Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Greg Gordon - Citi Investment Research
Greg Gordon - Citi Investment Research
When I try to think about the rate filling that you are going to make in the first half of this year, you use a forward test here, correct?
Gale Klappa
It would be a two-year forward-looking test year.
Greg Gordon – Citi Investment Research
So we’ll be looking at sort of 2010 average rate base.
Gale Klappa
Well again, two-year forward-looking test years, so we would look at 2010 and 2011 at 2010 and 2011 rate base.
Greg Gordon – Citi Investment Research
Great and rate base includes, CapEx minus depreciation obviously, but plus does that also include any dollars that you put into the pension including that $289 million you put in January?
Gale Klappa
It’s meant to include the total capitalization of the company, Greg. So, to the extent that you invest in working capital, your inventories all that, a whole range of things to drive capitalization get included in the rate making formula.
Greg Gordon - Citi Investment Research
The point being that is, it’s seen as funds on which you ought to be allowed to recoup your investment?
Gale Klappa
That’s right.
Rick Kuester
It seen as part of the capital base of the company, that’s right.
Greg Gordon - Citi Investment Research
Okay, I just wanted to make sure. Looking at where interest rates and equity risk premiums have gone over the last year, would it be your expectation that you be requesting a the higher return on equity in the case, same lower and how are you thinking about positioning for the case?
Gale Klappa
Greg, candidly, I don’t think we would be asking for a higher return on equity than we’re currently allowed. In part, I think we have to be in the commission would expect us to be sensitive to the economic climate. So, my sense is that at this stage of the game, again we haven’t put all the final pieces together yet for the filing, because that wont take place for a number of bunch yet.
My sense is, we would stay at a request of a 1075 return on equity and that the big driver actually and if you look at where we’re at, about 83% of all the Power the Future costs are already reflected in rate decisions of the commission has already made. So, one of the drivers for this upcoming case, as we know bring these units into services will be the remaining carrying costs on our Power the Future investment, but I think you will see based on all of the things we’re doing in the company. I think you’ll see a pretty modest rate increase request.
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