Contract analysis

I. Executive Summary The purpose of this memorandum is to present Calderwood & Harkness LLP's ("C&H") independent analysis and comprehensive review of the revised cost-of-service model and rate derivation prepared by Braswell Energy Consulting Group LLC ("Braswell" or "BEC"), Engagement No. BEC-2023-0041, under the direction of Dr. Raymond Braswell, former Senior Economist with the Federal Energy Regulatory Commissio

II. Background and Procedural Context A. The Ridgeline Pipeline System Ridgeline Midstream Services LLC owns and operates the Ridgeline Pipeline System, a 187-mile, 24-inch-diameter high-pressure natural gas transmission pipeline located in the Appalachian Basin. The system originates at the Wetzel County Interconnect in Wetzel County, West Virginia (approximately 39.6120° N, 80.7540° W), and terminates at the Waynes

III. Scope of Review and Methodology Calderwood & Harkness has independently reviewed the complete set of workpapers produced by Braswell Energy Consulting Group in connection with Engagement No. BEC-2023-0041, including the revised cost-of-service model, the updated DCF proxy group analysis (which is the subject of a separate C&H memorandum — DCF Proxy Group Analysis — Updated Q3 2024), the rate design calculations

1. Modified Fixed-Variable Rate Methodology. The original filing employed a straight fixed-variable ("SFV") rate design under which all fixed costs were allocated to the reservation component. The revised model employs a modified fixed-variable ("MFV") approach, which shifts certain cost elements between the reservation and usage components. This change was made to address concerns raised in the Deficiency Letter reg

3. Updated DCF Proxy Group Analysis. The original filing proposed an ROE of 14.00% based on a DCF proxy group analysis using market data through 2021. Deficiency Item 1 identified inadequate support for this proposed ROE. The revised model incorporates an updated DCF proxy group analysis as of Q3 2024, yielding a revised proposed ROE of 12.50%. The detailed DCF analysis is presented in a separate C&H memorandum.

4. Updated Operating Cost Data. The revised model reflects updated operations and maintenance and administrative and general expenses based on current-period cost data, as discussed in Sections VI.B and VI.C. The applicable regulatory authority for the proceeding includes Sections 4, 5, and 7 of the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717c, 717d, 717f, and the Commission's implementing regulations at 18 C.F.R. Part

IV. Rate Base — Detailed Derivation This section presents the detailed derivation of Ridgeline's rate base, the foundational building block of the cost-of-service model. As discussed below, the total rate base of $612.40 million is unchanged from the original May 2022 filing. This reflects a deliberate decision, recommended by Braswell and in which C&H concurs, to maintain the original test-year rate base rather than

V. Capital Structure and Cost of Capital A. Capital Structure The proposed capital structure for cost-of-service purposes is 55% equity and 45% debt. This capital structure is unchanged from the original filing. The hypothetical capital structure is supported by Ridgeline's actual financing arrangements, which consist of the following: Senior Secured Credit Facility. Ridgeline maintains a Senior Secured Credit Facili

VI. Operating Expenses — Detailed Line Items A. Depreciation Expense As discussed in Section IV.B above, Ridgeline employs a straight-line depreciation method at an annual rate of 2.5%, applied to the gross plant in service of $587.2 million. The resulting annual depreciation expense is: $587.2 million × 2.5% = $14.68 million This amount is unchanged from the original filing and is treated as a fixed cost in the modi

VII. Revenue Credits A. Original Revenue Credits The original filing included revenue credits of ($16.10 million). Revenue credits represent non-firm and miscellaneous revenue streams that reduce the cost of service to be recovered from firm transportation shippers. The original revenue credit figure included projected interruptible transportation revenues, penalty revenues, and miscellaneous service revenues. B. Rev

VIII. Total Cost of Service — Summary and Reconciliation A. Revised Cost-of-Service Summary Table The following table presents a side-by-side comparison of the original and revised cost-of-service components: B. Reconciliation of Change The net increase of $5.79 million in the total cost of service is the product of offsetting changes in the various cost-of-service components. The reconciliation is as follows: Decrea

IX. Billing Determinants — Load Factor Analysis A. Original Billing Determinants The original filing calculated billing determinants based on the full design capacity of the Ridgeline Pipeline System and a 100% load factor assumption: • Design capacity: 1,200,000 Dth/d (equivalent to 1.2 Bcf/d at 1,000 BTU/cf) • Load factor: 100% • Billing determinants: 1,200,000 Dth/d × 365 days × 100% = 438,000,000 Dth/yr FERC Defi

X. Revised Recourse Rate Derivation A. Rate Computation The revised total recourse rate is derived by dividing the revised total cost of service by the revised billing determinants: $103.15 million ÷ 328,500,000 Dth/yr = $0.3140/Dth (rounded) This represents the all-in per-unit charge that Ridgeline proposes to assess on firm transportation shippers, combining both the reservation and usage components. B. Reservation

XI. Interruptible Transportation Rate Implications The interruptible transportation ("IT") rate under the revised tariff design is derived from the firm recourse rate in accordance with FERC's policy requiring that the IT rate be set at a level no lower than the full cost of firm transportation. The detailed methodology for the IT rate derivation is presented in a separate C&H memorandum, Interruptible Transportation

XII. Fuel-Use and Lost-and-Unaccounted-For Gas (FL&U) Tracker The revised cost-of-service model does not include a fuel cost component in the base transportation rates. Instead, fuel consumed in the operation of the three compressor stations and gas volumes attributable to lost-and-unaccounted-for ("LAUF") gas are recovered in-kind from shippers through a Fuel-Use and Lost-and-Unaccounted-For Gas ("FL&U") tracker mec

XIII. Impact of Interconnection Facilities Costs on Rate Base The proposed interconnection at the Wetzel County Interconnect involves the construction of new facilities at Ridgeline milepost 0.0, where the Ridgeline Pipeline System will tie into ATPC's existing 30-inch mainline at ATPC Milepost 412.6. The interconnection facilities include a new meter station equipped with ultrasonic flow meters (three runs, 12-inch)