Contract analysis

I. INTRODUCTION AND QUALIFICATIONS A. Witness Identification Q. Please state your full name, title, and business address. A. My name is Angela Moretti. I am Vice President, Finance & Treasurer of Ridgeline Midstream Services LLC ("Ridgeline" or "RMS"). My principal office is located at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301. I am testifying in this proceeding on behalf of Ridgeline Mi

1. The test-year cost of service of $97.36 million that forms the basis for Ridgeline's proposed recourse rates;

2. The rate base of $612.40 million as of the test year ended March 31, 2022;

3. The proposed capital structure of 55% equity and 45% debt;

4. The weighted average cost of debt of 5.25%;

5. The proposed return on rate base, computed using a weighted average cost of capital of 10.0625%;

6. The annual depreciation expense of $14.68 million;

7. The operating expenses of $17.26 million, consisting of operations and maintenance ("O&M") expense and administrative and general ("A&G") expense;

8. Taxes, including taxes other than income taxes and the income tax allowance;

9. Revenue credits of $16.10 million; and

10. The identification of supporting exhibits and workpapers (Exhibits A through P filed with the application) that document and support the figures presented in my testimony. I note that the return on equity ("ROE") of 14.00% that is incorporated into my cost-of-service calculation is addressed separately and in detail in the pre-filed direct testimony of Dr. Raymond Braswell, Ridgeline's expert witness on cost of e

1. Ridgeline's total rate base, as filed, is $612.40 million. This figure is derived from Ridgeline's books and records, is computed in accordance with the FERC Uniform System of Accounts, and reflects the historical cost of the Ridgeline Pipeline System less accumulated depreciation, adjusted for accumulated deferred income taxes ("ADIT") and other rate base items including working capital allowance.

2. The proposed weighted average cost of capital ("WACC") is 10.0625%, computed using a capital structure of 55% equity and 45% debt, a return on equity of 14.00%, and a weighted average cost of debt of 5.25%.

3. The total cost of service is $97.36 million. This amount includes the return on rate base, depreciation expense, operating expenses, taxes, income tax allowance, and is net of revenue credits.

4. These figures are just and reasonable within the meaning of Sections 4 and 5 of the Natural Gas Act and are supported by Ridgeline's audited books and records, FERC Form No. 2 data, and the detailed workpapers filed as Exhibits A through P to the application. E. List of Exhibits Sponsored by This Witness Q. Please identify the exhibits that you are sponsoring in this proceeding. A. I am sponsoring the following ex

II. CORPORATE AND ORGANIZATIONAL OVERVIEW A. Ridgeline Midstream Services LLC Q. Please describe Ridgeline Midstream Services LLC. A. Ridgeline Midstream Services LLC is a limited liability company organized under the laws of the State of Delaware. Ridgeline's registered agent is Capitol Filings Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. Ridgeline's Employer Identification Number (EIN) is 87-423

1. Wetzel Station, located near the receipt point in Wetzel County, West Virginia, with installed compression of 15,000 horsepower ("HP");

2. Mannington Station, located at approximately milepost 78 near Mannington, Marion County, West Virginia, with installed compression of 15,000 HP; and

3. Waynesburg Station, located at the delivery point in Greene County, Pennsylvania, with installed compression of 15,000 HP. The aggregate installed compression across the three stations is 45,000 HP. The Ridgeline Pipeline System was placed in service on October 1, 2021. The original construction cost of the pipeline system was $587.2 million, as recorded on Ridgeline's books and records. The system was constructed

III. TEST YEAR AND ACCOUNTING BASIS A. Selection of Test Year Q. What test year has Ridgeline selected for purposes of this rate filing? A. Ridgeline has selected the twelve-month period ended March 31, 2022 as the test year for this rate filing. I will refer to this period as the "test year" or "test period" throughout my testimony. Q. Why did Ridgeline select this particular test year? A. The selection of the test

IV. RATE BASE A. Overview Q. What is Ridgeline's total rate base as filed in this proceeding? A. Ridgeline's total rate base as filed is $612.40 million. The rate base represents the total investment on which Ridgeline is entitled to earn a reasonable return, computed in accordance with the Commission's regulations and established precedent. Q. What are the principal components of the rate base? A. The rate base cons

V. CAPITAL STRUCTURE AND COST OF CAPITAL A. Proposed Capital Structure Q. What capital structure is Ridgeline proposing for purposes of this rate filing? A. Ridgeline proposes a capital structure of 55% equity and 45% debt for purposes of computing the weighted average cost of capital and the return on rate base. Q. What is the basis for the proposed 55% equity / 45% debt capital structure? A. The proposed capital st

VI. DEPRECIATION EXPENSE A. Depreciation Rate Q. What depreciation rate is Ridgeline proposing for the Ridgeline Pipeline System? A. Ridgeline proposes an annual straight-line depreciation rate of 2.5%, applied to the Gross Plant in Service of $587.20 million. Q. What is the basis for the proposed 2.5% depreciation rate? A. The proposed 2.5% annual straight-line depreciation rate is based on an estimated useful life

1. Physical life — The Ridgeline Pipeline System was constructed using modern materials (API 5L X-70 grade steel pipe) and construction techniques. The pipeline is equipped with a comprehensive cathodic protection system and high-performance coating to protect against external corrosion. Based on the physical characteristics of the pipe and the operating environment, a physical life of well in excess of 40 years is a

2. Functional life — The pipeline serves prolific natural gas production areas in the Marcellus and Utica shale formations, which are expected to sustain significant production volumes for decades to come. The functional demand for natural gas transportation capacity in the Appalachian Basin is expected to continue throughout and beyond the 40-year useful life estimate.

3. Regulatory and industry precedent — The Commission has approved depreciation rates in the range of 2.0% to 3.0% (corresponding to useful lives of approximately 33 to 50 years) for natural gas transmission pipelines in numerous rate proceedings. The proposed 2.5% rate (40-year life) is squarely within this range. Detailed depreciation rate support, including a life analysis and consideration of negative net salvage

VII. OPERATING EXPENSES A. Operations and Maintenance (O&M) Expense Q. What is the test-year O&M expense included in the cost of service? A. The test-year O&M expense is $12.44 million, as reported in Ridgeline's FERC Form No. 2 data and adjusted for known and measurable changes and normalization as described in Section III.B of my testimony. Q. What are the principal components of O&M expense? A. O&M expense consist

VIII. TAXES A. Taxes Other Than Income Taxes Q. What is the amount of taxes other than income taxes included in the cost of service? A. Taxes other than income taxes total $3.80 million. Q. What are the components of taxes other than income taxes? A. Taxes other than income taxes consist primarily of state and local property taxes and franchise taxes assessed on the Ridgeline Pipeline System and Ridgeline's business

IX. REVENUE CREDITS A. Revenue Credits Q. What revenue credits are included in the cost of service? A. Revenue credits of $16.10 million are included in the cost of service as an offset (reduction) to the total cost of service to be recovered through firm recourse rates. Q. What are the sources of the revenue credits? A. The revenue credits represent revenues received by Ridgeline from sources other than firm transpo