Hearing - E-01345A-25-0105 - Arizona Public Service Company - Jun 12, 2026
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What procedural matters are addressed at the start of this hearing?
All right, let's go ahead on go on the record. Uh, welcome. Happy Friday, everyone. And this uh inaugurating the sixteenth day in this intrepid journey. Um I think today, before we get started with the presentation of witnesses, I'll just quickly check do we have any procedural matters we need to take up this morning? Seeing no seeing no takers, uh, I take that as a no. All right. Okay, so I think we're starting today with Mr. Parcel, so I'll turn to staff. Uh Miss Scott.
Thank you. Staff calls Mr. David Parcel.
Good morning, Mr. Parcel.
Good morning. Welcome.
Welcome to Phoenix.
Thank you.
Could you please state your name and address for the record?
Certainly. David C. Parcel. two two one eight Worcester W O R C H E S T E R Road. Midlotian, M I D L O T H I N Virginia, two three, one, one, three.
And um Have you previously testified in rate proceedings before the commission?
Yes, I have. Lots.
And um you did say where you're employed and in what capacity.
Yes, I'm employed by Technical Associates Incorporated as a principal and senior economist.
Were you retained in this case by the utilities d division staff?
That is correct.
And what issues were you retained by them to address?
In broad terms, the cost of capital issue. That includes capital structure, cost of debt, cost of equity. I also comment on the fair value increment portion of the fair value rate of return. And I also comment on the risk implications of the fulmer rate or FRAM.
And do you have before you what are marked as exhibits S seven, S eight, and S nine?
Yes I do.
And could you please identify those exhibits for the record?
Yes. Staff seven is the my confidential No, staff seven is my redacted direct testimony. Staff eight is my cerebral testimony. And staff nine is my confidential. Unless I have those two reversed, I I think nine is confidential.
Yes. Were each of these exhibits prepared by you or under your direction and control?
Yes, they were.
Do you have any changes or modifications to your respective testimonies today?
No.
And and what formed the basis for your testimony recommendations?
Well uh I reviewed the application and of the schedule the deschedules of the uh company's application as well as the cost of capital testimony of Mr. uh Coyne. And I performed analyses of the risk of APS and I developed a proxy group of companies. I also used Mr. Coin's group of proxy companies and I developed um Cost of capital estimates based upon discounted cash flow or DCF, capital asset price model or Cap M, comparable earnings, C E and risk premium RP. So I used those four methods and I concluded that the Fair cost of capital for APS this time is a range of 9.55 to 10105 with a midpoint of 9.80%.
Okay. Um at this time, Your Honor, I would ask uh for the admission of S six or I'm sorry, S seven, S eight, and S nine.
All right. Any objections to the admission of S seven, S eight, or S nine? Hearing none, let uh S seven, S eight and S nine are hereby admitted.
So you talked a little bit about the um testimonies of APS witness coin, correct?
Yes.
Did you hear his cross examination earlier in this proceeding as well?
Yes, I did.
And do you have any further comments other than what you've already stated concerning his recommendations and criticisms of your testimony?
Oh just a few comments. The main real issue between uh Mr. Coyne and myself is the Is the relative risk of APS versus proxy groups? And in my direct testimony and in Surabell testimony, I show where the the the company has properly maintained that they're in good relationship with the commission now, that's a f uh a favorable regulatory framework. Uh that's view is shared by Moody's and Standard Poor's where they say that that uh favorable regulatory framework. work in in Arizona and they cite a number of of favorable regulatory mechanisms. that have been implemented over time and on a constantly increasing basis over the last several years. And also the fact that uh that the the Fram, which is new to this proceeding, is uh
Maybe the maybe the biggest and most favorable of all. And I conclude that um based upon those factors as well as the fact that
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Agenda
8 items
1
What procedural matters are addressed at the start of this hearing?
0:02–9:48
2
How does the expert discuss cost‑of‑capital methodology and ROE recommendations?
9:48–1:59:43
3
What corrections were made to Dr. Zhu’s testimony and how do they affect the discussion of the fair‑value increment and FRAM?
1:59:43–2:56:34
4
How does Dr. Zhu explain the cost‑of‑capital models and risk‑premium methodology used to evaluate the FRAM and its impact on APS’s ROE?
2:56:34–4:07:05
5
How do the DCF and risk‑premium models used by Mr. Walters affect the cost‑of‑capital analysis?
4:07:05–5:23:30
6
Why are affordability and credit‑rating considerations central to the commission’s ROE decision?
5:23:30–6:34:21
7
How do experts evaluate the appropriate beta and cost of equity for APS?
6:34:21–7:39:43
8
What is the relationship between authorized ROE, cost of equity, and customer bill impacts?
7:39:43–8:32:22
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