2. Background

On May 2, 2011, the Applicants filed simultaneous applications for approval of their respective proposed costs of capital for the three-year period beginning January 1, 2012. On May 31, 2011, Division of Ratepayers Advocate (DRA) filed a protest to the applications. Pursuant to the Scoping Memo of the assigned Commissioner issued September 13, 2011 the Applicants and DRA prepared and submitted extensive direct and rebuttal testimony addressing the methodology for determining costs of capital and their contrasting recommendations regarding those costs.

Evidentiary hearings were scheduled for the week of October 17, 2011. At the opening of the evidentiary hearings, the Parties informed the assigned Administrative Law Judge (ALJ) that they had reached a tentative settlement. On November 3, 2011, the Parties filed a joint motion for acceptance of the Agreement (Joint Motion).

After an initial review of the agreement, on November 28, 2011, the ALJ issued a ruling (Ruling) indicating his concern that the return on equity of
9.99 percent agreed to by the Parties might be excessive in light of current market conditions (and by extension, not in the public interest). The Ruling directed the Parties to supplement the record with additional testimony. In response, the Parties submitted joint testimony in support of the Agreement (Joint Testimony), specifically including testimony in support of the agreed-upon return on equity. At an evidentiary hearing on January 23, 2012, witnesses for the Parties testified in support of the settlement and the agreed-on return on equity. At the conclusion of the hearing, the ALJ issued an additional ruling directing the Parties to further supplement the record with written answers to a series of questions propounded by the assigned Commissioner. The Parties' filings in response to this ruling were received on February 27, 2012. This proceeding was submitted on January 23, 2012.