Contract analysis

I. PRELIMINARY STATEMENT Ridgeline Midstream Services LLC ("Ridgeline" or "Applicant"), a Delaware limited liability company with its principal office at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301, respectfully submits this Application to the Federal Energy Regulatory Commission ("Commission" or "FERC") pursuant to Sections 4 and 7 of the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717c, 717f,

II. DESCRIPTION OF APPLICANT A. Corporate Organization and Ownership Ridgeline Midstream Services LLC is a limited liability company organized and existing under the laws of the State of Delaware. The following table summarizes the key corporate and regulatory identification information for the Applicant: Ridgeline is wholly owned by Dunmore Energy Holdings Ltd. There are no other members, partners, or equity holders

III. DESCRIPTION OF THE RIDGELINE PIPELINE SYSTEM A. System Overview and Physical Specifications The Ridgeline Pipeline System consists of a 187-mile high-pressure natural gas transmission pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia, to the Waynesburg Compressor Station in Greene County, Pennsylvania. The pipeline traverses rural and semi-rural terrain through portions of We

IV. NEED FOR SERVICE AND PUBLIC INTEREST A. Market Demand The Ridgeline Pipeline System addresses a significant and well-documented need for additional natural gas transportation capacity in the Appalachian Basin. Over the past decade, the Marcellus and Utica shale formations in West Virginia, Ohio, and Pennsylvania have emerged as the most productive natural gas producing regions in the United States. According to d

V. PROPOSED TARIFF — FERC GAS TARIFF, ORIGINAL VOLUME NO. 1 A. Tariff Structure Ridgeline has prepared and concurrently files herewith its FERC Gas Tariff, Original Volume No. 1, which sets forth the rates, terms, and conditions under which Ridgeline will provide interstate natural gas transportation service on the Ridgeline Pipeline System. The proposed tariff is structured as a Part 284, Subpart G open-access trans

VI. COST OF SERVICE This section presents the detailed derivation of Ridgeline's annual cost of service of $97.36 million, which underlies the proposed initial recourse rate of $0.2265/Dth. The cost-of-service analysis follows the Commission's established methodology and is supported by the detailed schedules and workpapers filed as Exhibits A through I herewith. A. Test Year The cost of service presented herein is b

1. Net Plant in Service The original construction cost of the Ridgeline Pipeline System, as recorded on Ridgeline's books and records, is $587.2 million (gross plant in service). This amount represents the total capitalized cost of all pipeline, compressor station, meter station, and related facilities comprising the Ridgeline Pipeline System, including direct construction costs, land and right-of-way costs, engineer

2. Working Capital Allowance Ridgeline's working capital allowance is $18.64 million, calculated pursuant to the Commission's formula method as one-eighth (1/8) of the sum of operations and maintenance ("O&M") expenses and administrative and general ("A&G") expenses: O&M Expense: $12,440,000 A&G Expense: $4,820,000 Total O&M + A&G: $17,260,000 Working Capital (1/8 × $17,260,000): Approximately $2,157,500 Ridgeline no

3. Accumulated Deferred Income Taxes (ADIT) Accumulated deferred income taxes of ($12.45 million) reduce the rate base, consistent with the Commission's requirement that ADIT be deducted from rate base in the calculation of the revenue requirement. The ADIT balance arises primarily from the difference between accelerated depreciation for income tax purposes (under the Modified Accelerated Cost Recovery System, or "MA

4. Other Rate Base Items Other rate base items total $42.50 million and consist of the following components: • Gas stored underground (system gas inventory): $28.30 million • Materials and supplies inventory: $8.70 million • Prepayments and other regulatory assets: $5.50 million These amounts are recorded on Ridgeline's books and records and are consistent with Commission policy for inclusion in rate base. Supporting

5. Total Rate Base Ridgeline's total rate base is calculated as follows: The calculation is: $563,710,000 + $18,640,000 − $12,450,000 + $42,500,000 = $612,400,000. C. Return on Rate Base

1. Capital Structure Ridgeline proposes a capital structure consisting of 55% equity and 45% debt for purposes of calculating the weighted average cost of capital and the dollar return on rate base. This capital structure is consistent with the actual capitalization of Ridgeline and reflects the mix of equity contributed by DEH and debt financing obtained from third-party lenders in connection with the construction a

2. Return on Equity Ridgeline proposes a return on equity ("ROE") of 14.00 percent. The proposed ROE is based on a discounted cash flow ("DCF") proxy group analysis performed by Ridgeline's expert witness, Dr. Raymond Braswell, who has prepared pre-filed direct testimony and supporting workpapers in support of the proposed ROE. Dr. Braswell's analysis employs the two-step DCF methodology adopted by the Commission in

3. Cost of Debt Ridgeline's weighted average cost of debt is 5.25 percent, based on the actual interest costs incurred under the following two debt instruments: Senior Secured Credit Facility. On September 15, 2021, Ridgeline entered into a Senior Secured Credit Facility with a syndicate of lenders led by Pinnacle National Bank, N.A., as Administrative Agent. The facility consists of two tranches: (a) A $400 million

4. Weighted Average Cost of Capital (WACC) Ridgeline's weighted average cost of capital is calculated as follows: The calculation is: (0.55 × 14.00%) + (0.45 × 5.25%) = 7.7000% + 2.3625% = 10.0625%.

5. Dollar Return on Rate Base The dollar return on Ridgeline's rate base is: $612,400,000 × 10.0625% = $61,622,750 Rounded: $61,620,000 (as filed) D. Operating Expenses

1. Depreciation Expense Ridgeline's annual depreciation expense is $14.68 million, calculated using the straight-line method at an annual depreciation rate of 2.5 percent applied to the original construction cost of $587.2 million: $587,200,000 × 2.5% = $14,680,000 The 2.5 percent annual depreciation rate corresponds to a useful life of forty (40) years for the pipeline and related facilities, which is consistent wit

2. Operations and Maintenance (O&M) Expense Ridgeline's O&M expense for the test year is $12.44 million, as reported in Ridgeline's FERC Form 2 (Annual Report). O&M expenses include costs associated with the day-to-day operation of the pipeline, compressor stations, and meter stations, including labor costs for operating personnel, compressor fuel and power, pipeline inspection and maintenance, right-of-way maintenan

3. Administrative and General (A&G) Expense Ridgeline's A&G expense for the test year is $4.82 million, as reported in Ridgeline's FERC Form 2 (Annual Report). A&G expenses include costs associated with the general management and administration of Ridgeline's business, including executive and management salaries and benefits, office rent and utilities, professional fees (legal, accounting, engineering, and consulting

4. Taxes Other Than Income Ridgeline's taxes other than income for the test year total $3.80 million, consisting principally of ad valorem property taxes assessed by the counties and municipalities in West Virginia and Pennsylvania through which the Ridgeline Pipeline System traverses, as well as franchise taxes and other non-income-based taxes and assessments. The tax amounts are based on actual assessments and paym

I. Derivation of Proposed Recourse Rate The proposed initial recourse rate is derived by dividing the total annual cost of service by the annual billing determinants, as follows: Total Cost of Service: $97,360,000 Annual Billing Determinants: 438,000,000 Dth/yr Total Recourse Rate: $97,360,000 ÷ 438,000,000 Dth = $0.2223/Dth (reservation component) Plus: Usage Component: $0.0042/Dth Total Proposed Initial Recourse Ra

VII. EXHIBITS AND SUPPORTING DATA The following exhibits are filed concurrently herewith in support of this Application, in compliance with the requirements of 18 C.F.R. § 154.7 and other applicable provisions of the Commission's regulations: Exhibit A — Statement of Cost of Service. Detailed cost-of-service schedules supporting the total annual cost of service of $97.36 million, including all component costs (return

VIII. APPLICATION FOR INTERCONNECTION AUTHORIZATION (DOCKET NO. RP22-847-001) A. Requested Authorization Ridgeline respectfully requests that the Commission issue an order authorizing the physical interconnection of the Ridgeline Pipeline System with the existing pipeline system of Appalachian Trunk Pipeline Company, LLC ("ATPC"), pursuant to Section 7 of the Natural Gas Act, 15 U.S.C. § 717f, and the Commission's re