From: Roy, Robin [mailto:rroy@nrdc.org]

Sent: Friday, November 11, 2011 7:26 PM

To: Saint, Robert D.; Robert Berman

Cc: Corkran, Jerry L; Bolduc Christopher; Anderson Ri chard; Ballo Timothy; Beck Scott R.; Caskey John. F; Cymbalsky John; adelaski@standardsasap.org; Tom; Fernstrom Gary; Gaytan Carlos; Greeson Robert; bruce.r.hirsch@bge.com; Hodge Gerald R.; Hyland Michael J.; Millure David; Nadel Steven; Patterson Wesley F.; Petersen Eric; Polinski Raymond; artros enfeld@gmail.com; Rosenstock Steven J.; Simmons Charles E.; Cohen Dan; Coulter Greg; Creevy Jim; ahofmann@publicpower.org; Kumar Puesh; Mauer Joanna; Aaron Meyers; jrossetti@mlgw.org; Ryan Paul; Schoen Jerry W.; bsmith@federalpacific.com; Waltner, Meg; Brian Coffey; Coughlin Katie; brenda.edwards@ee.doe.gov; jeremiah.freeman@ee.doe.gov; Caitlin Johnson; Zh imei Luo; emily.marchetti@ee.doe.gov; Michael Rivest; Rosenquist Gregory; Drexler Charles R.; Ph il Hopkinson; James.Lass@cleco.com; Sampat Mahesh P.; DYoung@energy-solution.com; chad.kennedy@us.sc hneider-electric.com; eduardorobles@eaton.com; vijay.tendulkar@onyxpower.com; Kenneth Winder ; thomas.patzner@us.schneider-electric.com; carlosgsiqueiros@eaton.com; Raba Jim; Parker Richard Subject: RE: Cost of Capital to Electric Utilities

Thanks Bob,

Is the 6.22% rate of return real or nominal?

If it’s 6.22% nominal, then with cpi currently at ~3.9% the real rate is around 2.2%, which suggests 7% is

high.

Cheers, Robin

From: Saint, Robert D. [ mailto:robert.saint@nreca.coop ]

Sent: Friday, November 11, 2011 4:03 PM

To: Robert Berman

Cc: Corkran, Jerry L; Bolduc Christopher; Anderson Ri chard; Ballo Timothy; Beck Scott R.; Caskey John. F; Cymbalsky John; adelaski@standardsasap.org Delaski; Tom; Fernstrom Gary; Gaytan Carlos; Greeson

Robert; bruce.r.hirsch@bge.com Hirsch R; Hodge Gerald R.; Hyland Michael J.; Millure David; Nadel Steven; Patterson Wesley F.; Petersen Eric; Polinski Raymond; artrosenfeld@gmail.com Rosenfeld; Rosenstock Steven J.; Roy, Robin; Simmons Ch arles E.; Cohen Dan; Coulter Greg; Creevy Jim; ahofmann@publicpower.org Hofmann; Kumar Puesh; Mauer Joanna; Aaron Meyers; jrossetti@mlgw.org Rossetti; Ryan Paul; Schoen Jerry W.; bsmith@federalpacific.com Smith; Waltner, Meg; brian.coffey@navigant.com Coffey; Coughlin Katie; brenda.edwards@ee.doe.gov Edwards; jeremiah.freeman@ee.doe.gov Freeman; Johnson Caitlin; zhimei.luo@navigant.com Luo; emily.marchetti@ee.doe.gov ; mrivest@navigant.com Rivest; Rosenquist Gregory; Drexler Charles R.; Phil Hopkinson; James.Lass@cleco.com Lass; Sampat Mahesh P.; DYoung@energy-solution.com Young; chad.kennedy@us.schneider-electric.com Kennedy; eduardorobles@eaton.com Robles; vijay.tendulkar@onyxpower.com Tendulkar; Kenneth Winder; thomas.patzner@us.schneider-electric.com

Patzner; carlosgsiqueiros@eaton.com Siquieros; Raba Jim; Parker Richard Subject: RE: Cost of Capital to Electric Utilities



### Robert—

After much discussion within NRECA and consultation with a major supplemental lender for

distribution cooperatives, we have come up with median Rate of Return on Total Capitalization

of 6.22% for electric cooperatives. So, the 7% figure being used is well within the ball park.

# Bob Saint

Principal Distribution Engineer, Energy and Power Division National Rural Electric Cooperative Association (NRECA)

4301 Wilson Blvd Arlington, VA 22203 Phone: (703) 907-5863 Cell: (703) 283-5078

From: Robert Berman [ mailto:bermaneconomics@gmail.com ]

Sent: Monday, November 07, 2011 5:47 AM

To: Parker Richard

Cc: Robert Berman; Corkran, Jerry L; Bolduc Christop her; Anderson Richard; Ballo Timothy; Beck Scott R.; Caskey John. F; Cymbalsky John; adelaski@standardsasap.org Delaski; Tom; Fernstrom Gary; Gaytan

Carlos; Greeson Robert; bruce.r.hirsch@bge.com Hirsch R; Hodge Gerald R.; Hyland Michael J.; Millure David; Nadel Steven; Patterson Wesley F.; Petersen Eric; Polinski Raymond; artrosenfeld@gmail.com Rosenfeld; Rosenstock Steven J.; Roy Robin; Saint, Robert D.; Simmons Charle s E.; Cohen Dan; Coulter Greg; Creevy Jim; ahofmann@publicpower.org Hofmann; Kumar Puesh; Mauer Joanna; Aaron Meyers; jrossetti@mlgw.org Rossetti; Ryan Paul; Schoen Jerry W.; bsmith@federalpacific.com Smith; Waltner Meg; brian.coffey@navigant.com Coffey; Coughlin Katie; brenda.edwards@ee.doe.gov Edwards; jeremiah.freeman@ee.doe.gov Freeman; Johnson Caitlin; zhimei.luo@navigant.com Luo; emily.marchetti@ee.doe.gov ; mrivest@navigant.com Rivest; Rosenquist Gregory; Drexler Charles R.; Phil Hopkinson; James.Lass@cleco.com Lass; Sampat Mahesh P.; DYoung@energy-solution.com Young; chad.kennedy@us.schneider-electric.com Kennedy; eduardorobles@eaton.com Robles; vijay.tendulkar@onyxpower.com Tendulkar; Kenneth Winder; thomas.patzner@us.schneider-electric.com

Patzner; carlosgsiqueiros@eaton.com Siquieros; Raba Jim Subject: Cost of Capital to Electric Utilities



### Richard and All,

For those interested in the curren t cost of money to investor owne d electric utilities, the weighted average cost of capital a ppears to be a little over 5%. This is composed of about 7% equity and

4% debt. See attached for full li st of sector costs. As noted in my earlier email to Ken, rural electric coops and municipals typically borrow fr om RUS at rates pegged to long-term treasuries -- currently about 3%. Links also included her for convenience.

http://www.rurdev.usda.gov/UEP_Rates.html

and http://www.rurdev.usda.gov/UEP_Loans_Grants.html

Confidentiality Notice: This e-mail message, includi ng any attachments, is for the sole use of the intended recipient(s) and may contain confidenti al and privileged information. Any unauthorized review, copy, use, disclosure, or distribution is prohibi ted. If you are not the intended recipient, please contact the sender by reply e-mail and dest roy all copies of the original message.