Contract analysis

I. Executive Summary The purpose of this memorandum is to provide a comprehensive analysis of all party positions on the three key sticking points in the ongoing settlement negotiations in FERC Docket Nos. RP22-847-000 and RP22-847-001, to identify the Zone of Possible Agreement ("ZOPA") across each contested issue, and to recommend a settlement strategy for Ridgeline Midstream Services LLC ("Ridgeline" or the "Compa

II. Background and Procedural Status A. Proceeding Overview Ridgeline Midstream Services LLC, a Delaware limited liability company whose sole member is Dunmore Energy Holdings Ltd. ("DEH"), filed its application with the Federal Energy Regulatory Commission ("FERC" or the "Commission") on May 12, 2022, seeking authorization for an initial tariff rate and interconnection authorization under Sections 4 and 7 of the Nat

III. Analysis of Party Positions on Key Sticking Points The remainder of this memorandum analyzes in detail the positions of all parties on each of the three key sticking points, identifies the Zone of Possible Agreement for each issue, and assesses the financial impact of various settlement scenarios. The three sticking points are addressed in turn below. A. Sticking Point 1: Return on Equity (ROE) The ROE is the si

1. Ridgeline's Position Ridgeline's original filing in May 2022 proposed an ROE of 14.00%, based on a discounted cash flow ("DCF") proxy group analysis that relied on pre-2021 market data. This was identified as Deficiency Item 1 in the Commission's January 19, 2023 Deficiency Letter, which noted that the original analysis failed to account for post-2021 market conditions, including changes in interest rates, equity

2. ATPC's Position ATPC has proposed an ROE of 10.75%, as set forth in its answering testimony filed on January 9, 2023. ATPC's counsel, William Pratt of Kellner, Royce & Dillard LLP, has argued this position consistently across all four settlement conferences. ATPC's rationale for a 10.75% ROE rests on several grounds. First, ATPC contends that Ridgeline's pipeline faces limited market risk given the robust and grow

3. MGPC's Position MGPC has proposed an ROE of 11.25%, as presented in the answering testimony of Dr. Eleanor Vasquez filed on January 9, 2023. Dr. Vasquez performed an independent DCF analysis using a proxy group of comparable pipeline companies and concluded that a risk premium above typical master limited partnership ("MLP") yields is appropriate for a new pipeline system, but not to the extent claimed by Ridgelin

4. CMGA's Position CMGA has aligned its position with ATPC's on the ROE issue, supporting an ROE of 10.75% or lower. CMGA's primary concern is the potential for rate increases on ATPC's system that could result from the interconnection. To the extent that a lower Ridgeline ROE reduces the rate impact on ATPC's system (through lower interconnection facility costs included in Ridgeline's rate base), CMGA benefits. As a

5. FERC Trial Staff Position FERC Trial Staff has not formally proposed an ROE in testimony or in any filed pleading. However, Lead Economic Analyst Dr. Miriam Okafor indicated in informal discussions during a May 2023 staff meeting that Staff's analysis is likely to yield an ROE in the range of 11.00% to 12.00%. This is consistent with Staff's historical approach of supporting a narrower DCF range and tending to fav

6. ZOPA on ROE Based on the foregoing analysis, the range of positions on ROE extends from 10.75% (ATPC's floor) to 12.50% (Ridgeline's ceiling). The estimated Zone of Possible Agreement on ROE is 11.25% to 12.00%. To illustrate the impact of a potential compromise, consider a settlement ROE of 11.75%. This would represent a concession of 75 basis points below Ridgeline's current position of 12.50%, while remaining a

1. Ridgeline's Position The total estimated cost of the interconnection facilities at the ATPC Milepost 412.6 interconnection point is $22.3 million. This includes the meter station, pig launcher and receiver facilities, SCADA integration systems, associated piping and valves, site work, and engineering and construction management costs. Ridgeline has proposed an allocation of these costs such that Ridgeline would be

2. ATPC's Position ATPC has proposed a 50/50 split of interconnection costs, with each party bearing $11.15 million. ATPC's position is based on the argument that the interconnection equally benefits both pipeline systems. ATPC contends that Ridgeline derives substantial benefit from access to ATPC's established 640-mile network, which serves markets across three states and provides transportation pathways that Ridge

3. CMGA's Position CMGA supports ATPC's 50/50 cost allocation position. CMGA's concern is that the 65.9% allocation to ATPC proposed by Ridgeline would ultimately be passed through to ATPC's ratepayers, including CMGA's municipal customers. As a municipal utility serving residential and commercial customers in its service territory, CMGA is particularly sensitive to cost increases that could flow through ATPC's syste

4. MGPC's Position MGPC has taken a generally neutral position on the interconnection cost allocation as between Ridgeline and ATPC. MGPC's primary concern is the recourse rate on Ridgeline's system, not the allocation of interconnection costs between the two pipeline operators. However, MGPC has acknowledged that to the extent interconnection costs flow into Ridgeline's rate base and thereby increase the recourse ra

5. Financial Impact Analysis The financial impact to Ridgeline of conceding from its 34.1/65.9 position to ATPC's 50/50 position is relatively modest in per-unit rate terms, though it involves a meaningful shift in capital commitment. If Ridgeline were to accept the 50/50 split, Ridgeline's share of interconnection costs would increase from $7.6 million to $11.15 million — a net increase of $3.55 million. Conversely,

6. ZOPA on Interconnection Cost Allocation The range of positions on interconnection cost allocation extends from a 50/50 split (ATPC's position) to a 34.1/65.9 split (Ridgeline's position). The ZOPA likely encompasses several intermediate positions. A compromise at 40% Ridgeline / 60% ATPC would result in Ridgeline's share increasing to approximately $8.92 million and ATPC's share decreasing to $13.38 million. An al

1. Ridgeline's Position Ridgeline's original filing in May 2022 assumed a 100% load factor, resulting in billing determinants of 438,000,000 Dth/yr (calculated as 1,200,000 Dth/d × 365 days × 100%). This assumption was identified as Deficiency Item 4 in the Commission's January 19, 2023 Deficiency Letter, which found that Ridgeline had provided insufficient support for a 100% utilization assumption. Ridgeline's revis

2. ATPC's Position ATPC advocates for a load factor of 85% or higher. ATPC's argument is that Ridgeline's pipeline will achieve substantially higher utilization as Marcellus and Utica production increases and the interconnection between the two systems comes online. ATPC points to historical load factors for comparable Appalachian Basin pipelines, which generally range from 80% to 95%, as evidence that 75% is excessi

3. MGPC's Position MGPC also advocates for a load factor of 85% or higher, consistent with ATPC's position on this issue. Dr. Eleanor Vasquez testified in MGPC's answering testimony that an 85% load factor is a conservative assumption based on producer commitments and projected growth in Appalachian Basin production. Dr. Vasquez noted that MGPC's fourteen member companies collectively have existing or anticipated cap

4. Impact Analysis The load factor assumption has the largest per-unit rate impact of the three sticking points. The following calculations illustrate the rate impact at various load factor assumptions, holding all other cost-of-service parameters at Ridgeline's current revised levels (total COS of $103.15 million): • At 85% load factor: Billing determinants = 1,200,000 Dth/d × 365 × 0.85 = 372,300,000 Dth/yr. Recour

5. ZOPA on Load Factor The range of positions on load factor extends from 75% (Ridgeline) to 85% or higher (ATPC and MGPC). The estimated Zone of Possible Agreement on load factor is 78% to 82%. The rate implications of various compromise positions on load factor, when combined with a compromise on ROE, illustrate the potential for a package settlement: • At 80% load factor with 12.50% ROE (Ridgeline's current ROE):

IV. Composite ZOPA and Package Settlement Analysis A. Scenario Modeling To facilitate the Board's evaluation of settlement options, we have modeled five scenarios that span the range of possible outcomes from Ridgeline's current position through the intervenors' position, including three compromise scenarios at various points within the ZOPA. Each scenario adjusts the three key settlement parameters (ROE, load factor

V. Strategic Considerations A. Timing and the February 21, 2025 Deadline The February 21, 2025 filing deadline established by ALJ Whitfield creates a hard deadline that shapes the settlement dynamics. If no settlement is reached before that date, Ridgeline will be required to file the redesigned tariff and supplemental testimony, and the Track II hearing will resume before ALJ Whitfield. The filing deadline thus conv