OGE Energy : PUD 2021-00164 - Direct Testimony of Ann Bulkley

BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA

IN THE MATTER OF THE APPLICATION	)
OF OKLAHOMA GAS AND ELECTRIC	)
COMPANY FOR AN ORDER OF THE	)	CAUSE NO. PUD 202100164
COMMISSION AUTHORIZING APPLICANT	)
TO MODIFY ITS RATES, CHARGES, AND	)
TARIFFS FOR RETAIL ELECTRIC	)
SERVICE IN OKLAHOMA	)

Direct Testimony

of

Ann E. Bulkley

on behalf of

Oklahoma Gas and Electric Company

December 30, 2021

Direct Testimony of Ann E. Bulkley	Page 1 of 91
Cause No. PUD 202100164

TABLE OF CONTENTS

PAGE

A.	Economic Recovery and Performance of the Utility Sector..........................	17
B.	Effect of Tax Reform on the ROE and Capital Structure..............................	29
C.	Conclusion.....................................................................................................	33

A.	Importance of Multiple Analytical Approaches ............................................	38
B.	Constant Growth DCF Model .......................................................................	42
C.	CAPM Analysis.............................................................................................	47
D.	Bond Yield Plus Risk Premium Analysis......................................................	53
A.	February 2021 Winter Storm and Fuel Cost Recovery RiskError! Bookmark not defined.
B.	Capital Expenditures .....................................................................................	57
C.	Regulatory Risk.............................................................................................	62
	1.	Cost Recovery Mechanisms ...............................................................	65
	2.	Authorized ROEs................................................................................	68
D.	Flotation Cost ................................................................................................	75

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Cause No. PUD 202100164

DRAFT- PRIVILEGED AND CONFIDENTIAL

PREPARED AT THE REQUEST OF COUNSEL

	EXHIBITS
Exhibit	Description
Exhibit AEB-1	Resume and Testimony Listing of Ann E. Bulkley
Exhibit AEB-2	Summary of Results
Exhibit AEB-3	Proxy Group Selection
Exhibit AEB-4	Constant Growth DCF Model
Exhibit AEB-5	Capital Asset Pricing Model / Empirical Capital Asset
	Pricing Model
Exhibit AEB-6	Long-term Average Beta
Exhibit AEB-7	Market Return
Exhibit AEB-8	Bond Yield Plus Risk Premium Approach
Exhibit AEB-9	Flotation Cost
Exhibit AEB-10	Capital Expenditures Analysis
Exhibit AEB-11	Regulatory Risk Analysis
Exhibit AEB-12	RRA Regulatory Ranking Analysis
Exhibit AEB-13	S&P Credit Supportive Analysis
Exhibit AEB-14	Capital Structure Analysis

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Cause No. PUD 202100164

INTRODUCTION

1. Q. Please state your name and business address.
2. A. My name is Ann E. Bulkley. My business address is 293 Boston Post Road West, Suite
3. 500, Marlborough, Massachusetts 01752. I am employed by Concentric Energy Advisors,
4. Inc. ("Concentric") as a Senior Vice President.
5. Q. On whose behalf are you submitting this Prepared Direct Testimony?

6 A. I am submitting this testimony before the Oklahoma Corporation Commission

1. ("Commission") on behalf of Oklahoma Gas and Electric Company ("OG&E" or the
2. "Company") which is a wholly-owned subsidiary of OGE Energy Corp.
3. Q. Please describe your education and experience.
4. A. I hold a Bachelor's degree in Economics and Finance from Simmons College and a
5. Master's degree in Economics from Boston University, with more than 20 years of
6. experience consulting to the energy industry. I have advised numerous energy and utility
7. clients on a wide range of financial and economic issues with primary concentrations in
8. valuation and utility rate matters. Many of these assignments have included the
9. determination of the cost of capital for valuation and ratemaking purposes. I have included
10. my resume and a summary of testimony that I have filed in other proceedings as Exhibit
11. AEB-1.
12. Q. Please describe Concentric's activities in energy and utility engagements.
13. A. Concentric provides financial and economic advisory services to many and various energy
14. and utility clients across North America. Our regulatory, economic, and market analysis
15. services include utility ratemaking and regulatory advisory services; energy market

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Cause No. PUD 202100164

1	assessments; market entry and exit analysis; corporate and business unit strategy
2	development; demand forecasting; resource planning; and energy contract negotiations.
3	Our financial advisory activities include buy- and sell-side merger, acquisition, and

1. divestiture assignments; due diligence and valuation assignments; project and corporate
2. finance services; and transaction support services. In addition, we provide litigation support
3. services on a wide range of financial and economic issues on behalf of clients throughout
4. North America.
5. Q. Please describe the purpose of your testimony.
6. A. The purpose of my testimony is to present evidence and provide a recommendation
7. regarding the appropriate Return on Equity ("ROE")1 in this proceeding and to provide an
8. assessment of the capital structure to be used for ratemaking purposes.
9. Q. Was your testimony, including associated exhibits, prepared by you or under your
10. control and direction?
11. A. Yes. My analyses and recommendations are supported by the data presented in Exhibit
12. AEB-2through Exhibit AEB-14, which were prepared by me or under my direction.
13. Q. How is the remainder of your testimony organized?
14. A. Section II provides a summary of my analyses and conclusions. Section III reviews the
15. regulatory guidelines pertinent to the development of the cost of capital. Section IV
16. discusses current and projected capital market conditions and the effect of those conditions
17. on OG&E's cost of equity. Section V explains my selection of a proxy group of electric

1 Throughout my Prepared Direct Testimony, I interchangeably use the terms "ROE" and "cost of equity".

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Cause No. PUD 202100164