2001 0.00 0.00 0.00 0.00 NA NA NA NA NA2002 0.00 0.00 0.00 0.00 NA NA NA NA NA2003 0.00 0.00 0.00 0.00 NA NA NA NA NA2004 0.00 0.00 0.00 0.00 NA NA NA NA NA2005 0.00 0.00 0.00 0.00 NA NA NA NA NA2006 0.00 0.00 0.00 0.00 NA NA NA NA NA2007 0.00 0.00 0.00 0.00 NA NA NA NA NA

62

Accounts 352.3 & 352.4 Well Construction & Well Equipment

These accounts include any salvage and removal cost related to well

construction and well equipment assets used in connection with underground

storage operations. These accounts have an authorized net salvage rate of

negative 73 percent. In 2007, there was an atypical event where a third party

plugged a well to get access to the site. Based on the 10-year average for these

accounts of negative 68 percent net salvage, this study recommends moving from

the approved negative 73 percent net salvage to a negative 68 percent net salvage

for these accounts.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Combined Accounts 352.3 & 352.4 Well Construction & Well Equipment 1993 210,697.00 9,556.00 54,656.00 (45,100.00) -21.4% 1994 15,204.00 0.00 5,208.00 (5,208.00) -34.3% -22.3% 1995 2,815.00 200.00 0.00 200.00 7.1% -27.8% -21.9% 1996 0.00 21,550.00 92,815.00 (71,265.00) NA -2524.5% -423.3% -53.1% 1997 235,812.00 (34.00) 150,853.00 (150,887.00) -64.0% -94.2% -93.0% -89.5% -58.6%1998 694,213.70 21,815.00 205,825.00 (184,010.00) -26.5% -36.0% -43.7% -43.5% -43.4%1999 52,249.20 0.00 354,150.00 (354,150.00) -677.8% -72.1% -70.1% -77.4% -77.2%2000 565,088.30 13,385.00 208,339.00 (194,954.00) -34.5% -88.9% -55.9% -57.1% -61.7%2001 270,985.43 0.00 125,104.00 (125,104.00) -46.2% -38.3% -75.9% -54.2% -55.5%2002 76,946.70 1,198.00 130,479.00 (129,281.00) -168.0% -73.1% -49.2% -83.2% -59.5%2003 182,295.85 259,825.47 435,894.26 (176,068.79) -96.6% -117.8% -81.2% -57.1% -85.4%2004 714,137.01 4,111.38 942,668.25 (938,556.87) -131.4% -124.3% -127.8% -110.0% -86.4%2005 81,801.90 35,169.92 427,838.48 (392,668.56) -480.0% -167.3% -154.1% -155.1% -132.8%2006 1,228,199.72 29,779.59 470,891.17 (441,111.58) -35.9% -63.6% -87.6% -88.3% -91.0%2007 853,452.80 2,265.00 267,631.00 (265,366.00) -31.1% -33.9% -50.8% -70.8% -72.3%

63

Account 353.0 Well Lines

This account includes any salvage and removal cost related to well lines used

in connection with underground storage operations. The currently authorized net

salvage is negative 140 percent. The historical data shows a decrease in the

negative net salvage for this account. In certain circumstances in the last couple

years, negotiations with third parties have allowed the removal of the well lines for

specific wells at cost. This is impacting the realized net salvage and is expected to

continue. In addition, Pipeline Integrity Program (“PIP”) costs have been removed

from this analysis. The five-year and ten-year ten salvage percentages have been

slightly over negative 50 percent. Therefore, this study recommends moving from

the approved net salvage of negative 140 percent to the longer-term average of

negative 50 percent for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 353 Lines

1993 114,570.00 0.00 92,967.00 (92,967.00) -81.1% 1994 0.00 0.00 1,145.00 (1,145.00) NA -82.1% 1995 139,709.00 0.00 123,477.00 (123,477.00) -88.4% -89.2% -85.6% 1996 0.00 9,480.00 23,683.00 (14,203.00) NA -98.5% -99.4% -91.2% 1997 2,355.50 0.00 296.00 (296.00) -12.6% -615.5% -97.1% -97.9% -90.4%1998 52,655.10 32.00 0.00 32.00 0.1% -0.5% -26.3% -70.8% -71.4%1999 0.00 0.00 2,273.00 (2,273.00) NA -4.3% -4.6% -30.4% -72.0%2000 83,805.30 0.00 3,396.00 (3,396.00) -4.1% -6.8% -4.1% -4.3% -14.5%2001 8,000.00 0.00 54,940.00 (54,940.00) -686.8% -63.5% -66.0% -41.9% -41.5%2002 35,190.00 874.00 33,951.00 (33,077.00) -94.0% -203.8% -72.0% -73.8% -52.1%2003 0.00 0.00 147,486.24 (147,486.24) NA -513.1% -545.3% -188.1% -189.9%2004 580,786.00 1,458.02 71,225.86 (69,767.84) -12.0% -37.4% -40.6% -48.9% -43.6%2005 19,493.95 4,403.52 65,486.22 (61,082.70) -313.3% -21.8% -46.4% -49.0% -56.9%2006 248,445.62 4,200.00 36,629.00 (32,429.00) -13.1% -34.9% -19.2% -36.6% -38.9%2007 7,748.45 0.00 172,861.00 (172,861.00) -2230.9% -80.1% -96.6% -39.2% -56.5%

64


This account includes any salvage and removal cost related to compressor

station equipment used in connection with underground storage operations. The

currently authorized net salvage rate for this account is negative 17 percent. The

current 5-year average net salvage for this account is over negative 24 percent, and

the ten-year average net salvage is negative 23 percent. Since the pattern remains

erratic, this study recommends retaining the approved negative 17 percent net

salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 354 Compressor Station Equipment 1993 2,236.00 1,600.00 1,251.00 349.00 15.6% 1994 1,186,269.00 0.00 73,650.00 (73,650.00) -6.2% -6.2% 1995 25,378.00 0.00 41,975.00 (41,975.00) -165.4% -9.5% -9.5% 1996 0.00 0.00 281,691.00 (281,691.00) NA -1275.4% -32.8% -32.7% 1997 3,304,272.50 0.00 7,932.00 (7,932.00) -0.2% -8.8% -10.0% -9.0% -9.0%1998 212,994.40 10,000.00 174,661.00 (164,661.00) -77.3% -4.9% -12.9% -14.0% -12.1%1999 1,359,568.20 0.00 90,251.00 (90,251.00) -6.6% -16.2% -5.4% -11.2% -12.0%2000 58,428.00 2,695.00 27,039.00 (24,344.00) -41.7% -8.1% -17.1% -5.8% -11.5%2001 138,606.89 0.00 26,666.00 (26,666.00) -19.2% -25.9% -9.1% -17.3% -6.2%2002 63,552.07 0.00 103,217.00 (103,217.00) -162.4% -64.2% -59.2% -15.1% -22.3%2003 170,609.31 0.00 48,555.51 (48,555.51) -28.5% -64.8% -47.9% -47.0% -16.4%2004 149,072.90 0.00 111,734.76 (111,734.76) -75.0% -50.1% -68.8% -55.6% -54.2%2005 0.00 1,006.44 18,198.95 (17,192.51) NA -86.5% -55.5% -73.2% -58.9%2006 242,875.53 0.00 9,030.76 (9,030.76) -3.7% -10.8% -35.2% -33.2% -46.3%2007 870,363.56 0.00 157,460.11 (157,460.11) -18.1% -15.0% -16.5% -23.4% -24.0%

65

Account 355.0 Measuring & Regulating Equipment

This account includes any salvage and removal cost related to measuring and

regulating equipment used in connection with underground storage operations. The

currently authorized net salvage rate for this account is negative 22 percent. The

five-year and ten-year average net salvage percents reflect a negative 17 percent

net salvage rate. This study recommends moving from the approved negative 22

percent net salvage to negative 17 percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 355 M & R Station Equipment 1993 37,906.00 1,328.00 22,679.00 (21,351.00) -56.3% 1994 0.00 0.00 (1,029.00) 1,029.00 NA -53.6% 1995 0.00 0.00 0.00 0.00 NA NA -53.6% 1996 0.00 0.00 0.00 0.00 NA NA NA -53.6% 1997 12,219.50 0.00 1,418.00 (1,418.00) -11.6% -11.6% -11.6% -3.2% -43.4%1998 13,735.30 546.00 6,426.00 (5,880.00) -42.8% -28.1% -28.1% -28.1% -24.2%1999 0.00 0.00 749.00 (749.00) NA -48.3% -31.0% -31.0% -31.0%2000 35,649.80 359.00 1,306.00 (947.00) -2.7% -4.8% -15.3% -14.6% -14.6%2001 23,092.60 0.00 264.00 (264.00) -1.1% -2.1% -3.3% -10.8% -10.9%2002 0.00 0.00 288.00 (288.00) NA -2.4% -2.6% -3.8% -11.2%2003 0.00 13,364.36 14,168.56 (804.20) NA NA -5.9% -3.9% -5.2%2004 531,236.54 253.52 49,136.20 (48,882.68) -9.2% -9.4% -9.4% -9.1% -8.7%2005 1,691.89 1,340.35 23,083.95 (21,743.60) -1285.2% -13.3% -13.4% -13.5% -12.9%2006 296,594.74 443.87 14,232.72 (13,788.85) -4.6% -11.9% -10.2% -10.3% -10.3%2007 10,630.17 0.00 62,493.00 (62,493.00) -587.9% -24.8% -31.7% -17.5% -17.6%

66

Account 356.0 Purification Equipment

This account includes any salvage and removal cost related to purification

equipment used in connection with underground storage operations. The currently

authorized net salvage rate for this account is negative 28 percent. The five year

average net salvage rate for this account is negative 28 percent. This study

recommends retaining the approved negative 28 percent net salvage rate for this

account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 356 Purification Equipment 1993 15,716.00 2,697.00 18,978.00 (16,281.00) -103.6% 1994 80,596.00 0.00 2,821.00 (2,821.00) -3.5% -19.8% 1995 0.00 0.00 0.00 0.00 NA -3.5% -19.8% 1996 0.00 0.00 0.00 0.00 NA NA -3.5% -19.8% 1997 18,773.30 0.00 111,652.00 (111,652.00) -594.7% -594.7% -594.7% -115.2% -113.6%1998 71,720.50 1,513.00 18,251.00 (16,738.00) -23.3% -141.9% -141.9% -141.9% -76.7%1999 0.00 0.00 13,210.00 (13,210.00) NA -41.8% -156.5% -156.5% -156.5%2000 44,054.00 2,270.00 14,215.00 (11,945.00) -27.1% -57.1% -36.2% -114.1% -114.1%2001 21,508.20 0.00 6,252.00 (6,252.00) -29.1% -27.8% -47.9% -35.1% -102.4%2002 2,156.10 88.00 8,106.00 (8,018.00) -371.9% -60.3% -38.7% -58.2% -40.3%2003 0.00 24,282.14 44,162.69 (19,880.55) NA -1293.9% -144.3% -68.1% -87.6%2004 89,572.91 409.89 35,024.03 (34,614.14) -38.6% -60.8% -68.1% -60.7% -51.3%2005 237,948.41 3,345.27 46,439.07 (43,093.80) -18.1% -23.7% -29.8% -32.0% -31.9%2006 144,200.74 2,398.18 52,058.49 (49,660.31) -34.4% -24.3% -27.0% -31.2% -32.8%2007 57,432.28 0.00 0.00 0.00 0.0% -24.6% -21.1% -24.1% -27.8%

67

Account 357.0 Other Storage Equipment

This account includes any salvage and removal cost related to other storage

equipment used in connection with underground storage operations. The currently

authorized net salvage rate for this account is negative 11 percent. Most of the net

salvage percentages of more than four years are close to negative 6 percent.

Therefore, this study recommends moving from the approved negative 11 percent

net salvage to negative 6 percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 357 Underground Storage Other Equipment 1993 19,848.00 1,919.00 0.00 1,919.00 9.7% 1994 4,556.00 285.00 0.00 285.00 6.3% 9.0% 1995 0.00 0.00 0.00 0.00 NA 6.3% 9.0% 1996 261,688.00 2,911.00 12,892.00 (9,981.00) -3.8% -3.8% -3.6% -2.7% 1997 12,333.70 0.00 20,027.00 (20,027.00) -162.4% -11.0% -11.0% -10.7% -9.3%1998 5,296.50 135.00 0.00 135.00 2.5% -112.8% -10.7% -10.7% -10.4%1999 0.00 0.00 52.00 (52.00) NA 1.6% -113.1% -10.7% -10.7%2000 0.00 0.00 0.00 0.00 NA NA 1.6% -113.1% -10.7%2001 0.00 0.00 0.00 0.00 NA NA NA 1.6% -113.1%2002 0.00 0.00 11.00 (11.00) NA NA NA NA 1.4%2003 0.00 0.00 485.84 (485.84) NA NA NA NA NA2004 271,138.00 0.00 12,883.89 (12,883.89) -4.8% -4.9% -4.9% -4.9% -4.9%2005 982.80 0.00 5,510.67 (5,510.67) -560.7% -6.8% -6.9% -6.9% -6.9%2006 14,071.00 0.00 545.01 (545.01) -3.9% -40.2% -6.6% -6.8% -6.8%2007 63,742.96 0.00 0.00 0.00 0.0% -0.7% -7.7% -5.4% -5.6%

68

Transmission Plant



used in connection with transmission operations. The authorized net salvage rate

for this account is 0 percent. Generally, little or no removal cost is incurred and no

salvage is received at the retirement of land rights. The removal cost in this account

will be reassigned to a different account. Therefore, this study recommends

retaining the approved 0% net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 365.2 Transmission Land Rights 1993 0.00 0.00 0.00 0.00 NA 1994 0.00 0.00 0.00 0.00 NA NA 1995 150.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 1996 0.00 0.00 0.00 0.00 NA 0.0% 0.0% 0.0% 1997 0.00 0.00 0.00 0.00 NA NA 0.0% 0.0% 0.0%1998 836.10 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%1999 29,602.80 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2000 0.00 0.00 0.00 0.00 NA 0.0% 0.0% 0.0% 0.0%2001 0.00 0.00 0.00 0.00 NA NA 0.0% 0.0% 0.0%2002 0.00 0.00 0.00 0.00 NA NA NA 0.0% 0.0%2003 0.00 0.00 0.00 0.00 NA NA NA NA 0.0%2004 0.00 139.32 0.00 139.32 NA NA NA NA NA2005 0.00 0.00 0.00 0.00 NA NA NA NA NA2006 0.00 28.26 111.96 (83.70) NA NA NA NA NA2007 0.00 0.00 0.00 0.00 NA NA NA NA NA

69

Account 366.0 Structures and Improvements

This account includes any salvage and removal cost related to structures and

improvements used in connection with transmission operations. The authorized net

salvage rate for this account is negative 2 percent. The most recent average net

salvage percentages are negative 25 percent or higher. Therefore based on the

Company’s experience, this study recommends moving from the approved negative

2 percent net salvage to a conservative negative 25 percent net salvage for this

account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 366 Transmission Structures and Improvements 1993 43,278.00 0.00 52,041.00 (52,041.00) -120.2% 1994 0.00 0.00 (24,879.00) 24,879.00 NA -62.8% 1995 19,933.00 11,200.00 410.00 10,790.00 54.1% 178.9% -25.9% 1996 11,256.00 12.00 28.00 (16.00) -0.1% 34.5% 114.3% -22.0% 1997 0.00 0.00 0.00 0.00 NA -0.1% 34.5% 114.3% -22.0%1998 9,313.50 0.00 0.00 0.00 0.0% 0.0% -0.1% 26.6% 88.0%1999 0.00 0.00 0.00 0.00 NA 0.0% 0.0% -0.1% 26.6%2000 1,933.80 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% -0.1%2001 0.00 0.00 8,626.00 (8,626.00) NA -446.1% -446.1% -76.7% -76.7%2002 0.00 0.00 6,799.00 (6,799.00) NA NA -797.7% -797.7% -137.1%2003 0.00 10,416.38 9,293.31 1,123.07 NA NA NA -739.6% -739.6%2004 8,753.39 0.00 3,001.17 (3,001.17) -34.3% -21.5% -99.1% -197.7% -161.9%2005 5,078.21 0.00 3,520.16 (3,520.16) -69.3% -47.1% -39.0% -88.2% -150.5%2006 194,097.15 0.00 24,890.18 (24,890.18) -12.8% -14.3% -15.1% -14.6% -17.8%2007 12,292.55 0.00 24,680.00 (24,680.00) -200.8% -24.0% -25.1% -25.5% -25.0%

70

Account 367.0 Mains

This account includes any salvage and removal cost related to mains used in

connection with transmission operations. The authorized net salvage rate for this

account is negative 26 percent. The removal cost experienced in 2003 through 2007

included nearly $16 million in Pipeline Integrity (“PI”) Program costs. The table

below excludes PI Program costs. Recent years have seen a decline in cost of

removal, in large part due to the focus on PI. However, the most recent moving

averages of periods 7 years or more are well in excess of the current approved net

salvage percent. Until more non-normal PI activity occurs, this study recommends

retaining the current approved net salvage of 26 percent.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 367 Transmission Mains 1993 151,669.00 4,643.00 1,452.00 3,191.00 2.1% 1994 20.00 0.00 8,749.00 (8,749.00) -43745.0% -3.7% 1995 4,700.00 129.00 7,208.00 (7,079.00) -150.6% -335.3% -8.1% 1996 28,402.00 1,310.00 443.00 867.00 3.1% -18.8% -45.2% -6.4% 1997 7,000.00 1,890.00 22.00 1,868.00 26.7% 7.7% -10.8% -32.6% -5.2%1998 7,100.00 5,377.00 58,488.00 (53,111.00) -748.0% -363.4% -118.5% -121.7% -140.2%1999 1,800.00 0.00 69.00 (69.00) -3.8% -597.5% -322.7% -113.9% -117.4%2000 29,195.30 0.00 359,169.00 (359,169.00) -1230.2% -1159.0% -1082.4% -910.3% -557.3%2001 216,119.10 0.00 228,703.00 (228,703.00) -105.8% -239.6% -237.9% -252.2% -244.7%2002 0.00 3,500.00 163,947.00 (160,447.00) NA -180.1% -305.0% -302.9% -315.3%2003 68,721.30 0.00 20,446.00 (20,446.00) -29.8% -263.2% -143.8% -244.8% -243.4%2004 343,529.98 2,343.21 65,771.00 (63,427.79) -18.5% -20.3% -59.3% -75.3% -126.6%2005 219,804.53 0.00 0.00 0.00 0.0% -11.3% -13.3% -38.7% -55.8%2006 353,461.83 72.99 10,152.00 (10,079.01) -2.9% -1.8% -8.0% -9.5% -25.8%2007 40,654.56 1,452.83 32.45 1,420.38 3.5% -2.2% -1.4% -7.5% -9.0%

71

Account 368.0 Compressor Station Equipment

This account includes any salvage and removal cost related to compressor

station equipment used in connection with transmission operations. The authorized

net salvage rate for this account is negative 1 percent. Significant retirements

occurred in the earlier years, whereas more recent years have smaller retirements.

For these reasons focus is on the full fifteen year band which yields a the net

salvage percent of negative 10 percent This study recommends moving from the

approved negative 1 percent net salvage rate to negative 10 percent net salvage for

this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 368 Compressor Station Equipment 1993 539,285.00 0.00 180,751.00 (180,751.00) -33.5% 1994 1,599,219.00 1,045.00 65,754.00 (64,709.00) -4.0% -11.5% 1995 0.00 (4,812.00) 61,002.00 (65,814.00) NA -8.2% -14.6% 1996 0.00 92,877.00 0.00 92,877.00 NA NA -2.4% -10.2% 1997 82,654.80 282.00 17,174.00 (16,892.00) -20.4% 91.9% 12.3% -3.2% -10.6%1998 72,000.00 130,698.00 158,079.00 (27,381.00) -38.0% -28.6% 31.4% -11.1% -4.7%1999 2,918,766.80 2,378.00 64,950.00 (62,572.00) -2.1% -3.0% -3.5% -0.5% -2.6%2000 95,905.00 0.00 773.00 (773.00) -0.8% -2.1% -2.9% -3.4% -0.5%2001 0.00 0.00 0.00 0.00 NA -0.8% -2.1% -2.9% -3.4%2002 0.00 0.00 8,750.00 (8,750.00) NA NA -9.9% -2.4% -3.2%2003 446,808.94 0.00 30,418.76 (30,418.76) -6.8% -8.8% -8.8% -7.4% -3.0%2004 42,274.40 0.00 118,870.53 (118,870.53) -281.2% -30.5% -32.3% -32.3% -27.1%2005 18,529.37 0.00 64,613.96 (64,613.96) -348.7% -301.8% -42.1% -43.9% -43.9%2006 157,135.52 0.00 49,118.04 (49,118.04) -31.3% -64.7% -106.7% -39.6% -40.9%2007 121,989.56 10,127.00 33,860.15 (23,733.15) -19.5% -26.1% -46.2% -75.4% -36.4%

72

Account 369.0 Measuring & Regulating Equipment

This account includes any salvage and removal cost related to measuring and

regulating station equipment used in connection with transmission operations. The

authorized net salvage rate for this account is negative 6 percent. The five year

average net salvage is negative 36 percent, and the full fifteen year band average

net salvage percent is negative 35 percent. This study recommends moving from

the approved negative 6 percent net salvage rate to negative 35 percent net salvage

for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 369 Measuring and Regulating Equipment 1993 18,377.00 0.00 9,759.00 (9,759.00) -53.1% 1994 42,340.00 0.00 16,109.00 (16,109.00) -38.0% -42.6% 1995 30,704.00 0.00 13,717.00 (13,717.00) -44.7% -40.8% -43.3% 1996 83,441.00 2,019.00 5,023.00 (3,004.00) -3.6% -14.6% -21.0% -24.4% 1997 199,306.60 3,658.00 10,768.00 (7,110.00) -3.6% -3.6% -7.6% -11.2% -13.3%1998 21,068.30 1,962.00 64,032.00 (62,070.00) -294.6% -31.4% -23.8% -25.7% -27.1%1999 57,512.50 4,696.00 29,323.00 (24,627.00) -42.8% -110.3% -33.8% -26.8% -28.2%2000 314,108.80 43.00 67,654.00 (67,611.00) -21.5% -24.8% -39.3% -27.3% -24.3%2001 67,742.31 0.00 72,591.00 (72,591.00) -107.2% -36.7% -37.5% -49.3% -35.5%2002 53,350.00 146.00 0.00 146.00 0.3% -59.8% -32.2% -33.4% -44.1%2003 372,537.60 0.00 54,650.47 (54,650.47) -14.7% -12.8% -25.7% -24.1% -25.3%2004 255,209.77 249.80 72,839.11 (72,589.31) -28.4% -20.3% -18.7% -26.7% -25.1%2005 63,915.83 0.00 33,816.65 (33,816.65) -52.9% -33.3% -23.3% -21.6% -28.7%2006 1,365,787.77 0.00 509,801.73 (509,801.73) -37.3% -38.0% -36.6% -32.6% -31.8%2007 94,139.94 1,452.83 107,608.73 (106,155.90) -112.8% -42.2% -42.6% -40.6% -36.1%

73


This account includes any salvage and removal cost related to

communication equipment used in connection with transmission operations. The

authorized net salvage rate for this account is negative 1 percent. The six year

average net salvage rate is negative 1.7 percent, and there is consistency in recent

bands of a small negative net salvage. This study recommends moving from the

approved negative 1 percent net salvage rate to negative 2 percent net salvage for

this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 370 Communication Equipment 1993 30,177.00 0.00 1,835.00 (1,835.00) -6.1% 1994 0.00 0.00 1,414.00 (1,414.00) NA -10.8% 1995 2,000.00 0.00 549.00 (549.00) -27.5% -98.2% -11.8% 1996 32,672.00 19.00 43.00 (24.00) -0.1% -1.7% -5.7% -5.9% 1997 31,965.50 65.00 1,618.00 (1,553.00) -4.9% -2.4% -3.2% -5.3% -5.6%1998 3,234.30 0.00 25,609.00 (25,609.00) -791.8% -77.2% -40.1% -39.7% -41.7%1999 6,508.10 0.00 784.00 (784.00) -12.0% -270.9% -67.0% -37.6% -37.3%2000 1,717,718.30 29.00 0.00 29.00 0.0% 0.0% -1.5% -1.6% -1.6%2001 0.00 0.00 16,054.00 (16,054.00) NA -0.9% -1.0% -2.5% -2.5%2002 0.00 0.00 7,830.00 (7,830.00) NA NA -1.4% -1.4% -2.9%2003 879,867.93 0.00 6,806.13 (6,806.13) -0.8% -1.7% -3.5% -1.2% -1.2%2004 966,190.34 0.00 15,290.04 (15,290.04) -1.6% -1.2% -1.6% -2.5% -1.3%2005 879,867.93 0.00 19,036.46 (19,036.46) -2.2% -1.9% -1.5% -1.8% -2.4%2006 116,850.31 0.00 102.27 (102.27) -0.1% -1.9% -1.8% -1.5% -1.7%2007 0.00 1,452.82 8,338.01 (6,885.19) NA -6.0% -2.6% -2.1% -1.7%

74

Account 371.0 Other Equipment

This account includes any salvage and removal cost related to other

equipment used in connection with transmission operations. The authorized net

salvage rate for this account is negative 1 percent. This account has experienced

very small removal cost in the last three years. This study recommends moving

from the approved negative 1 percent net salvage rate to 0 percent net salvage for

this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 371 Other Equipment 1993 9,054.00 1,034.00 0.00 1,034.00 11.4% 1994 19,187.00 0.00 804.00 (804.00) -4.2% 0.8% 1995 0.00 0.00 504.00 (504.00) NA -6.8% -1.0% 1996 120,763.00 0.00 5,037.00 (5,037.00) -4.2% -4.6% -4.5% -3.6% 1997 7,065.70 0.00 6,602.00 (6,602.00) -93.4% -9.1% -9.5% -8.8% -7.6%1998 0.00 0.00 0.00 0.00 NA -93.4% -9.1% -9.5% -8.8%1999 5,038.80 0.00 0.00 0.00 0.0% 0.0% -54.5% -8.8% -9.1%2000 0.00 0.00 0.00 0.00 NA 0.0% 0.0% -54.5% -8.8%2001 0.00 0.00 (61.00) 61.00 NA NA 1.2% 1.2% -54.0%2002 0.00 0.00 886.00 (886.00) NA NA NA -16.4% -16.4%2003 21,046.60 28,191.62 24,114.64 4,076.98 19.4% 15.2% 15.5% 15.5% 12.5%2004 0.00 0.00 1,568.29 (1,568.29) NA 11.9% 7.7% 8.0% 8.0%2005 0.00 0.00 524.96 (524.96) NA NA 9.4% 5.2% 5.5%2006 344,434.28 0.00 0.00 0.00 0.0% -0.2% -0.6% 0.5% 0.3%2007 95,934.25 0.00 0.00 0.00 0.0% 0.0% -0.1% -0.5% 0.4%

75

Distribution Function



used in connection with distribution operations. Generally, little or no removal cost is

incurred and no salvage is received at the retirement of land rights. The historical

data also supports a 0% net salvage for these accounts. Therefore, this study

recommends retaining the approved 0% net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 374.2 Rights of Way 1993 0.00 0.00 0.00 0.00 NA 1994 0.00 0.00 0.00 0.00 NA NA 1995 0.00 0.00 0.00 0.00 NA NA NA 1996 0.00 0.00 0.00 0.00 NA NA NA NA 1997 0.00 0.00 0.00 0.00 NA NA NA NA NA1998 0.00 0.00 0.00 0.00 NA NA NA NA NA1999 6,537.70 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2000 0.00 0.00 0.00 0.00 NA 0.0% 0.0% 0.0% 0.0%2001 0.00 0.00 0.00 0.00 NA NA 0.0% 0.0% 0.0%2002 0.00 0.00 0.00 0.00 NA NA NA 0.0% 0.0%2003 0.00 0.00 0.00 0.00 NA NA NA NA 0.0%2004 0.00 0.00 0.00 0.00 NA NA NA NA NA2005 96.39 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2006 0.00 0.00 0.00 0.00 NA 0.0% 0.0% 0.0% 0.0%2007 0.00 0.00 0.00 0.00 NA NA 0.0% 0.0% 0.0%

76


This account consists of any salvage and removal cost related to small

structures and associated assets on the distribution system. The Commission has

authorized a negative 17 percent net salvage rate for this account. The recent

experience reflect a slightly more negative 24 to negative 35 percent net salvage for

the three and five year bands, respectively. Since there have only been retirements

in recent years during the last four years, the three year band and four year bands

are given added weight. Therefore, this study recommends moving from the

approved negative 17 percent net salvage to negative 25 percent net salvage.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 375 Structures and Improvements 1993 36,257.00 0.00 6,425.00 (6,425.00) -17.7% 1994 76,678.00 0.00 7,488.00 (7,488.00) -9.8% -12.3% 1995 1,621.00 398.00 16,767.00 (16,369.00) -1009.8% -30.5% -26.4% 1996 16,471.00 0.00 3,156.00 (3,156.00) -19.2% -107.9% -28.5% -25.5% 1997 1,985.80 0.00 776.00 (776.00) -39.1% -21.3% -101.1% -28.7% -25.7%1998 9,837.60 0.00 4,115.00 (4,115.00) -41.8% -41.4% -28.4% -81.6% -29.9%1999 0.00 0.00 0.00 0.00 NA -41.8% -41.4% -28.4% -81.6%2000 4,391.10 0.00 46.00 (46.00) -1.0% -1.0% -29.2% -30.4% -24.8%2001 0.00 33.00 3,241.00 (3,208.00) NA -74.1% -74.1% -51.8% -50.2%2002 0.00 51.00 3,126.00 (3,075.00) NA NA -144.1% -144.1% -73.4%2003 0.00 0.00 1,570.06 (1,570.06) NA NA NA -179.9% -179.9%2004 17,686.02 0.00 11,684.83 (11,684.83) -66.1% -74.9% -92.3% -110.5% -88.7%2005 9,165.55 0.00 7,378.36 (7,378.36) -80.5% -71.0% -76.8% -88.3% -100.2%2006 46,394.83 0.00 3,004.57 (3,004.57) -6.5% -18.7% -30.1% -32.3% -36.5%2007 6,876.39 0.00 4,380.21 (4,380.21) -63.7% -13.9% -23.6% -33.0% -35.0%

77

Account 376 Mains (Including all Mains types)

This account consists of any salvage and removal cost related to Mains of all

material types. There are five sub accounts within this account: 376.01 Mains –

bare steel, 376.02 Mains – coated & wrapped steel, 376.03 Mains – cast iron,

376.04 Mains – copper, and 376.05 Mains – plastic. The authorized net salvage

rate for this account is negative 105 percent. The net salvage experienced in this

account has generally been decreasing since 2002 due in part to an accounting

effort to better clarify the determination of Operation and Maintenance expense and

Removal Cost for this account. The overall net salvage experience of mains is

influenced by the younger retirement of plastic mains. The retirement weighted five-

year average for this account is negative 78 percent, and the retirement weighted

three year average is negative 75 percent. Based on this three-year weighted net

salvage data, this study recommends changing the net salvage rate to negative 75

percent from the existing negative 105 percent.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Roll-up Account 376 Mains

1993 1,974,936.00 12,827.00 1,427,970.00 (1,415,143.00) -71.7% 1994 987,623.00 5,409.00 1,091,514.00 (1,086,105.00) -110.0% -84.4% 1995 1,067,447.00 4,699.00 1,384,453.00 (1,379,754.00) -129.3% -120.0% -96.3% 1996 901,215.00 5,366.00 1,203,898.00 (1,198,532.00) -133.0% -131.0% -124.0% -103.0% 1997 770,001.60 2,524.00 1,078,804.00 (1,076,280.00) -139.8% -136.1% -133.4% -127.2% -108.0%1998 516,173.90 1,405.00 953,205.00 (951,800.00) -184.4% -157.7% -147.5% -141.5% -134.2%1999 771,552.40 385.00 1,222,587.00 (1,222,202.00) -158.4% -168.8% -158.0% -150.4% -144.8%2000 1,088,211.60 0.00 1,528,325.00 (1,528,325.00) -140.4% -147.9% -155.8% -151.9% -147.7%2001 1,174,170.80 58.00 1,663,448.00 (1,663,390.00) -141.7% -141.1% -145.5% -151.1% -149.1%2002 1,304,279.30 0.00 1,297,295.00 (1,297,295.00) -99.5% -119.5% -125.9% -131.6% -137.3%2003 1,426,112.31 0.00 1,189,753.68 (1,189,753.68) -83.4% -91.1% -106.3% -113.7% -119.7%2004 1,329,300.96 0.00 1,087,885.51 (1,087,885.51) -81.8% -82.7% -88.1% -100.1% -107.0%2005 1,372,964.32 1,634.69 1,256,628.55 (1,254,993.86) -91.4% -86.7% -85.6% -88.9% -98.3%2006 2,098,013.74 3,072.82 1,265,524.64 (1,262,451.82) -60.2% -72.5% -75.1% -77.0% -80.9%2007 1,444,177.42 27,986.04 1,233,305.09 (1,205,319.05) -83.5% -69.7% -75.7% -77.0% -78.2%

78

Account 378.0 Measuring & Regulating Station Equipment

This account includes any salvage and removal cost related to installed

equipment used in regulating gas at entry points to the distribution system. The

currently authorized net salvage is negative 25 percent. As shown below, the five

year average is a more negative 32 percent. This study recommends moving from

the currently approved negative 25 percent net salvage rate to a negative 32 percent

net salvage.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 378 Measuring and Regulating Equipment 1993 257,966.00 0.00 52,421.00 (52,421.00) -20.3% 1994 640,776.00 34,414.00 102,089.00 (67,675.00) -10.6% -13.4% 1995 158,819.00 7,796.00 92,733.00 (84,937.00) -53.5% -19.1% -19.4% 1996 352,071.00 0.00 48,331.00 (48,331.00) -13.7% -26.1% -17.4% -18.0% 1997 116,355.30 5,000.00 43,323.00 (38,323.00) -32.9% -18.5% -27.4% -18.9% -19.1%1998 149,696.20 0.00 24,734.00 (24,734.00) -16.5% -23.7% -18.0% -25.3% -18.6%1999 143,148.10 4,089.00 63,661.00 (59,572.00) -41.6% -28.8% -30.0% -22.5% -27.8%2000 215,835.30 1,100.00 23,466.00 (22,366.00) -10.4% -22.8% -21.0% -23.2% -19.8%2001 57,263.20 453.00 127,272.00 (126,819.00) -221.5% -54.6% -50.2% -41.3% -39.8%2002 24,923.04 3,694.00 100,115.00 (96,421.00) -386.9% -271.6% -82.4% -69.2% -55.8%2003 174,114.27 0.00 130,116.03 (130,116.03) -74.7% -113.8% -137.9% -79.6% -70.7%2004 618,960.33 0.00 52,088.40 (52,088.40) -8.4% -23.0% -34.1% -46.3% -39.2%2005 327,966.04 0.00 231,542.69 (231,542.69) -70.6% -30.0% -36.9% -44.5% -52.9%2006 693,727.58 (1,315.57) 68,841.38 (70,156.95) -10.1% -29.5% -21.6% -26.7% -31.5%2007 325,622.18 22,457.00 232,162.01 (209,705.01) -64.4% -27.5% -38.0% -28.7% -32.4%

79

Account 380 Services (Including all Services types)

This account includes any salvage and removal cost related to services

related to distribution operations. Service lines are the pipes and accessories

leading from the main to the customers’ premises. The authorized net salvage rate

for this account is negative 168 percent. Generally, pipe is abandoned in place.

However, removal cost is still incurred even when abandoning the pipe in place.

For pipe that is being replaced, activities such as isolating the old pipe, cutting the

old pipe, purging or foaming the old pipe and capping the old pipe are charged as

removal costs. When the pipe is not being replaced, in addition to the above

activities, dispatching a crew, uncovering the pipe, recovering the hole and repairing

the surface are additional activities charged to removal cost.

One significant adjustment was made to the retirements in this account. In

2000, the Company retired $11.1 million in risers that were inadvertently not retired

at the time of a change in property units in the mid 1980s. This $11.1 million was

reflected in the year the retirement should have been made.

The trend seen in the historical data over the last few years has been toward

a less negative removal cost. This is based at least in part on the accounting efforts

to better clarify the determination of Operation & Maintenance and Removal Cost in

2000 and 2001. As with Mains, the overall net salvage experience of Services is

influenced by the younger retirement of newer plastic services. The retirement

weighted five-year average for this account is negative 161percent, while the three-

year average is negative 149 percent. The current year net salvage is negative 142

percent. Due to the trend of decreasing net salvage experienced in the last few

years, this study recommends projecting this downward trend by moving from the

approved negative 168 percent to a negative 130 percent net salvage.

80

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Roll-up Account 380 Services 1993 3,436,578.36 328,285.00 4,894,246.00 (4,565,961.00) -132.9% 1994 2,690,182.55 206,909.00 7,339,047.00 (7,132,138.00) -265.1% -190.9% 1995 2,906,160.90 165,662.00 6,783,676.00 (6,618,014.00) -227.7% -245.7% -202.8% 1996 2,657,063.48 126,363.00 6,746,519.00 (6,620,156.00) -249.2% -238.0% -246.8% -213.3% 1997 2,354,377.70 16,180.00 6,549,592.00 (6,533,412.00) -277.5% -262.5% -249.7% -253.6% -224.1%1998 2,923,301.35 2,972.00 6,721,168.00 (6,718,196.00) -229.8% -251.1% -250.4% -244.4% -248.5%1999 3,290,677.72 296.00 6,822,358.00 (6,822,062.00) -207.3% -217.9% -234.3% -237.8% -235.7%2000 3,391,227.25 0.00 5,403,603.00 (5,403,603.00) -159.3% -183.0% -197.2% -213.0% -219.6%2001 1,906,669.30 63.00 4,261,658.00 (4,261,595.00) -223.5% -182.4% -192.0% -201.6% -214.5%2002 1,668,088.80 0.00 4,046,578.00 (4,046,578.00) -242.6% -232.4% -196.8% -200.2% -206.8%2003 1,983,157.57 0.00 3,774,711.43 (3,774,711.43) -190.3% -214.2% -217.4% -195.4% -198.6%2004 2,363,151.53 0.00 4,167,360.62 (4,167,360.62) -176.3% -182.7% -199.3% -205.2% -191.4%2005 2,600,864.10 723.31 4,028,769.65 (4,028,046.34) -154.9% -165.1% -172.3% -185.9% -192.7%2006 2,606,191.57 1,114.18 3,951,920.80 (3,950,806.62) -151.6% -153.2% -160.4% -166.7% -177.9%2007 2,754,480.99 0.00 3,922,473.00 (3,922,473.00) -142.4% -146.9% -149.5% -155.6% -161.2%

81

Account 381.0 Meters

This account includes any salvage and removal cost related to meters used in

measuring gas to residential customers. The currently authorized net salvage rate is

0 percent. A meter move-out program (moving inside meters to outside locations)

over the last several years has increased the level of retirements seen in this

account. In the last few years, salvage for meters has been experienced in this

account. Over the last five years, the average net salvage has been 15.1 percent.

Therefore, this study recommends moving from the approved 0 percent net salvage

to a positive 15 percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 381 Meters 1993 1,074,390.00 8,541.00 0.00 8,541.00 0.8% 1994 971,282.00 33,330.00 0.00 33,330.00 3.4% 2.0% 1995 582,282.00 2,963.00 0.00 2,963.00 0.5% 2.3% 1.7% 1996 612,930.50 7,067.00 0.00 7,067.00 1.2% 0.8% 2.0% 1.6% 1997 678,142.70 107.00 0.00 107.00 0.0% 0.6% 0.5% 1.5% 1.3%1998 353,730.10 60.00 0.00 60.00 0.0% 0.0% 0.4% 0.5% 1.4%1999 766,291.10 16.00 0.00 16.00 0.0% 0.0% 0.0% 0.3% 0.3%2000 1,475,519.60 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.2%2001 1,941,659.60 2.00 0.00 2.00 0.0% 0.0% 0.0% 0.0% 0.0%2002 1,552,713.10 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2003 2,208,939.14 35,749.51 0.00 35,749.51 1.6% 1.0% 0.6% 0.5% 0.5%2004 1,453,443.96 198,843.80 0.00 198,843.80 13.7% 6.4% 4.5% 3.3% 2.7%2005 1,681,846.57 311,648.13 0.00 311,648.13 18.5% 16.3% 10.2% 7.9% 6.2%2006 1,934,560.76 292,320.29 0.00 292,320.29 15.1% 16.7% 15.8% 11.5% 9.5%2007 2,504,588.67 639,645.95 0.00 639,645.95 25.5% 21.0% 20.3% 19.0% 15.1%

82

Account 382.0 Meter Station Installation/ Account 383.0 House Regulators

Account 382 includes any salvage and removal cost related to meter stations

(excluding regulators). Account 383 includes any salvage and removal cost related

to regulators. Most of the removal cost related to meter installations and house

regulators appear to have been charged to the meter installation. For this reason,

the two accounts were combined for net salvage analysis. The currently authorized

net salvage percents for 382 and 383 are negative 76 percent and negative 4

percent respectively. Net salvage has been consistent over recent years with the

three- and five-year average net salvage for this account being a negative 67

percent. This study recommends moving net salvage for both accounts from the

current levels to negative 67 percent net salvage for both accounts.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. %

Account 382 and 383 Meter Installations & House Regulators

1993 749,416.00 44,693.00 387,693.00 (343,000.00) -45.8% 1994 555,263.00 36,241.00 386,976.00 (350,735.00) -63.2% -53.2% 1995 639,031.00 9,699.00 277,258.00 (267,559.00) -41.9% -51.8% -49.5% 1996 549,002.00 (2,198.00) 297,882.00 (300,080.00) -54.7% -47.8% -52.7% -50.6% 1997 379,210.90 54,127.00 398,521.00 (344,394.00) -90.8% -69.4% -58.2% -59.5% -55.9%1998 418,602.60 7,059.00 237,609.00 (230,550.00) -55.1% -72.1% -65.0% -57.5% -58.8%1999 527,273.60 (595.00) 352,184.00 (352,779.00) -66.9% -61.7% -70.0% -65.5% -59.5%2000 557,759.90 0.00 540,125.00 (540,125.00) -96.8% -82.3% -74.7% -78.0% -72.7%2001 693,546.10 14.00 624,946.00 (624,932.00) -90.1% -93.1% -85.3% -79.6% -81.2%2002 826,751.60 302.00 683,774.00 (683,472.00) -82.7% -86.1% -89.0% -84.5% -80.4%2003 962,332.71 0.00 907,177.21 (907,177.21) -94.3% -88.9% -89.2% -90.6% -87.1%2004 1,310,096.64 0.00 597,221.68 (597,221.68) -45.6% -66.2% -70.6% -74.2% -77.1%2005 1,666,521.26 0.00 888,449.68 (888,449.68) -53.3% -49.9% -60.7% -64.6% -67.8%2006 1,457,656.65 0.00 997,742.01 (997,742.01) -68.4% -60.4% -56.0% -62.8% -65.5%2007 1,588,715.07 0.00 1,270,030.50 (1,270,030.50) -79.9% -74.4% -67.0% -62.3% -66.7%

83

GENERAL PLANT



used in connection with general utility operations. The currently authorized net

salvage rate for this account is negative 0 percent. Generally, little or no removal

cost is incurred and no salvage is received at the retirement of land rights.

Therefore, this study recommends retaining the approved 0% net salvage for this

account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 389.2 Rights of Way 1993 0.00 0.00 0.00 0.00 NA 1994 0.00 0.00 0.00 0.00 NA NA 1995 0.00 0.00 0.00 0.00 NA NA NA 1996 0.00 0.00 0.00 0.00 NA NA NA NA 1997 0.00 0.00 0.00 0.00 NA NA NA NA NA1998 0.00 0.00 0.00 0.00 NA NA NA NA NA1999 0.00 0.00 0.00 0.00 NA NA NA NA NA2000 0.00 0.00 0.00 0.00 NA NA NA NA NA2001 0.00 0.00 0.00 0.00 NA NA NA NA NA2002 0.00 0.00 0.00 0.00 NA NA NA NA NA2003 0.00 0.00 0.00 0.00 NA NA NA NA NA2004 0.00 0.00 0.00 0.00 NA NA NA NA NA2005 0.00 0.00 0.00 0.00 NA NA NA NA NA2006 0.00 0.00 0.00 0.00 NA NA NA NA NA2007 0.00 0.00 0.00 0.00 NA NA NA NA NA

84


This account includes any salvage and removal cost related to structures and

improvements used for general utility operations. The currently authorized net

salvage rate for this account is negative 10 percent. The large removal cost in 2005

is related to the replacement of service center roofing. With that transaction, the five

year average net salvage rate is 85 percent. If that transaction is removed as not

typical of the remaining investment, the five-year average net salvage is negative 27

percent. Most of the salvage is interim, not associated with the final demolition of a

building. Cost of removal has been exceeding the authorized negative 10 percent

over most periods. This study recommends moving from the approved negative 10

percent net salvage rate to negative 25 percent net salvage for this account and

reexamining this account in the next depreciation study.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 390 General Structures and Improvements 1993 78,342.00 0.00 (35,220.00) 35,220.00 45.0% 1994 110,525.00 0.00 76,369.00 (76,369.00) -69.1% -21.8% 1995 0.00 0.00 78,763.00 (78,763.00) NA -140.4% -63.5% 1996 0.00 0.00 19,808.00 (19,808.00) NA NA -158.3% -74.0% 1997 0.00 0.00 72,255.00 (72,255.00) NA NA NA -223.7% -112.2%1998 113,857.90 0.00 444,243.00 (444,243.00) -390.2% -453.6% -471.0% -540.2% -308.2%1999 0.00 0.00 27,685.00 (27,685.00) NA -414.5% -477.9% -495.3% -564.5%2000 43,234.13 0.00 28,089.00 (28,089.00) -65.0% -129.0% -318.3% -364.3% -376.9%2001 78,250.60 0.00 27,306.00 (27,306.00) -34.9% -45.6% -68.4% -224.1% -254.8%2002 13,868.56 0.00 70,211.00 (70,211.00) -506.3% -105.9% -92.8% -113.3% -239.8%2003 57,448.70 0.00 8,831.62 (8,831.62) -15.4% -110.8% -71.1% -69.7% -84.1%2004 0.00 0.00 3,684.57 (3,684.57) NA -21.8% -116.0% -73.6% -71.6%2005 338,084.02 0.00 302,527.52 (302,527.52) -89.5% -90.6% -79.7% -94.1% -84.6%2006 170,359.46 0.00 77,821.17 (77,821.17) -45.7% -74.8% -75.5% -69.4% -79.9%2007 440.25 0.00 122,519.00 (122,519.00) -27829.4% -117.3% -98.8% -99.5% -91.0%

85

Account 391.0 Office Furniture and Equipment

This account includes any salvage and removal cost related to miscellaneous

office furniture such as desks, chairs, filing cabinets, and tables. The currently

authorized net salvage rate for this account is 0 percent. The Company received

approximately $78.6 thousand in salvage in 2005 for a one-time event. This salvage

is not considered representative of ongoing activities and has been excluded from

the analysis. The Company has experienced little other net salvage based on recent

experience. Therefore this study recommends remaining at the approved 0 percent

net salvage rate for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 391 Office Furniture and Fixtures 1993 413.00 0.00 0.00 0.00 0.0% 1994 195,903.00 0.00 0.00 0.00 0.0% 0.0% 1995 19,018.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 1996 1,476,533.00 2,618.00 8,511.00 (5,893.00) -0.4% -0.4% -0.3% -0.3% 1997 0.00 0.00 0.00 0.00 NA -0.4% -0.4% -0.3% -0.3%1998 4,247.80 3,843.00 0.00 3,843.00 90.5% 90.5% -0.1% -0.1% -0.1%1999 0.00 0.00 0.00 0.00 NA 90.5% 90.5% -0.1% -0.1%2000 110,221.23 0.00 0.00 0.00 0.0% 0.0% 3.4% 3.4% -0.1%2001 1,715.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 3.3% 3.3%2002 0.00 0.00 0.00 0.00 NA 0.0% 0.0% 0.0% 3.3%2003 129,648.95 0.00 129.74 (129.74) -0.1% -0.1% -0.1% -0.1% -0.1%2004 16,224.54 56.38 0.00 56.38 0.3% -0.1% -0.1% 0.0% 0.0%2005 72,117.81 0.00 0.00 0.00 0.0% 0.1% 0.0% 0.0% 0.0%2006 384,885.68 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2007 221,117.59 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%

86

Account 391.2 Computer Equipment

This account includes any salvage and removal cost related to computer

equipment used in general operations. The currently authorized net salvage rate for

this account is 0 percent. Some positive net salvage has been received in recent

years. The most recent bands of eight years or longer yield a 4 percent net salvage

percent. Therefore, this study recommends moving from the approved 0 percent net

salvage rate to 4 percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 391.2 Computer Equipment 1993 0.00 0.00 0.00 0.00 NA 1994 108,787.00 0.00 0.00 0.00 0.0% 0.0% 1995 13,715.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 1996 110,228.00 295.00 684.00 (389.00) -0.4% -0.3% -0.2% -0.2% 1997 596,180.80 23,613.00 0.00 23,613.00 4.0% 3.3% 3.2% 2.8% 2.8%1998 0.00 0.00 0.00 0.00 NA 4.0% 3.3% 3.2% 2.8%1999 189,306.10 0.00 39,228.00 (39,228.00) -20.7% -20.7% -2.0% -1.8% -1.8%2000 3,391,604.78 0.00 2,422.00 (2,422.00) -0.1% -1.2% -1.2% -0.4% -0.4%2001 169,712.38 0.00 100.00 (100.00) -0.1% -0.1% -1.1% -1.1% -0.4%2002 1,797,369.31 0.00 65.00 (65.00) 0.0% 0.0% 0.0% -0.8% -0.8%2003 568,568.62 28,365.24 236.96 28,128.28 4.9% 1.2% 1.1% 0.4% -0.2%2004 1,584,368.64 64,903.81 83.77 64,820.04 4.1% 4.3% 2.4% 2.3% 1.2%2005 1,053,981.43 0.00 2,814.02 (2,814.02) -0.3% 2.4% 2.8% 1.8% 1.7%2006 1,523,286.33 97,146.21 0.00 97,146.21 6.4% 3.7% 3.8% 4.0% 2.9%2007 54,729.30 310,356.45 0.00 310,356.45 567.1% 25.8% 15.4% 11.1% 10.4%

87

Account 393.0 Stores Equipment

This account includes any salvage and removal cost related to stores

equipment. The currently authorized net salvage rate for this account is 0 percent.

The overall fifteen year band experienced a 0 percent net salvage rate. Therefore,

this study recommends retaining the approved 0 percent net salvage for this

account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 393 Stores Equipment 1993 0.00 0.00 0.00 0.00 NA 1994 16,224.00 0.00 0.00 0.00 0.0% 0.0% 1995 6,390.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 1996 113,056.00 0.00 399.00 (399.00) -0.4% -0.3% -0.3% -0.3% 1997 10,628.30 421.00 0.00 421.00 4.0% 0.0% 0.0% 0.0% 0.0%1998 0.00 0.00 0.00 0.00 NA 4.0% 0.0% 0.0% 0.0%1999 0.00 0.00 0.00 0.00 NA NA 4.0% 0.0% 0.0%2000 1,250.98 0.00 0.00 0.00 0.0% 0.0% 0.0% 3.5% 0.0%2001 1,622.43 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 3.1%2002 0.00 0.00 0.00 0.00 NA 0.0% 0.0% 0.0% 0.0%2003 0.00 0.00 0.00 0.00 NA NA 0.0% 0.0% 0.0%2004 0.00 0.00 0.00 0.00 NA NA NA 0.0% 0.0%2005 0.00 0.00 0.00 0.00 NA NA NA NA 0.0%2006 0.00 72.33 0.00 72.33 NA NA NA NA NA2007 0.00 231.08 0.00 231.08 NA NA NA NA NA

88

Account 394.0 Tools, Shop, and Garage Equipment

This account includes any salvage and removal cost related to various items

or tools used in shop and garages such as air compressors, grinders, mixers, hoists,

and cranes. The currently authorized net salvage rate for this account is 0 percent.

Except for the non-typical salvage in 2002, the company has been experiencing a

positive 3 percent net salvage for this account in the overall fifteen-year band.

Therefore, this study recommends moving from the approved 0 percent net salvage

to 3 percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 394 Tools, Shop, and Garage Equipment 1993 129.00 0.00 0.00 0.00 0.0% 1994 603,459.00 685.00 0.00 685.00 0.1% 0.1% 1995 56,731.00 0.00 0.00 0.00 0.0% 0.1% 0.1% 1996 658,819.00 859.00 36,362.00 (35,503.00) -5.4% -5.0% -2.6% -2.6% 1997 32,772.00 1,249.00 0.00 1,249.00 3.8% -5.0% -4.6% -2.5% -2.5%1998 17,530.30 15,859.00 0.00 15,859.00 90.5% 34.0% -2.6% -2.4% -1.3%1999 8,327.10 0.00 472.00 (472.00) -5.7% 59.5% 28.4% -2.6% -2.4%2000 20,117.30 0.00 14.00 (14.00) -0.1% -1.7% 33.4% 21.1% -2.6%2001 16,203.80 1,122.00 0.00 1,122.00 6.9% 3.1% 1.4% 26.5% 18.7%2002 37,181.16 24,621.00 0.00 24,621.00 66.2% 48.2% 35.0% 30.9% 41.4%2003 85,818.21 5,825.60 27.04 5,798.56 6.8% 24.7% 22.7% 19.8% 18.5%2004 83,648.18 2,006.07 253.73 1,752.34 2.1% 4.5% 15.6% 14.9% 13.7%2005 30,563.81 7,561.19 605.27 6,955.92 22.8% 7.6% 7.3% 16.5% 15.9%2006 18,831.27 3,086.24 0.00 3,086.24 16.4% 20.3% 8.9% 8.0% 16.5%2007 39,490.88 17,535.00 0.00 17,535.00 44.4% 35.4% 31.0% 17.0% 13.6%

89

Account 395.0 Laboratory Equipment

This account includes any salvage and removal cost related to laboratory


The Company is experiencing a slightly positive 2 percent net salvage in this

account for the overall fifteen-year band. Therefore, this study recommends moving

from the approved 0 percent net salvage to 2 percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 395 Laboratory Equipment 1993 0.00 0.00 0.00 0.00 NA 1994 116,605.00 0.00 0.00 0.00 0.0% 0.0% 1995 0.00 0.00 0.00 0.00 NA 0.0% 0.0% 1996 675,520.00 1,471.00 4,899.00 (3,428.00) -0.5% -0.5% -0.4% -0.4% 1997 0.00 0.00 0.00 0.00 NA -0.5% -0.5% -0.4% -0.4%1998 0.00 0.00 0.00 0.00 NA NA -0.5% -0.5% -0.4%1999 0.00 0.00 0.00 0.00 NA NA NA -0.5% -0.5%2000 0.00 0.00 0.00 0.00 NA NA NA NA -0.5%2001 12,513.69 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2002 1,728.03 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2003 8,967.65 132.83 0.00 132.83 1.5% 1.2% 0.6% 0.6% 0.6%2004 98,399.33 363.26 0.00 363.26 0.4% 0.5% 0.5% 0.4% 0.4%2005 71,877.20 2,465.48 0.00 2,465.48 3.4% 1.7% 1.7% 1.6% 1.5%2006 84,855.93 6,531.40 0.00 6,531.40 7.7% 5.7% 3.7% 3.6% 3.6%2007 51,865.24 20,866.10 0.00 20,866.10 40.2% 20.0% 14.3% 9.8% 9.6%

90

Account 396.0 Power Operated Equipment

This account includes any salvage and removal cost related to bulldozers, forklifts,

trenchers, and other power operated equipment that cannot be licensed on

roadways. The currently authorized net salvage rate for this account is 0 percent.

Based on the net salvage data, this study recommends retaining the approved 0

percent net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 396 Power Operated Equipment 1993 0.00 24,643.00 0.00 24,643.00 NA 1994 132.00 29,696.00 0.00 29,696.00 22497.0% 41165.9% 1995 2,743.00 1,188.00 0.00 1,188.00 43.3% 1074.2% 1931.4% 1996 150,704.00 0.00 793.00 (793.00) -0.5% 0.3% 19.6% 35.6% 1997 1,005.30 0.00 0.00 0.00 0.0% -0.5% 0.3% 19.5% 35.4%1998 19,309.20 0.00 0.00 0.00 0.0% 0.0% -0.5% 0.2% 17.3%1999 0.00 0.00 0.00 0.00 NA 0.0% 0.0% -0.5% 0.2%2000 37.99 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% -0.5%2001 0.00 0.00 0.00 0.00 NA 0.0% 0.0% 0.0% 0.0%2002 0.00 0.00 0.00 0.00 NA NA 0.0% 0.0% 0.0%2003 0.00 0.00 0.00 0.00 NA NA NA 0.0% 0.0%2004 0.00 0.00 (13.45) 13.45 NA NA NA NA 35.4%2005 96,731.94 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2006 9,242.96 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%2007 6,332.59 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%

91



communication equipment such as the 800 MHz radio system. The currently

authorized net salvage rate for this account is 0 percent. The large retirement in

2001 was related to upgrading the Company’s 800 MHz radio system. The average

net salvage taking into account experience since 2001 has been approximately 2

percent. The net salvage percent for the six- to ten-year bands are 2% net salvage.

Therefore, this study recommends moving from the approved 0% net salvage to 2 %

net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 397 Communication Equipment 1993 0.00 0.00 0.00 0.00 NA 1994 44,317.00 0.00 14,804.00 (14,804.00) -33.4% -33.4% 1995 13,647.00 0.00 17,367.00 (17,367.00) -127.3% -55.5% -55.5% 1996 15,249.00 0.00 869.00 (869.00) -5.7% -63.1% -45.1% -45.1% 1997 1,513.90 60.00 8,612.00 (8,552.00) -564.9% -56.2% -88.1% -55.7% -55.7%1998 0.00 0.00 0.00 0.00 NA -564.9% -56.2% -88.1% -55.7%1999 0.00 0.00 0.00 0.00 NA NA -564.9% -56.2% -88.1%2000 17,823.87 0.00 0.00 0.00 0.0% 0.0% 0.0% -44.2% -27.2%2001 7,019,042.06 156,648.00 5,680.00 150,968.00 2.2% 2.1% 2.1% 2.1% 2.0%2002 0.00 0.00 6,102.00 (6,102.00) NA 2.1% 2.1% 2.1% 2.1%2003 0.00 0.00 6,821.75 (6,821.75) NA NA 2.0% 2.0% 2.0%2004 29,646.57 1,322.83 2,128.26 (805.43) -2.7% -25.7% -46.3% 1.9% 1.9%2005 236,380.87 8,686.27 0.00 8,686.27 3.7% 3.0% 0.4% -1.9% 2.0%2006 56,724.30 3,171.24 1,012.73 2,158.51 3.8% 3.7% 3.1% 1.0% -0.9%2007 100,357.98 10,131.27 0.00 10,131.27 10.1% 7.8% 5.3% 4.8% 3.2%

92

Account 398.0 Miscellaneous Equipment



Little salvage or removal cost is expected for these assets. The five and six year

average net salvage rates reflect a 7 percent net salvage rate. Therefore, this study

recommends moving from the approved 0 percent net salvage rate to a 7 percent

net salvage for this account.

2- yr 3- yr 4- yr 5- yr Gross Cost of Net Net Net Net Net Net Retirements Salvage Removal Salvage Salv. % Salv. % Salv. % Salv. % Salv. % Account 398 Miscellaneous Equipment 1993 0.00 0.00 0.00 0.00 NA 1994 16,497.00 0.00 0.00 0.00 0.0% 0.0% 1995 1,184.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 1996 25,906.00 0.00 71.00 (71.00) -0.3% -0.3% -0.2% -0.2%1997 0.00 0.00 0.00 0.00 NA -0.3% -0.3% -0.2% -0.2%1998 0.00 0.00 0.00 0.00 NA NA -0.3% -0.3% -0.2%1999 0.00 0.00 0.00 0.00 NA NA NA -0.3% -0.3%2000 0.00 0.00 0.00 0.00 NA NA NA NA -0.3%2001 0.00 0.00 0.00 0.00 NA NA NA NA NA2002 0.00 0.00 0.00 0.00 NA NA NA NA NA2003 33,508.12 170.41 0.00 170.41 0.5% 0.5% 0.5% 0.5% 0.5%2004 8,305.31 294.06 0.00 294.06 3.5% 1.1% 1.1% 1.1% 1.1%2005 2,191.06 0.00 0.00 0.00 0.0% 2.8% 1.1% 1.1% 1.1%2006 8,308.07 1,115.86 0.00 1,115.86 13.4% 10.6% 7.5% 3.0% 3.0%2007 21,079.31 3,565.00 0.00 3,565.00 16.9% 15.9% 14.8% 12.5% 7.0%

93

APPENDIX A

Depreciation Rate Calculations

RE

VIS

ED

Exh

ibit

A-I

(DA

W-I

)A

ppen

dix

AC

ase

No.

U-1

5629

Apr

il20

09P

age

Io

fI

CO

NS

UM

ER

SE

NE

RG

YG

AS

CO

MP

UT

AT

ION

OF

AC

CR

UA

LR

AT

EA

TD

EC

EM

BE

R3

1,2

00

7T

RA

DIT

ION

AL

NE

TS

AL

VA

GE

An

nu

al

An

nu

al

Pla

nt

InS

erv

ice

Bo

ok

De

pre

cia

tio

nN

et

Sa

lva

ge

Un

acc

rue

dR

em

ain

ing

Acc

rua

lA

ccru

al

Acco

un

t12

131/

2007

1213

1/20

07N

et

Sa

lva

ge

%A

mo

un

tB

ala

nce

Lif

eA

mo

un

tA

ccru

al

Ra

teG

35

0.2

·Rig

hts

ofW

ay

1,4

28

,66

5.9

57

75

,39

7.2

30

.00

%0

.00

65

3,2

68

.72

33

.00

19

,79

4.1

01

.39

%G

35

1.2

-Co

mp

ress

or

Sta

tion

Str

uct

ure

9,0

52

,23

4.1

64

,19

9,5

25

.96

-6.0

0%

(54

3,1

34

.05

)5

,39

5,8

42

.25

22

.40

24

0,8

67

.62

2.6

6%

G351.~Meas

&R

egS

tatio

nS

tru

ctu

re1

61

,32

9.2

01

7,6

21

.64

-6.0

0%

(9,6

79

.75

)15

3,38

7.31

40

.62

3,7

75

.86

2.3

4%

G3

51

.4-0

the

rS

tora

ge

Str

uct

ure

s3

,47

1,0

67

.16

2,1

81

,01

1.0

9-2

8.0

0%

(97

1,8

98

.80

)2

,26

1,9

54

.87

25

.18

89,8

37.1

12

.59

%G

35

2.1

-Le

ase

ho

lds

&R

ight

s6

.84

1,6

99

.67

3,4

01

,49

3.7

30

.00

%0

.00

3,4

40

,20

5.9

43

9.3

38

7,4

74

.63

1.2

8%

G352.~Weli

Co

nst

ruct

ion

44

,64

4,8

95

.04

26

,21

6,4

40

.09

-68

.00

%(3

0,3

58

,52

8.6

3)

48

,78

6,9

83

.58

32.3

11

,50

9,8

00

.37

3.3

8%

G3

52

.4-W

ell

Eq

uip

me

nt

19

,01

6,4

03

.08

12

,84

2,6

17

.51

-68

.00

%(1

2,9

31

.15

4.0

9)

19

,10

4,9

39

.66

28.4

26

72

,32

2.7

73

.54

%G353.~Lines

33

,54

1,7

11

.50

16

,68

9,3

71

.65

-50

.00

%(1

6,7

70

,85

5.7

5)

33

,62

3,1

95

.60

52.2

16

43

,99

1.9

41

.92

%G354.~Compressor

Sta

tion

Eq

uip

me

nt

82

,60

4,6

57

.86

43

,95

4,9

86

.51

-17

.00

%(1

4,0

42

,79

1.8

4)

52

,69

2,4

63

.19

21

.79

2,41

7,86

0.41

2.9

3%

G355.~Measuring

&R

eg

ula

ting

Equ

ip7

,30

1,6

08

.61

1,2

27

,89

5.0

9-1

7.0

0%

(1,2

41

,27

3.4

6)

7,3

14

,98

6.9

83

2.5

52

24

,70

8.3

23

.08

%G356.~PurificationE

qu

ipm

en

t1

8,7

15

.08

7.3

28

,08

0,8

36

.69

-28

.00

%(5

,24

0,2

24

.45

)1

5,8

74

,47

5.0

82

2.4

77

06

,33

9.4

23

.77

%G357.~Other

Sto

rag

eE

qu

ipm

en

t6

,07

5,7

81

.13

56

9,5

15

.77

-6.0

0%

(36

4.5

46

.87

)5

,87

0,8

12

.23

20.5

92

85

,15

4.6

04

.69

%G

36

5.2

-Rig

hts

of

Wa

y3

2,4

96

,95

6.6

26

,82

3,6

38

.49

0.0

0%

0.0

02

5,6

73

,31

8.1

36

1.5

94

16

,84

7.1

61

.28

%G366.~Structures

and

Imp

rove

me

nts

11

,80

5,6

43

.13

4,7

25

,49

9.4

2-2

5.0

0%

(2,9

51

,41

0.7

8)

10

,03

1,5

54

.49

39

.58

25

3,4

60

.16

2.1

5%

G367.~Mains

29

7,9

32

.83

4.7

91

10

,17

7,6

53

.87

-26

.00

%(7

7,4

62

.53

7.0

5)

26

5,2

17

,71

7.9

75

6.0

04

,73

5,7

16

.28

1.5

9%

G368.~Compressor

Sta

tion

Eq

uip

me

nt

41

,64

3.2

96

.17

23

,23

8,3

94

.89

-10

.00

%(4

,16

4,3

29

.62

)2

2,5

69

,23

0.9

02

0.3

41

,10

9,6

70

.22

2.6

6%

G369.~Measuring

&R

eg

ula

ting

Eq

uip

38

,14

7,6

66

.72

7,4

90

,53

5.1

6-3

5.0

0%

(13

,35

1.6

83

.35

)4

4,0

08

,81

4.9

13

3.9

61

,29

5,7

60

.36

3.4

0%

G370.~Communication

Eq

uip

me

nt

8,5

82

,85

4.6

63

,69

7,8

20

.55

-2.0

0%

(17

1,6

57

.09

)5

.05

6,6

91

.20

6.9

073

3,10

2.51

8.5

4%

G371.~Other

Eq

uip

me

nt

4,7

84

,59

0.8

12

,28

4,8

67

.40

0.0

0%

0.0

02,

499,

723.

412

2.6

811

0,20

9.71

2.3

0%

G3

74

.2-R

igh

tso

fW

ay

8,9

68

,96

7.2

02

,38

2,8

12

.27

0.0

0%

0.0

06

,58

6,1

54

.93

57

.05

11

5,4

52

.15

1.2

9%

G375.~Structures

and

Imp

rove

me

nts

5,3

43

.69

9.5

82

,58

4,0

57

.11

-25

.00

%(1

,33

5,9

24

.90

)4

,09

5,5

67

.37

31

.94

12

8,2

07

.10

2.4

0%

G3

76

.1-M

ain

s-

Bar

e3

,70

8,0

32

.29

5,4

51

,56

1.2

7-7

5.0

0%

(2,7

81

,02

4.2

2)

1.0

37

,49

5.2

42

6.7

038

,857

.61

1.0

5%

G3

76

.2-M

ain

s-

C&

W3

78

,31

2,2

30

.29

35

4,9

27

,02

0.1

3-7

5.0

0%

(28

3,7

34

,17

2.7

2)

30

7,1

19

,38

2.8

84

9.9

56

,14

8,9

02

.17

1.6

3%

G376.~Mains

-C

ast

Iron

8,2

34

,72

6.8

71

4,4

84

,52

1.6

0-7

5.0

0%

(6,1

76

,04

5.1

5)

-73

,74

9.5

817

.41

NA

NA

G3

76

.4-M

ain

s-

Co

pp

er

13

.12

6.4

71

9.2

50

.08

-75

.00

%(9

.84

4.8

5)

3,7

21

.24

7.4

45

00

.49

3.8

1%

G3

76

.5-M

ain

s-

Pla

stic

66

1,8

71

.95

8.8

62

99

,47

4,4

93

.12

-75

.00

%(4

96

,40

3.9

69

.15

)8

58

,80

1,4

34

.89

47

.82

17

,95

7,3

99

.33

2.7

1%

G378.~Measuring

&R

eg

ula

ting

Equ

ip4

5,7

81

,48

0.4

11

1,6

92

,29

3.2

0-3

2.0

0%

(14

,65

0.0

73

.73

)4

8,7

39

,26

0.9

44

0.8

01

,19

4,5

22

.96

2.6

1%

G38

0.I-

Se

rvic

es

-B

are

18

0,5

61

.03

21

3,9

04

.36

-13

0.0

0%

(23

4,7

29

.34

)20

1,38

6.01

9.5

42

1,1

13

.76

11

.69

%G

38

0.2

-Se

rvic

es

-C

&W

69

,41

6,9

71

.73

10

1,0

25

,47

6.9

3-1

30

.00

%(9

0,2

42

,06

3.2

5)

58

,63

3,5

58

.05

31

.14

1,8

82

,81

2.6

42

.71

%G

38

0.4

-Se

rvic

es

-C

op

pe

r2

5,3

82

,76

7.1

34

1,6

61

,21

2.6

7-1

30

.00

%(3

2,9

97

,59

7.2

7)

16

,71

9,1

51

.73

19

.12

87

4,5

79

.57

3.4

5%

G3

80

.5-S

erv

ice

s-

Pla

stic

67

1,4

43

,56

2.4

55

28

,3n

.02

0.6

8-1

30

.00

%(8

72

,87

6.6

31

.19

)1

,01

5,9

43

,17

2.9

63

3.5

33

0,3

00

,28

2-4

94

.51

%G381.~Meters

19

5,7

56

,21

2.7

18

0,5

27

,43

1.2

21

5.0

0%

29,3

63,4

31.9

18

5,8

65

,34

9.5

825

.35

3,3

87

,50

5.5

51

.73

%G382.~Meter

Inst

alla

tion

s1

89

,49

2,5

03

.04

94

,81

9,2

33

.39

-67

.00

%(1

26

,95

9,9

77

.04

)2

21

,63

3,2

46

.69

36.3

16

,10

3,8

26

.53

3.2

2%

G383.~House

Re

gu

lato

rs1

9,7

84

,57

8.8

85

,25

2,7

54

.64

-67

.00

%(1

3,2

55

,66

7.8

5)

27

.78

7,4

92

.09

31.0

18

96

,20

8.2

64

.53

%G

38

9.2

-Rig

hts

of

Wa

y1

,51

6.0

01

41

.79

0.0

0%

0.0

01,

374.

2137

.01

37

.13

2.4

5%

G390.~Structuresa

nd

Imp

rove

me

nts

27

,64

4,2

84

.06

15

,54

9,9

62

.88

-25

.00

%(6

,91

1.0

71

.02

)1

9,0

05

,39

2.2

03

3.0

057

5,94

5.31

2.0

8%

39

1.0

Off

ice

Fum

rtur

eA

ndE

qu

ipm

Tot

al1

,03

6,1

40

.26

26

2,3

26

.98

0.0

0%

0.0

07

73

,81

3.2

84

.52

171,

298.

111

6.5

3%

391.

2C

om

pu

ter

Eq

uip

me

nt

To

tal

3,7

96

.62

9.3

82

,44

2,7

31

.09

4.0

0%

15

1,8

65

.18

1,20

2,03

3.11

1.5

27

93

,37

0.3

32

0.9

0%

39

3.0

Sto

res

Eq

uip

me

nt

Tot

al5

0.8

39

.92

19,3

34.3

10

.00

%0

.00

31,5

05.6

11

0.5

52

,98

7.2

05

.88

%3

94

.0T

oo

lsS

ho

pA

nd

Ga

rag

eE

qu

ipT

otal

7,2

31

,90

3.7

41

,70

3,2

08

.26

3.0

0%

216,

957.

115

,31

1,7

38

.37

11

.64

45

6,2

26

.24

6.3

1%

395.

0L

ab

ora

tory

Eq

uip

me

ntT

oIal

82

4,7

81

.78

28

8,6

61

.43

2.0

0%

16

,49

5.6

451

9,62

4.71

4.0

21

29

,27

9.5

31

5.6

7%

G396.~Power

Ope

rate

dE

qu

ipm

en

t3

,59

6,5

50

.41

11

9,8

06

.57

0.0

0%

0.0

03

,47

6,7

43

.84

6.5

75

29

,45

7.0

91

4.7

2%

39

7.0

Co

mm

un

ica

tion

Eq

uip

me

nt

Tot

al7

,85

7,0

38

.20

3.5

85

,29

5.8

02

.00

%1

57

,14

0.7

64

,11

4,6

01

.64

5.3

07

76

.24

3.7

39

.88

%3

98

.0M

isce

llan

eo

us

Eq

uip

me

nt

To

tal

40

3,8

53

.81

14

3,8

18

.32

7.0

0%

28

,26

9.7

72

31

,76

5.7

28

.06

28.,7

69.0

77

.12

%T

otal

3,0

04

,38

3,9

00

.08

1,845,603.4~.~-L

-2,0

99

,21

0d

36

.88

3~57,990,784.12

88

.07

0.4

n.9

0

95

APPENDIX B

Depreciation Expense Comparison

CONSUMERS ENERGY COMPANY

COMPARISON OF DEPECIATION ACCRUAL RATES

BASED ON DEPRECIABLE INVESTMENT AT 12·31·07

R VI DExhibit A-I (DAW-l)Appendix BCase o. U-I5629Apri12009Page I of L

CHANGE FROM

APPROVED PROPOSED APPROVED

Annual Annual Annual AccrualPlant in Service Accrual Annual Accrual Accrual Annual Accrual Amount·

Acct Description 12131/2007 Rate Amount Rate Amount Traditional

350.2 U.GSTORAGE RIGHTS OF WAY $1,428,665.95 1.16% $16,572.53 1.39% $19,794.1C $3,221.57

351.2 COMPRESSOR STA STRUCTURE~ $9,052,234.16 2.47% $223,590.18 2.66% $240,867.62 $17,277.44

351.3 MEAS'G & REG STA STRUCT $161,329.20 2.78% $4,484.95 2.34% $3,775.86 ($709.09)

351.4 OTHER STRUCTURES $3,471,067.16 2.69% $93,371.71 2.59% $89,837.11 ($3,534.59)

352.1 U.G.S.LEASEHOLDS & RIGHTS $6,841,699.67 1.16% $79,363.72 1.28% $87,474.63 $8,110.91

352.3 WELL CONSTRUCTION $44,644,895.04 3.57% $1,593,822.75 3.38% $1,509,800.37 ($84,022.38)

352.4 WELL EQUIPMENT $19,016,40308 3.62% $688,393.79 3.54% $672,322.77 ($16,071.02)

353 LINES $33,541,711.50 3.76% $1,261,168.35 1.92% $643,991.94 ($617,176.41)

354 COMPRESSOR STA EQUIPMENT $82,604,657.86 3.04% $2,511,181.60 2.93% $2,417,860.41 ($93,321 19)

355 MEAS'G & REG STA EQUIP $7,301,608.61 2.89% $211,016.4S 308% $224,708.32 $13,691.83

356 PURIFICATION EQUIPMENT $18,715,087.32 3.77% $705,558.79 3.77% $706,339.4" $780.63

357 OTHER EQUIPMENT $6,075,781.13 3.81% $231,487.26 4.69% $285,154.60 $53,667.34

3652 RIGHTS OF WAY $32,496,956.62 1.05% $341,218.04 1.28% $416,847.16 $75,629.12

366 STRUCTURES & IMPROVEMENTS $11,805,643.13 1.23% $145,209.41 2.15% $253,460.16 $108,250.75

367 MAINS $297,932,834.79 1.45% $4,320,026.1 ( 1.59% $4,735,716.28 $415,690.18

368 COMPRESSOR STA EQUIPMENT $41,643,296.17 0.88% $366,461.01 2.66% $1,109,670.22 $743,209.22

369 MEAS'G & REG STA EQUIP $38,147,666.72 1.64% $625,621. 7~ 3.40% $1,295,760.36 $670,13862

370 COMMUNICATION EQUIPMENT $8,582,854.66 3.48% $298,683.34 8.54% $733,102.51 $434,419.17

371 OTHER EQUIPMENT $4,784,590.81 2.53% $121,050.15 2.30% $110,209.71 ($10,840.44)

3742 RIGHTS OF WAY $8,968,967.20 0.77% $69,061.05 1.29% $115,452.15 $46,391.11


3761 MAINS BARE $3,708,032.29 208% $77,127.07 1.05% $38,857.61 ($38,269.47)

3762 MAINS- C & W $378,312,230.29 2.45% $9,268,649.64 1.63% $6,148,902.17 ($3,119,747.47)

376.3 MAINS- CAST IRON $8,234,726.87 1.67% $137,519.94 NA $0.00 ($137,519.94)

376.4 MAINS- COPPER $13,126.47 2.61% $342.60 3.81% $500.49 $157.89

376.5 MAINS- PLASTIC $661,871,958.86 3.31% $21,907,961.84 2.71% $17,957,399.33 ($3,950,562.50)

378 PUMPING & REG EQUIPMENT $45,781,480.41 1.93% $883,582.57 2.61% $1,194,52296 $310,940.39

380.1 SERVICES- BARE $180,561.03 6.99% $12,621.2 11.69% $21,1137E $8,492.54

380.2 SERVICES- C & W $69,416,97173 5.12% $3,554,148.95 2.71% $1,882,812.64 ($1,671,336.31 )

380.4 SERVICES- COPPER $25,382,767.13 5.49% $1,393,513.9 3.45% $874,579.5/ ($518,934.35)

380.5 SERVICES- PLASTIC $671,443,562.45 6.89% $46,262,461.4! 451% $30300,282.49 ($15962,17896)

381 METERS $195,756,212.71 0.50% $978,781.0E 1.73% $3,387,50555 $2,408,724.48

382 METER,HSE REG INSTALLATNS $189,492,503.04 3.01% $5,703,724.34 3.22% $6,103,826.53 $400,102.19

383 HOUSE REGULATOR $19,784,578.88 0.99% $195,867.3: 4.53% $896,208.2E $700,340.93

389.2 RIGHTS OF WAY $1,516.00 2.50% $37.9( 2.45% $37.1: ($077)


391 OFFICE FURNITURE & EQUIP $1,036,140.26 17.78% $184,225.74 16.53% $171,298.11 ($12,927.62)

391.2 COMPUTER EQUIPMENT $3,796,629.38 4.80% $182,238.21 20.90% $793,370.32 $611,132.12

393 STORES EQUIPMENT $50,839.92 11.20% $5,694.07 5.88% $2,987.2C ($2,706.87)

394 TOOLS,SHOP,GARAGE EQUIP $7,231,903.74 8.74% $632,068.39 6.31% $456,226.2~ ($175,842.15)

395 LABORATORY EQUIPMENT $824,781.78 17.41% $143,594.51 15.67% $129,279.5 ($14,314.98)

396 POWER-OPERATED EQUIPMENT $3,596,550.41 28.38% $1,020,701.01 14.72% $529,457.od ($491,243.92)

397 COMMUNICATION EQUIPMENT $7,857,038.20 11.50% $903,559.3! 9.88% $776,243.7~ ($127,315.66)

398 MISCELLANEOUS EQUIPMENT $403,853.81 17.73% $71,603.28 7.12% $28,769.oi ($42,834.21)

$3,004,383,900.08 $107,814,252.58 $88,070,477 90 ($19,743,77468)

97

APPENDIX C

Depreciation Parameter Comparison

App

endi

x C

Acc

tD

escr

iptio

nPl

ant I

n Se

rvic

e

12-3

1-07

Ann

ual

Dep

r R

ate

Life

Iow

a C

urve

Net

Sa

lvag

eLi

feIo

wa

Cur

veN

et

Salv

age

Life

Net

Sa

lvag

e35

0.2

U.G

.STO

RA

GE

RIG

HTS

OF

WA

Y$1

,428

,665

.95

1.16

%65

S2

0.00

%65

R4

0.00

%0.

000.

0035

1.2

CO

MP

RE

SS

OR

STA

STR

UC

TUR

ES

$9,0

52,2

34.1

62.

47%

45R

3-6

.00%

45R

5-6

.00%

0.00

0.00

%35

1.3

ME

AS

'G &

RE

G S

TA S

TRU

CT

$161

,329

.20

2.78

%45

R3

-6.0

0%45

R3

-6.0

0%0.

000.

00%

351.

4O

THE

R S

TRU

CTU

RE

S$3

,471

,067

.16

2.69

%50

R4

-28.

00%

50R

3-2

8.00

%0.

000.

00%

352.

1U

.G.S

.LE

AS

EH

OLD

S &

RIG

HTS

$6,8

41,6

99.6

71.

16%

65S

20.

00%

65S

20.

00%

0.00

0.00

%35

2.3

WE

LL C

ON

STR

UC

TIO

N$4

4,64

4,89

5.04

3.57

%50

R4

-73.

00%

50R

4-6

8.00

%0.

005.

00%

352.

4W

ELL

EQ

UIP

ME

NT

$19,

016,

403.

083.

62%

50R

2.5

-73.

00%

48R

2-6

8.00

%(2

.00)

5.00

%35

3LI

NE

S$3

3,54

1,71

1.50

3.76

%65

S2

-140

.00%

65R

2-5

0.00

%0.

0090

.00%

354

CO

MP

RE

SS

OR

STA

EQ

UIP

ME

NT

$82,

604,

657.

863.

04%

40R

3-1

7.00

%40

R2.

5-1

7.00

%0.

000.

00%

355

ME

AS

'G &

RE

G S

TA E

QU

IP$7

,301

,608

.61

2.89

%45

R2.

5-2

2.00

%40

R3

-17.

00%

(5.0

0)5.

00%

356

PU

RIF

ICA

TIO

N E

QU

IPM

EN

T$1

8,71

5,08

7.32

3.77

%35

R5

-28.

00%

35R

4-2

8.00

%0.

000.

00%

357

OTH

ER

EQ

UIP

ME

NT

$6,0

75,7

81.1

33.

81%

30R

3-1

1.00

%30

R2.

5-6

.00%

0.00

5.00

%36

5.2

RIG

HTS

OF

WA

Y$3

2,49

6,95

6.62

1.05

%75

R3

0.00

%75

R3

0.00

%0.

000.

00%

366

STR

UC

TUR

ES

& IM

PR

OV

EM

EN

TS$1

1,80

5,64

3.13

1.23

%60

R3

-2.0

0%60

R3

-25.

00%

0.00

-23.

00%

367

MA

INS

$297

,932

,834

.79

1.45

%75

R3

-26.

00%

75R

3-2

6.00

%0.

000.

00%

368

CO

MP

RE

SS

OR

STA

EQ

UIP

ME

NT

$41,

643,

296.

170.

88%

40R

4-1

.00%

40R

3-1

0.00

%0.

00-9

.00%

369

ME

AS

'G &

RE

G S

TA E

QU

IP$3

8,14

7,66

6.72

1.64

%55

R2

-6.0

0%43

R1.

5-3

5.00

%(1

2.00

)-2

9.00

%37

0C

OM

MU

NIC

ATI

ON

EQ

UIP

ME

NT

$8,5

82,8

54.6

63.

48%

15R

4-1

.00%

13R

3-2

.00%

(2.0

0)-1

.00%

371

OTH

ER

EQ

UIP

ME

NT

$4,7

84,5

90.8

12.

53%

30L2

-1.0

0%32

L10.

0%2.

001.

00%

374.

2R

IGH

TS O

F W

AY

$8,9

68,9

67.2

00.

77%

75R

30.

00%

75R

30.

0%0.

000.

00%

375

STR

UC

TUR

ES

& IM

PR

OV

EM

EN

TS$5

,343

,699

.58

0.67

%50

S1

-17.

00%

55R

4-2

5.0%

5.00

-8.0

0%37

6.1

MA

INS

BA

RE

$3,7

08,0

32.2

92.

08%

70R

2-1

05.0

0%73

R1.

5-7

5.0%

3.00

30.0

0%37

6.2

MA

INS

- C &

W$3

78,3

12,2

30.2

92.

45%

75R

3-1

05.0

0%80

R3

-75.

0%5.

0030

.00%

376.

3M

AIN

S- C

AS

T IR

ON

$8,2

34,7

26.8

71.

67%

65S

3-1

05.0

0%63

S2

-75.

0%(2

.00)

30.0

0%37

6.4

MA

INS

- CO

PP

ER

$13,

126.

472.

61%

60R

5-1

05.0

0%42

R4

-75.

0%(1

8.00

)30

.00%

376.

5M

AIN

S- P

LAS

TIC

$661

,871

,958

.86

3.31

%60

R3

-105

.00%

60R

4-7

5.0%

0.00

30.0

0%37

8P

UM

PIN

G &

RE

G E

QU

IPM

EN

T$4

5,78

1,48

0.41

1.93

%50

L0.5

-25.

00%

50L0

.5-3

2.0%

0.00

-7.0

0%38

0.1

SE

RV

ICE

S- B

AR

E$1

80,5

61.0

36.

99%

42L0

-168

.00%

30L0

-130

.0%

(12.

00)

38.0

0%38

0.2

SE

RV

ICE

S- C

& W

$69,

416,

971.

735.

12%

56R

0.5

-168

.00%

57R

0.5

-130

.0%

1.00

38.0

0%38

0.4

SE

RV

ICE

S- C

OP

PE

R$2

5,38

2,76

7.13

5.49

%53

R1

-168

.00%

46R

1-1

30.0

%(7

.00)

38.0

0%38

0.5

SE

RV

ICE

S- P

LAS

TIC

$671

,443

,562

.45

6.89

%40

R1.

5-1

68.0

0%46

R4

-130

.0%

6.00

38.0

0%38

1M

ETE

RS

$195

,756

,212

.71

0.50

%42

S2

0.00

%41

R2.

515

.0%

(1.0

0)15

.00%

382

ME

TER

,HS

E R

EG

INS

TALL

ATN

S$1

89,4

92,5

03.0

43.

01%

52R

2.5

-76.

00%

50R

3-6

7.0%

(2.0

0)9.

00%

383

HO

US

E R

EG

ULA

TOR

$19,

784,

578.

880.

99%

55R

1-4

.00%

45R

1-6

7.0%

(10.

00)

-63.

00%

389.

2R

IGH

TS O

F W

AY

$1,5

16.0

02.

50%

50R

30.

00%

50R

30.

0%0.

000.

00%

390

STR

UC

TUR

ES

& IM

PR

OV

EM

EN

TS$2

7,64

4,28

4.06

1.27

%50

R3

-10.

00%

50R

1.5

-25.

0%0.

00-1

5.00

%39

1O

FFIC

E F

UR

NIT

UR

E &

EQ

UIP

$1,0

36,1

40.2

617

.78%

15S

Q0.

00%

15S

Q0.

0%0.

000.

00%

391.

2C

OM

PU

TER

EQ

UIP

ME

NT

$3,7

96,6

29.3

84.

80%

7S

Q0.

00%

5S

Q4.

0%(2

.00)

4.00

%39

3S

TOR

ES

EQ

UIP

ME

NT

$50,

839.

9211

.20%

20S

Q0.

00%

25S

Q0.

0%5.

000.

00%

394

TOO

LS,S

HO

P,G

AR

AG

E E

QU

IP$7

,231

,903

.74

8.74

%20

SQ

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91

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29

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91

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55

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7.0

9

11

4.7

2%

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,45

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9($

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43

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97

CO

MM

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ICA

TIO

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6%

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59

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43

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3($

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15

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61

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15

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98

MIS

CE

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AN

EO

US

EQ

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ME

NT

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03

.85

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11

7.7

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1,6

03

.28

7.1

2%

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8.7

69

.07

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%$

28

,76

4.0

57

.12

%$

28

,76

9.0

77.

12%

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8,7

69

.07

(54

2.8

34

.21

)($

42

.83

9.2

3)

($4

2.8

34

.21

)(5

42

.83

4.2

1)

53

.00

4,3

83

.90

0.0

8$

10

7,8

14

.25

2.5

8SR8,070.~7'1

QO\Q

4.6

07

.36

86

3m

.04

S.I

IJ.9

SI

~91,726,~3H7

~(~19.7~3.77~.68)

(SI

J.2

06

.8S

19

01

(S3

0.7

69

,IJ8

63

1(S

1<;.

087.

819.

11)

rmcgill

Text Box


Exhibit A-6 (DAW-6)Case No. U-15629

April 2009Page 1 of 1

Asset Depreciation Expense"Purchasing Power" Recovery

$500 Initial investment

Year Straight-line Depreciation

Current Value "Purchasing Power"

(5.26%)(a) (b) (c)01 $10.00 $9.502 $10.00 $9.033 $10.00 $8.574 $10.00 $8.155 $10.00 $7.746 $10.00 $7.357 $10.00 $6.988 $10.00 $6.649 $10.00 $6.30

10 $10.00 $5.9911 $10.00 $5.6912 $10.00 $5.4113 $10.00 $5.1414 $10.00 $4.8815 $10.00 $4.6316 $10.00 $4.4017 $10.00 $4.1818 $10.00 $3.9719 $10.00 $3.7820 $10.00 $3.5921 $10.00 $3.4122 $10.00 $3.2423 $10.00 $3.0824 $10.00 $2.9225 $10.00 $2.7826 $10.00 $2.6427 $10.00 $2.5128 $10.00 $2.3829 $10.00 $2.2630 $10.00 $2.1531 $10.00 $2.0432 $10.00 $1.9433 $10.00 $1.8434 $10.00 $1.7535 $10.00 $1.6636 $10.00 $1.5837 $10.00 $1.5038 $10.00 $1.4339 $10.00 $1.3540 $10.00 $1.2941 $10.00 $1.2242 $10.00 $1.1643 $10.00 $1.1044 $10.00 $1.0545 $10.00 $1.0046 $10.00 $0.9547 $10.00 $0.9048 $10.00 $0.8549 $10.00 $0.8150 $10.00 $0.77

Total Recovery $500.00 $175.46Percent Recovery 35%

rmcgill

Text Box


Exhibit A-7 (DAW-7)Case No. U-15629

April 2009Page 1 of 1

Calculation of Total Cost of Traditional Method Versus "Purchasing Power" MethodCurrent, Future and Nominal Value

Year Age

Traditional Removal

Cost

Purchasing Power (PP)

Removal Cost

PP Carrying Cost

Change (CC)

Cumulative PP CC Change

Future Value (FV) Traditional

RCFV PP RC

+ CC

Current Value (CV)

Traditional RC

CV PP RC + CC

Nominal Value (NV)

Traditional RC

NV PP RC + CC

(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l)2010 1 10.00 1.53 0.85 0.85 205.84 48.87 10.00 2.37 10.00 2.372011 2 10.00 1.61 0.84 1.69 195.56 64.42 9.50 3.13 10.00 3.292012 3 10.00 1.69 0.83 2.52 185.79 78.20 9.03 3.80 10.00 4.212013 4 10.00 1.78 0.82 3.34 176.50 90.37 8.57 4.39 10.00 5.122014 5 10.00 1.87 0.81 4.15 167.68 101.05 8.15 4.91 10.00 6.032015 6 10.00 1.97 0.80 4.95 159.30 110.36 7.74 5.36 10.00 6.932016 7 10.00 2.08 0.79 5.75 151.34 118.41 7.35 5.75 10.00 7.822017 8 10.00 2.19 0.78 6.53 143.78 125.29 6.98 6.09 10.00 8.712018 9 10.00 2.30 0.77 7.30 136.59 131.12 6.64 6.37 10.00 9.602019 10 10.00 2.42 0.76 8.06 129.77 135.97 6.30 6.61 10.00 10.482020 11 10.00 2.55 0.75 8.80 123.28 139.93 5.99 6.80 10.00 11.352021 12 10.00 2.68 0.73 9.53 117.12 143.08 5.69 6.95 10.00 12.222022 13 10.00 2.82 0.72 10.25 111.27 145.48 5.41 7.07 10.00 13.072023 14 10.00 2.97 0.70 10.95 105.71 147.21 5.14 7.15 10.00 13.932024 15 10.00 3.13 0.69 11.64 100.43 148.33 4.88 7.21 10.00 14.772025 16 10.00 3.29 0.67 12.31 95.41 148.88 4.63 7.23 10.00 15.602026 17 10.00 3.47 0.65 12.96 90.64 148.93 4.40 7.24 10.00 16.432027 18 10.00 3.65 0.63 13.60 86.11 148.53 4.18 7.22 10.00 17.252028 19 10.00 3.84 0.62 14.21 81.81 147.72 3.97 7.18 10.00 18.062029 20 10.00 4.04 0.60 14.81 77.72 146.53 3.78 7.12 10.00 18.852030 21 10.00 4.26 0.57 15.38 73.84 145.02 3.59 7.05 10.00 19.642031 22 10.00 4.48 0.55 15.94 70.15 143.22 3.41 6.96 10.00 20.422032 23 10.00 4.72 0.53 16.46 66.64 141.15 3.24 6.86 10.00 21.182033 24 10.00 4.96 0.50 16.97 63.31 138.86 3.08 6.75 10.00 21.932034 25 10.00 5.23 0.48 17.45 60.15 136.36 2.92 6.62 10.00 22.672035 26 10.00 5.50 0.45 17.89 57.14 133.69 2.78 6.49 10.00 23.402036 27 10.00 5.79 0.42 18.32 54.29 130.86 2.64 6.36 10.00 24.112037 28 10.00 6.09 0.39 18.71 51.57 127.91 2.51 6.21 10.00 24.802038 29 10.00 6.42 0.36 19.06 49.00 124.84 2.38 6.07 10.00 25.482039 30 10.00 6.75 0.32 19.39 46.55 121.69 2.26 5.91 10.00 26.142040 31 10.00 7.11 0.29 19.68 44.22 118.46 2.15 5.75 10.00 26.792041 32 10.00 7.48 0.25 19.93 42.01 115.17 2.04 5.59 10.00 27.412042 33 10.00 7.88 0.21 20.14 39.91 111.83 1.94 5.43 10.00 28.022043 34 10.00 8.29 0.17 20.31 37.92 108.46 1.84 5.27 10.00 28.602044 35 10.00 8.73 0.13 20.44 36.02 105.07 1.75 5.10 10.00 29.172045 36 10.00 9.18 0.08 20.52 34.22 101.67 1.66 4.94 10.00 29.712046 37 10.00 9.67 0.03 20.56 32.51 98.27 1.58 4.77 10.00 30.222047 38 10.00 10.18 (0.02) 20.54 30.89 94.87 1.50 4.61 10.00 30.712048 39 10.00 10.71 (0.07) 20.47 29.34 91.49 1.43 4.44 10.00 31.182049 40 10.00 11.28 (0.13) 20.34 27.88 88.14 1.35 4.28 10.00 31.622050 41 10.00 11.87 (0.19) 20.15 26.49 84.81 1.29 4.12 10.00 32.022051 42 10.00 12.49 (0.25) 19.90 25.16 81.51 1.22 3.96 10.00 32.402052 43 10.00 13.15 (0.31) 19.59 23.90 78.26 1.16 3.80 10.00 32.742053 44 10.00 13.84 (0.38) 19.20 22.71 75.05 1.10 3.65 10.00 33.052054 45 10.00 14.57 (0.46) 18.75 21.57 71.88 1.05 3.49 10.00 33.322055 46 10.00 15.34 (0.53) 18.21 20.50 68.77 1.00 3.34 10.00 33.552056 47 10.00 16.14 (0.61) 17.60 19.47 65.70 0.95 3.19 10.00 33.742057 48 10.00 16.99 (0.70) 16.90 18.50 62.70 0.90 3.05 10.00 33.892058 49 10.00 17.89 (0.79) 16.11 17.58 59.75 0.85 2.90 10.00 34.002059 50 10.00 18.83 (0.88) 15.23 16.70 56.86 0.81 2.76 10.00 34.062060 51 10.00 19.82 (0.98) 14.25 15.86 54.03 0.77 2.63 10.00 34.062061 52 10.00 20.86 (1.09) 13.16 15.07 51.27 0.73 2.49 10.00 34.022062 53 10.00 21.96 (1.20) 11.97 14.32 48.57 0.70 2.36 10.00 33.922063 54 10.00 23.11 (1.31) 10.66 13.60 45.93 0.66 2.23 10.00 33.772064 55 10.00 24.33 (1.43) 9.22 12.92 43.35 0.63 2.11 10.00 33.552065 56 10.00 25.61 (1.56) 7.66 12.28 40.84 0.60 1.98 10.00 33.272066 57 10.00 26.95 (1.70) 5.97 11.66 38.39 0.57 1.87 10.00 32.922067 58 10.00 28.37 (1.84) 4.13 11.08 36.01 0.54 1.75 10.00 32.502068 59 10.00 29.86 (1.99) 2.14 10.53 33.69 0.51 1.64 10.00 32.012069 60 10.00 31.43 (2.14) (0.00) 10.00 31.43 0.49 1.53 10.00 31.43

Total 600.00 600.00 803.51 3,929.12 5,974.55 190.88 290.25 600.00 1,403.51

Increase ("Purchasing Power' versus Traditional) 52% 52% 134%

Inflation Rate 5.26%Cost of Capital 10.00%Life 60

rmcgill

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21

42

01

.37

437

.01

37

.13

00

37

2.45

%2

7.6

44

,28

41

5.5

49

.96

312

,439

.970

3,10

9.99

315

,204

.314

33.0

046

0.75

6.25

(88

.32

6)

(11

4.1

73

)5

74

.92

92

.08

%1.

036.

140

26

2.3

27

26

2.3

27

07

73

.81

34

.52

17

1.2

98

.11

(14

2)

(18

4)

17

1.4

82

16.5

50/,

3.7

96

.62

92.

442,

731

2,4

17

.28

62

5.4

45

1,3

79

.34

31.

5291

0.39

9.32

31

.93

641

.281

86

9.1

18

22

.89

%50

,840

19

.33

41

9.3

34

03

1.5

06

10.5

52,

987.

2022

28

2.9

59

5.8

2%

7.23

1,90

41.

703.

208

1.66

8.09

13

5.1

18

5,5

63

.81

31

1.6

44

77

.87

6.9

92

,84

53

,67

84

74

.19

96

.56

%8

24

,78

228

8,66

128

8.66

10

536.

120

4.02

13

3.3

83

.54

1.7

95

2.32

01

31

.06

315

.89

tl /tl

3.59

6,55

011

9.80

711

9,80

70

3,4

76

.74

46

.57

529,

457.

093.

650

4.7

18

52

4.7

39

14.5

9%7,

857,

038

3,5

85

.29

63

.58

5,2

96

04

,27

1.7

42

5.30

805,

889.

267

.77

510

,050

79

5.8

39

10.1

3%40

3,85

41

43

,81

81

43

.81

80

260,

035

8.0

63

2,2

78

.19

33

843

731

,841

7.8

8%

3.00

4,38

3,90

0·1

.84

5,6

QM

53

t.069,OSO,~7

77

6,5

52

.45

61

,93

5,3

32

,90

354

,077

,447

.50

(7.7

01.7

61)

83

50

01

47

rmcgill

Text Box


depreciation rate study at december 31, 2007

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