MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Patricia Dunmore, Founder & Chairperson, Dunmore Energy Holdings Ltd.
FROM: George Trujillo, Responsible Partner, Energy & Infrastructure, Calderwood & Harkness LLP
DATE: May 12, 2022
RE: Fee Arrangement, Staffing Plan, and Estimated Budget — FERC Rate and Interconnection Proceeding, Docket Nos. RP22-847-000 and RP22-847-001
C&H Matter No.: 1016-00005
CLIENT: Dunmore Energy Holdings Ltd. / Ridgeline Midstream Services LLC
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I. Purpose and Scope of Memorandum
This memorandum sets forth the internal fee arrangement, staffing plan, hourly rate schedule, and estimated matter budget for Calderwood & Harkness LLP's ("C&H" or the "Firm") representation of Dunmore Energy Holdings Ltd. ("DEH") and its wholly owned subsidiary, Ridgeline Midstream Services LLC ("Ridgeline" or "RMS"), in the proceeding before the Federal Energy Regulatory Commission ("FERC" or the "Commission") initiated by the application filed on May 12, 2022 (the "Application"). The proceeding encompasses two related docket numbers: FERC Docket No. RP22-847-000, which involves the initial tariff rate case for Ridgeline's interstate natural gas transportation service, and FERC Docket No. RP22-847-001, which involves the authorization of an interconnection between Ridgeline's pipeline system and the existing facilities of Appalachian Trunk Pipeline Company, LLC ("ATPC").
This memorandum relates to, and should be read in conjunction with, the engagement letter dated May 10, 2022, from Calderwood & Harkness LLP to DEH, executed by Patricia Dunmore on behalf of DEH and by the undersigned on behalf of C&H (the "Engagement Letter"). This memorandum is intended for internal C&H use and for the client's review and approval. It supplements, but does not supersede, the terms and conditions set forth in the Engagement Letter, including provisions relating to the scope of representation, the attorney-client relationship, conflicts of interest, confidentiality, and fee payment obligations. To the extent any provision of this memorandum conflicts with the Engagement Letter, the Engagement Letter shall control.
The representation to which this memorandum pertains involves practice before the FERC under the Natural Gas Act ("NGA"), 15 U.S.C. §§ 717 et seq., specifically Sections 4, 5, and 7 thereof, as well as the Commission's implementing regulations at 18 C.F.R. Parts 154 (Rate Schedules and Tariffs), 157 (Applications for Certificates of Public Convenience and Necessity and for Orders Permitting and Approving Abandonment under Section 7 of the Natural Gas Act), and 284 (Certain Sales and Transportation of Natural Gas Under the Natural Gas Policy Act of 1978 and Related Authorities). The representation also encompasses all related procedural and substantive matters arising before the Commission, including but not limited to responses to deficiency letters, settlement proceedings, evidentiary hearings, exceptions, rehearing, and potential judicial review in the United States Court of Appeals for the District of Columbia Circuit.
II. Matter Description
A. Client and Applicant
The client in this engagement is Dunmore Energy Holdings Ltd., an exempted limited company organized under the laws of the Cayman Islands. DEH maintains its registered address at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands. DEH is registered with the Cayman Islands Registrar of Companies under Cayman Registry No. CR-381204. Based on internal valuation analyses conducted as of December 31, 2023, DEH has an estimated enterprise value of approximately $2.8 billion. DEH's consolidated annual revenue for fiscal year 2023 was approximately $485 million, derived primarily from natural gas gathering, processing, and transportation operations in the Appalachian Basin.
Patricia Dunmore is the Founder, Chairperson, and controlling shareholder of DEH, holding approximately 72% of the equity interest in the company. Ms. Dunmore also serves as the billing partner at Calderwood & Harkness LLP on this engagement. This dual role has been fully disclosed and is the subject of a separate Conflict Waiver Memorandum, which documents the informed consent of both DEH (obtained through independent action of DEH's board of directors, with Ms. Dunmore recused from the relevant deliberations) and C&H's internal Ethics and Conflicts Committee. The specific arrangements governing this dual role are addressed in greater detail in Section VIII of this memorandum.
The applicant before the FERC is Ridgeline Midstream Services LLC, a Delaware limited liability company that is 100% owned by DEH. Ridgeline maintains its principal office at 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301. Ridgeline's registered agent in the State of Delaware is Capitol Filings Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. Ridgeline's federal employer identification number is 87-4231956. Ridgeline was formed for the purpose of owning, operating, and managing interstate natural gas pipeline and related midstream infrastructure assets in the Appalachian Basin region, with its primary asset being the Ridgeline Pipeline System described below.
B. The Ridgeline Pipeline System
The Ridgeline Pipeline System (the "Pipeline" or the "System") consists of a 187-mile, 24-inch-diameter high-pressure natural gas pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia (the "Receipt Point") to the Waynesburg Compressor Station in Greene County, Pennsylvania (the "Delivery Point"). The Pipeline traverses the natural gas-producing regions of northern West Virginia and southwestern Pennsylvania, providing critical transportation infrastructure for the movement of Appalachian-sourced natural gas to downstream markets.
The Pipeline has a total design capacity of 1.2 billion cubic feet per day ("Bcf/d"), equivalent to 1,200,000 decatherms per day ("Dth/d"). As of the date of this memorandum, the Pipeline is operating at a current throughput of approximately 680 million cubic feet per day ("MMcf/d"), representing a utilization rate of approximately 56.67% of total design capacity. This throughput level reflects the Pipeline's current contractual commitments and the state of market demand for transportation service in the region.
The System is supported by three compressor stations located along the pipeline route:
(i) Wetzel Compressor Station — located at the Receipt Point in Wetzel County, West Virginia;
(ii) Mannington Compressor Station — located at an intermediate point along the Pipeline in Marion County, West Virginia; and
(iii) Waynesburg Compressor Station — located at the Delivery Point in Greene County, Pennsylvania.
These three compressor stations have an aggregate installed compression capacity of 45,000 horsepower ("HP"), providing the pressure necessary to move gas volumes through the Pipeline system at design capacity.
The Pipeline was placed in service on October 1, 2021, following completion of construction. The original construction cost of the Pipeline and associated facilities was approximately $587.2 million. Ridgeline's FERC Gas Tariff designation is Original Volume No. 1, and the Pipeline is assigned FERC Code 960442.
C. Nature of Proceeding
The proceeding before the Commission encompasses two related components, each assigned a separate docket number.
Docket No. RP22-847-000 — Initial Tariff Rate Case. Ridgeline has filed an application seeking authorization to establish initial tariff rates for interstate transportation service under Part 284, Subpart G of the Commission's regulations (open-access transportation). The proposed initial recourse rate is $0.2265 per Dth, consisting of a reservation charge of $0.2223 per Dth and a usage charge of $0.0042 per Dth, derived on the basis of a 100% load factor and a 25-year levelized cost-of-service methodology. The key rate case parameters, as set forth in the Application, are as follows:
• Rate Base (as filed): $612.40 million
• Total Cost of Service (as filed): $97.36 million per year
• Proposed Return on Equity ("ROE"): 14.00%
• Capital Structure: 55% equity / 45% debt
• Cost of Debt: 5.25% (weighted average)
• Weighted Average Cost of Capital ("WACC"): 10.0625%
• Rate Design Methodology: 100% load factor, 25-year levelization
Docket No. RP22-847-001 — Interconnection Authorization. Ridgeline has also filed for authorization to construct and operate interconnection facilities at the Wetzel County Interconnect, providing a physical interconnection between Ridgeline's 24-inch pipeline and ATPC's existing 30-inch mainline at ATPC Milepost 412.6. The estimated total cost of the interconnection facilities is $22.3 million. Ridgeline has proposed an interconnection cost allocation under which Ridgeline would bear $7.6 million (approximately 34.1%) of the total cost and ATPC would bear $14.7 million (approximately 65.9%) of the total cost. The proposed cost allocation reflects Ridgeline's analysis of the relative benefits of the interconnection to each pipeline system and the respective capacities and throughput levels of the two systems.
Known and Anticipated Opposing Parties. Based on the interventions and protests filed to date, the following parties have taken positions adverse to or potentially adverse to Ridgeline in this proceeding:
(a) Appalachian Trunk Pipeline Company, LLC ("ATPC") — ATPC is the owner and operator of the existing 30-inch mainline with which Ridgeline's Pipeline will interconnect. ATPC is represented by the law firm of Kellner, Royce & Dillard LLP, with William Pratt serving as lead counsel. ATPC's principal opposition relates to the interconnection cost allocation, with ATPC advocating a 50/50 cost split ($11.15 million each) rather than Ridgeline's proposed 34.1/65.9 allocation. ATPC has also raised issues regarding the proposed tariff provisions governing scheduling and operational coordination at the interconnect.
(b) Mountainside Gas Producers Coalition ("MGPC") — MGPC is a coalition of natural gas producers operating in the Appalachian Basin. MGPC is represented by Whitmore & Sable LLP, with Rebekah Montague serving as lead counsel. MGPC's primary concerns relate to the proposed rate level, rate design methodology, and the allocation of costs between firm and interruptible services.
(c) Clearwater Municipal Gas Authority ("CMGA") — CMGA is a municipal gas utility serving residential and commercial customers in the pipeline's service area. CMGA is represented by Fordham Municipal Law Group PC, with Stephen Greer serving as lead counsel. CMGA's intervention focuses on the rate level, the impact of the proposed rates on end-use consumers, and creditworthiness provisions in the proposed tariff.
FERC Trial Staff. The Commission's Trial Staff participating in this proceeding is led by Jonathan Briggs, Trial Attorney, and Dr. Miriam Okafor, Economic Analyst, both of the Commission's Office of Energy Market Regulation.
III. Staffing Plan
A. Engagement Team — Attorneys
The following attorneys have been assigned to the engagement team for this matter. The roles, responsibilities, and qualifications of each team member are described below.
In addition to the attorneys listed above, one or more paralegals and/or legal assistants will be assigned to the engagement team as needed. Paralegal staffing assignments will be determined by C&H's paralegal coordinator in consultation with George Trujillo, and the specific paralegal(s) assigned will be identified on subsequent invoices. All paralegal time will be billed at the applicable rate set forth in Section IV.
B. Key Client Contacts
The following individuals at Ridgeline Midstream Services LLC have been identified as key client contacts for this engagement. C&H team members will coordinate with these individuals in accordance with the liaison assignments indicated below.
Day-to-day operational communications will generally be directed through the designated C&H liaison for each client contact. Strategic matters, significant developments in the proceeding, and Board-level communications will be handled by George Trujillo and, as appropriate, by Patricia Dunmore in her capacity as billing partner and DEH Chairperson, consistent with the dual-role arrangements described in Section VIII.
C. Third-Party Consultants (Anticipated; Fees Not Included in C&H Budget)
The client has engaged, or may engage, various economic, technical, and accounting consultants in connection with this proceeding. The fees and expenses of all such third-party consultants are billed separately from C&H's fees and are not included in the budget estimates set forth in this memorandum. C&H will coordinate with these consultants as necessary in the course of the representation, but C&H does not undertake responsibility for the management or supervision of their work product except to the extent that such work product is incorporated into filings or testimony prepared by or under the direction of C&H.
The following third-party consultants have been retained or are anticipated to be retained in connection with this matter:
(a) Ridgepoint Appraisal & Valuation Inc. — Houston, Texas. Ridgepoint has been retained by DEH for purposes of providing pipeline appraisal and rate base support in connection with the Application. Ridgepoint's valuation analyses are expected to support the rate base figures set forth in the Application and to provide rebuttal support in the event that opposing parties challenge the rate base.
(b) Ashford & McBride LLP — New York, New York. Ashford & McBride serves as DEH's independent auditors. In connection with this proceeding, Ashford & McBride may provide cost-of-service support, including verification of financial data, depreciation schedules, and capital expenditure records.
(c) Dr. Raymond Braswell / Braswell Energy Consulting Group LLC — McLean, Virginia. Dr. Braswell submitted pre-filed direct testimony on behalf of Ridgeline on December 5, 2022, addressing return on equity and capital structure. Dr. Braswell's engagement for purposes of testifying as an expert witness is a direct engagement between Dr. Braswell (through Braswell Energy Consulting Group LLC) and DEH, and his fees are billed directly to DEH outside of C&H's fee arrangement. Any subsequent consulting engagement by Braswell Energy Consulting Group LLC — for example, in connection with tariff redesign support — would be engaged separately by DEH and billed outside C&H's fee arrangement. The anticipated tariff design support engagement has been assigned the preliminary engagement number BEC-2023-0041, pending formal retention.
IV. Hourly Rate Schedule
A. Standard Hourly Rates (Effective May 2022)
The following hourly rates shall apply to time recorded by members of the engagement team in connection with this matter, effective as of May 2022:
The rates set forth above reflect the negotiated engagement rates for this matter and represent an approximate 5% discount from C&H's standard rack rates, as agreed in the Engagement Letter of May 10, 2022. The discount is applicable to all timekeepers assigned to the engagement for the duration of the representation, unless otherwise agreed in writing. A detailed comparison of standard rack rates and engagement discounted rates is set forth in Appendix A to this memorandum.
B. Rate Adjustment Provisions
Hourly rates are subject to annual adjustment effective January 1 of each calendar year, consistent with C&H's firm-wide rate schedule. Any such adjustments will reflect the Firm's general rate increases applicable to the relevant timekeeper classifications and will maintain the approximate 5% engagement discount from the adjusted standard rack rates. The client will be notified in writing in advance of any rate adjustment, and the adjusted rates will be reflected in invoices for time recorded on or after the effective date of the adjustment. Rate adjustments do not require a formal amendment to the Engagement Letter but will be documented in the applicable invoice cover letter and in any supplemental engagement correspondence.
C. Billing Practices
The engagement will be billed on a monthly cycle. Invoices will be prepared and issued within 15 business days following the end of each calendar month in which time and/or expenses are recorded. Payment is due within 30 days of the invoice date, consistent with the terms of the Engagement Letter.
All professional time will be recorded in increments of six minutes (0.1 hour). Each time entry will include a description of the work performed sufficient to enable the client to evaluate the nature and scope of the services rendered.
Out-of-pocket expenses will be billed at cost, without markup, and will be itemized on each invoice. Anticipated categories of expenses include, but are not limited to, the following:
• FERC filing fees and eFiling system costs;
• Travel expenses associated with trips to Ridgeline's principal office in Charleston, West Virginia; meetings and hearings at FERC headquarters at 888 First Street NE, Washington, D.C.; settlement conferences; and other proceeding-related travel to Pittsburgh, Pennsylvania and other locations;
• Document production and reproduction costs, including printing and binding of FERC filings, exhibits, and testimony;
• Court reporter fees and transcript costs (hearing transcripts, deposition transcripts, and settlement conference transcripts);
• Overnight courier and delivery charges (Severin Partners LLC, Halcyon Partners LLC, and similar services);
• Electronic research database charges (Westmark Data Systems, Sundial Solutions, FERC eLibrary, and other research platforms);
• Conference call and videoconference costs.
There is no contingency, success, or bonus fee component to this engagement. The engagement is structured as a purely hourly fee arrangement, with compensation based solely on the time recorded by the engagement team at the applicable hourly rates, plus reimbursement of out-of-pocket expenses at cost.
Patricia Dunmore, as billing partner, will review and approve all invoices prior to their transmission to the client. In light of Ms. Dunmore's dual role, any billing disputes or questions raised by the client will be directed to George Trujillo in the first instance. If any such dispute cannot be resolved by Mr. Trujillo, it will be escalated to C&H's General Counsel for resolution.
V. Projected Phases and Estimated Budget
A. Overview of Anticipated Phases
The matter is projected to proceed through nine distinct phases, each of which corresponds to a major stage of the FERC proceeding. Budget estimates for each phase are based on the assumptions described in Section VII below and assume a fully contested proceeding through evidentiary hearing, initial decision by the Administrative Law Judge ("ALJ"), Commission order, and potential rehearing. The ninth phase — judicial appeal — is contingent and would be incurred only if the matter proceeds to the United States Court of Appeals for the District of Columbia Circuit.
It is important to note that settlement at any stage of the proceeding could substantially reduce the costs incurred in subsequent phases. The budget estimates set forth below represent the Firm's good-faith projections based on the information available as of the date of this memorandum and the Firm's experience with comparable FERC rate cases and interconnection proceedings. Actual costs may vary depending on the factors discussed in Section VII.
The nine projected phases are as follows:
• Phase I: Application Preparation and Filing
• Phase II: Intervention Period, Responsive Pleadings, and Prehearing
• Phase III: Direct Testimony and discovery
• Phase IV: Answering Testimony Review, Rebuttal, and Deficiency Letter Response
• Phase V: Tariff Redesign
• Phase VI: Resumed Hearing and Evidentiary Proceeding
• Phase VII: Initial Decision and Exceptions
• Phase VIII: Commission Order and Rehearing
• Phase IX: Judicial Appeal (Contingent)
Each phase is described in detail below, together with the estimated hours, fees, expenses, and total cost for each phase.
B. Phase I — Application Preparation and Filing (Pre-Filing through May 2022)
Scope: Phase I encompasses all work performed in connection with the preparation and filing of the Application, from the initial engagement opening and conflicts clearance through the filing date of May 12, 2022. This phase includes the drafting and finalization of the application itself, together with FERC Gas Tariff Original Volume No. 1 and all supporting exhibits (Exhibits A through P), including the cost-of-service statement, rate base compilation, depreciation schedules, construction and operating cost data, system maps, flow diagrams, and certificate and environmental exhibits. Phase I also includes preparation of the verification, transmittal letter, notice of appearance, certificate of service, and statement of nature of filing. Work performed during this phase includes coordination with Ridgeline management regarding the content and supporting data for the Application, review of the pipeline valuation analysis prepared by Ridgepoint Appraisal & Valuation Inc., and all internal engagement opening and conflicts clearance procedures.
Estimated Hours:
Estimated Fees: Approximately $457,250
Estimated Expenses: Approximately $15,000, consisting primarily of FERC filing fees, document reproduction and printing costs, and overnight delivery charges for service copies.
Phase I Total: Approximately $472,250
C. Phase II — Intervention Period, Responsive Pleadings, and Prehearing (June 2022 – November 2022)
Scope: Phase II encompasses the period from the filing of the Application through the conclusion of the prehearing conference, including all work associated with the intervention and protest period, the preparation of responsive pleadings, and preparation for the evidentiary hearing track. Specific tasks within this phase include: review and analysis of the interventions and protests filed by ATPC (filed August 15, 2022), MGPC (filed July 28, 2022), and CMGA (filed August 1, 2022); preparation and filing of Ridgeline's answer to the ATPC protest (filed October 17, 2022); preparation and filing of the pro hac vice motion for George Trujillo; preparation of the statement of issues pursuant to the ALJ's prehearing conference order; attendance at the prehearing conference before Administrative Law Judge Whitfield (held November 14, 2022); negotiation of the terms of a confidentiality and protective order with Kellner, Royce & Dillard LLP (counsel for ATPC); discovery scheduling coordination with Whitmore & Sable LLP (counsel for MGPC) and Fordham Municipal Law Group PC (counsel for CMGA); and preparation for the initial settlement conference (the first settlement conference was held on November 30, 2022 before Settlement Judge Margolis). This phase also encompasses all internal case management and strategy development activities during the intervention and prehearing period.
Estimated Hours:
Estimated Fees: Approximately $566,750
Estimated Expenses: Approximately $25,000, consisting primarily of travel costs for trips to Pittsburgh, Pennsylvania and Washington, D.C. for prehearing conference attendance, settlement conference preparation, and meetings with opposing counsel; transcript costs; and document reproduction.
Phase II Total: Approximately $591,750
D. Phase III — Direct Testimony and discovery (November – December 2022)
Scope: Phase III covers the preparation and filing of pre-filed direct testimony on behalf of Ridgeline. A total of seven witnesses submitted pre-filed direct testimony on December 5, 2022. The witnesses and their testimony topics are as follows:
(1) James K. Winfield (CEO & President, Ridgeline) — policy testimony regarding the need for the Pipeline, market conditions, and the public interest basis for the proposed service;
(2) Angela Moretti (VP, Finance & Treasurer, Ridgeline) — cost-of-service testimony addressing the rate base, operating expenses, depreciation, taxes, and overall cost-of-service methodology;
(3) Thomas Greaves (VP, Engineering & Operations, Ridgeline) — engineering testimony regarding system design, construction, capacity, compression, and operational characteristics of the Pipeline;
(4) Dr. Natasha Orlov (Director of Rates & Regulatory, Ridgeline) — rate design testimony addressing the proposed rate structure, tariff provisions, General Terms and Conditions, and the 100% load factor / 25-year levelization methodology;
(5) Dr. Raymond Braswell (Braswell Energy Consulting Group LLC) — expert testimony on return on equity, capital structure, cost of debt, and the discounted cash flow and capital asset pricing model analyses supporting the proposed 14.00% ROE;
(6)–(7) Two additional witnesses (to be identified) — supporting testimony on topics to be determined based on the development of the issues in the proceeding.
Phase III also encompasses the preparation of supporting exhibits for all testimony, coordination with client witnesses and the expert witness (Dr. Braswell), document production in response to discovery requests, and the preparation and filing of discovery responses.
Estimated Hours:
Estimated Fees: Approximately $677,500
Estimated Expenses: Approximately $30,000, consisting primarily of travel costs, transcript fees, document reproduction for testimony filings and exhibits, and costs associated with coordination with Dr. Braswell and other expert witnesses.
Phase III Total: Approximately $707,500
E. Phase IV — Answering Testimony Review, Rebuttal, and Deficiency Letter Response (January 2023 – May 2023)
Scope: Phase IV encompasses the review and analysis of answering testimony filed by the opposing parties, the response to the Commission's deficiency letter, and the initial stages of rebuttal preparation. Answering testimony was filed on January 9, 2023 by ATPC, MGPC (including the expert testimony of Dr. Eleanor Vasquez on rate issues), and CMGA. This phase includes a detailed analysis of each opposing witness's testimony, identification of areas of agreement and disagreement, and development of rebuttal strategy.
A significant component of Phase IV involves the response to the FERC Deficiency Letter dated January 19, 2023, which identified fourteen deficiency items requiring supplemental information and revisions to the Application and proposed tariff. Ridgeline filed a partial response to the Deficiency Letter on March 15, 2023, addressing items 1 through 4 and items 7 through 10. The remaining deficiency items (items 5, 6, and 11 through 14) required more extensive analysis and tariff revisions, which ultimately became the basis for the comprehensive tariff redesign addressed in Phase V.
Phase IV also includes: preparation and filing of Ridgeline's first motion for extension of time (requesting a 120-day extension, filed April 28, 2023); attendance at the second settlement conference before Settlement Judge Margolis (held March 8, 2023); an initial strategic assessment of the tariff redesign requirements arising from the Deficiency Letter; and ongoing negotiations regarding the interconnection agreement with ATPC (Versions 2.0 and 3.0 of the interconnection agreement were developed during this period).
Estimated Hours:
Estimated Fees: Approximately $802,750
Estimated Expenses: Approximately $20,000, consisting primarily of travel costs, FERC filing fees, and document reproduction.
Phase IV Total: Approximately $822,750
F. Phase V — Tariff Redesign (May 2023 – February 2025; Subject to Supplemental Engagement Letter)
Note: This phase was not originally scoped in detail at the time of the initial Engagement Letter. The comprehensive nature and extended timeline of the tariff redesign became apparent following the Commission's issuance of the Deficiency Letter on January 19, 2023, which identified fourteen deficiency items requiring substantial revisions to the proposed tariff and supporting materials. A supplemental engagement letter dated April 20, 2023 (the "Supplemental Engagement Letter") was executed by the parties to expand the scope of the engagement to include the tariff redesign phase. The budget estimates for Phase V set forth below are preliminary; detailed, refined estimates are provided in the Supplemental Engagement Letter and will be updated as the tariff redesign progresses.
Scope: Phase V encompasses the comprehensive redesign of FERC Gas Tariff, Original Volume No. 1, to address all fourteen deficiency items identified in the Commission's Deficiency Letter. This is the most extensive and complex phase of the engagement and involves the following major work streams:
(a) Tariff Redesign and Drafting. Preparation of revised tariff drafts (First through Fourth Drafts), incorporating revisions to all deficient tariff provisions, rate schedules, and General Terms and Conditions. Coordination with Braswell Energy Consulting Group LLC (engagement BEC-2023-0041, engaged April 15, 2023) on tariff design and rate structure issues.
(b) Internal Memoranda and Policy Analysis. Preparation of internal C&H memoranda analyzing specific deficiency items and related policy issues, including: fuel, losses, and unaccounted-for gas ("FL&U") tracker mechanism design; interruptible transportation ("IT") rate derivation methodology; greenhouse gas ("GHG") cost recovery provisions; implications of Order No. 2222 for the tariff structure; NAESB compliance requirements; creditworthiness provisions and financial assurance standards; and segmentation and flexible receipt-and-delivery point provisions.
(c) Revised Cost-of-Service and Rate Design Analysis. Development of a revised cost-of-service model incorporating updated data and addressing deficiency items related to cost allocation and rate design. Revision of the rate design methodology from the originally proposed 100% load factor basis to a modified fixed-variable methodology using a 75% load factor, reflecting input from C&H's analysis and recommendations from Braswell Energy Consulting Group LLC.
(d) Revised ROE Analysis. Preparation of an updated return on equity analysis reflecting a revised proposed ROE of 12.50% (reduced from the originally proposed 14.00%), based on an updated discounted cash flow ("DCF") proxy group analysis using Q3 2024 financial data.
(e) Extension Requests and Procedural Filings. Preparation and filing of the second and third motions for extension of time (second extension request for 180 days, filed August 25, 2023; third extension request for 12 months, filed February 20, 2024). Preparation and filing of quarterly status reports as required by the ALJ's order (status reports filed June 15, 2024; September 14, 2024; and December 13, 2024).
(f) Settlement Conferences and Negotiations. Attendance at the third and fourth settlement conferences before Settlement Judge Margolis (held July 12, 2023 and January 18, 2024, respectively). Preparation of settlement offers (Versions 2.0 and 3.0) on behalf of Ridgeline.
(g) Interconnection Agreement Revisions. Continued negotiations with Kellner, Royce & Dillard LLP on behalf of ATPC regarding the interconnection agreement, incorporating revisions responsive to the Deficiency Letter and addressing the ongoing dispute over interconnection cost allocation.
(h) Lender Communications and Regulatory Covenant Analysis. Communications with Ridgeline's lenders and noteholders, including Pinnacle National Bank, Harborview Capital Management, and Sentinel Ridge Fund, regarding the status of the proceeding and compliance with regulatory covenants under the existing $400 million term loan and $150 million second lien notes. Analysis of the implications of the tariff redesign and revised rate proposals on Ridgeline's compliance with applicable financial and regulatory covenants.
(i) Supplemental Pre-Filed Testimony. Drafting of supplemental pre-filed testimony for Dr. Natasha Orlov (revised rate design) and Angela Moretti (revised cost of service), to be filed in connection with the redesigned tariff.
(j) Filing Preparation. Preparation of the draft transmittal letter and filing package for the February 21, 2025 filing deadline for the redesigned tariff and supplemental testimony.
Estimated Hours (Cumulative Phase V):
Estimated Fees: Approximately $1,545,000
Estimated Expenses: Approximately $45,000, consisting primarily of travel costs for multiple trips to Charleston, West Virginia and Washington, D.C.; FERC filing fees; document reproduction for tariff drafts, revised exhibits, and supplemental testimony; and coordination costs with Braswell Energy Consulting Group LLC and other third-party consultants.
Phase V Total: Approximately $1,590,000
G. Phase VI — Resumed Hearing and Evidentiary Proceeding (Projected: Spring/Summer 2025)
Scope: Phase VI encompasses the filing of the redesigned tariff and supplemental testimony (filing deadline: February 21, 2025) and all work associated with the resumed evidentiary hearing track before ALJ Whitfield. This phase includes: preparation for the resumed Track II hearing, including development of the hearing strategy and identification of key issues for hearing; cross-examination preparation for all opposing witnesses; preparation of rebuttal testimony for Ridgeline's witnesses; attendance at evidentiary hearing sessions (estimated at 5 to 10 hearing days, depending on the scope of remaining contested issues); post-hearing briefing, including preparation and filing of initial and reply post-hearing briefs; and preparation and filing of proposed findings of fact and conclusions of law.
Estimated Hours:
Estimated Fees: Approximately $1,150,750
Estimated Expenses: Approximately $50,000, consisting primarily of travel costs for attendance at hearing sessions in Washington, D.C.; court reporter and transcript costs for evidentiary hearing days; hearing preparation materials and exhibit production; and related costs.
Phase VI Total: Approximately $1,200,750
H. Phase VII — Initial Decision and Exceptions (Projected: Late 2025 – Early 2026)
Scope: Phase VII covers the period following the close of the evidentiary record and the issuance of the ALJ's initial decision. Specific tasks within this phase include: review and analysis of the ALJ's initial decision; preparation and filing of exceptions to the initial decision (or, if the initial decision is favorable, preparation and filing of a brief opposing exceptions filed by other parties); preparation and filing of reply briefs on exceptions; and client counseling regarding the implications of the initial decision for the overall outcome of the proceeding, including analysis of the initial decision's findings on each contested issue (rate base, cost of service, ROE, rate design, interconnection cost allocation, and tariff provisions).
Estimated Hours:
Estimated Fees: Approximately $552,750
Estimated Expenses: Approximately $10,000, consisting primarily of filing fees, document reproduction, and overnight delivery charges.
Phase VII Total: Approximately $562,750
I. Phase VIII — Commission Order and Rehearing (Projected: 2026)
Scope: Phase VIII covers the period from the issuance of the Commission's order on the merits of the rate case and interconnection proceeding through the completion of any rehearing proceedings. Specific tasks within this phase include: review and analysis of the Commission's order; preparation and filing of a request for rehearing, if necessary, within the 30-day statutory deadline; preparation for and participation in any compliance filing required by the Commission's order; and client counseling regarding the implications of the Commission's final order for Ridgeline's rates, tariff, and interconnection authorization. This phase also encompasses evaluation of whether to seek judicial review of any adverse Commission determinations.
Estimated Hours:
Estimated Fees: Approximately $367,250
Estimated Expenses: Approximately $8,000, consisting primarily of filing fees and document reproduction.
Phase VIII Total: Approximately $375,250
J. Phase IX — Judicial Appeal (Contingent; If Necessary)
Scope: Phase IX is contingent and will be incurred only if the matter proceeds to judicial review in the United States Court of Appeals for the District of Columbia Circuit, either through a petition for review filed by Ridgeline or through the defense of a petition for review filed by one or more opposing parties. Specific tasks within this phase include: preparation and filing of a petition for review (or responsive pleading in the event a petition is filed by another party); preparation of appellate briefs (opening brief, response brief, and reply brief, as applicable); preparation for and participation in oral argument; and coordination with appellate counsel if additional appellate expertise is required. This phase also encompasses any post-argument proceedings, including motions for rehearing en banc or, in extraordinary circumstances, petitions for certiorari to the United States Supreme Court.
Estimated Hours:
Estimated Fees: Approximately $682,250
Estimated Expenses: Approximately $20,000, consisting primarily of appellate filing fees, printing and binding of appellate briefs and appendices, and travel costs for oral argument in Washington, D.C.
Phase IX Total: Approximately $702,250
Note: Phase IX is contingent and may not be incurred. The budget for this phase is included for planning and completeness purposes only. The decision whether to pursue or defend a judicial appeal will be made by the client, in consultation with C&H, based on the outcome of the Commission proceedings.
VI. Budget Summary Table
The following table summarizes the estimated fees, expenses, and total cost for each phase of the engagement:
The total estimated budget for Phases I through VIII (excluding the contingent judicial appeal) is $6,323,000, consisting of $6,120,000 in estimated professional fees and $203,000 in estimated out-of-pocket expenses. If the contingent judicial appeal phase is included, the total estimated budget increases to $7,025,250, consisting of $6,802,250 in estimated professional fees and $223,000 in estimated expenses.
These estimates are subject to the assumptions and qualifications set forth in Section VII below.
VII. Budget Assumptions and Qualifications
A. Key Assumptions
The budget estimates set forth in Sections V and VI above are based on the following key assumptions:
1. The budget assumes a fully contested proceeding through evidentiary hearing before ALJ Whitfield, initial decision, exceptions, Commission order on the merits, and rehearing. The budget further assumes that the proceeding will follow the general timeline and procedural course outlined in Appendix B to this memorandum.
2. Settlement at any stage of the proceeding could significantly reduce the fees incurred in subsequent phases. As of the date of this memorandum, four settlement conferences have been held before Settlement Judge Margolis (on November 30, 2022; March 8, 2023; July 12, 2023; and January 18, 2024), and none has resulted in a settlement of the proceeding. Based on the most recent settlement discussions, the parties remain approximately $0.058/Dth apart on the proposed rate, with Ridgeline's most recent settlement offer at $0.2145/Dth and the most favorable counterproposal from MGPC at $0.1565/Dth. The prospects for settlement remain uncertain as of the date of this memorandum, and the budget does not assume that settlement will be achieved.
3. The budget does not include the fees or expenses of any third-party consultants retained or to be retained by the client in connection with this matter, including Braswell Energy Consulting Group LLC, Ridgepoint Appraisal & Valuation Inc., and Ashford & McBride LLP. The budget also does not include the fees of any expert witnesses, including Dr. Raymond Braswell, or of any other non-C&H professionals.
4. The budget does not include the fees or expenses of any local counsel or co-counsel, if retained. As of the date of this memorandum, no local counsel or co-counsel has been retained, and none is currently anticipated.
5. The Phase V (Tariff Redesign) estimates are preliminary. Detailed, refined estimates for Phase V are being prepared in connection with the Supplemental Engagement Letter dated April 20, 2023, and will be provided to the client when finalized. The Phase V estimates set forth in this memorandum are based on C&H's initial assessment of the scope of the tariff redesign and may be revised as the scope of the work becomes more clearly defined.
6. The budget assumes no material change in the scope of the proceeding, the number of intervenors or active parties, or the overall complexity of the issues under consideration. If additional parties intervene, if new issues are raised by the Commission or existing parties, if the scope of discovery or testimony expands significantly beyond current expectations, or if there are material changes in FERC policy affecting the proceeding, the budget may require revision.
7. The budget assumes that Ridgeline will provide timely access to its personnel, records, data, and facilities as reasonably needed by C&H in connection with the representation. Delays in obtaining information or access from the client could result in increased costs due to duplicated effort, expedited work, or additional coordination time.
B. Factors That Could Increase Budget
The following factors, among others, could cause actual fees and expenses to exceed the budget estimates:
• Additional rounds of testimony or supplemental filings beyond those currently anticipated, including the possibility that the Commission or the ALJ may require additional information or analysis not contemplated in the current scope of work.
• Expanded discovery, including broader or more detailed data requests from opposing parties, or contentious discovery disputes requiring motion practice or ALJ intervention.
• Prolonged or expanded settlement negotiations, or additional settlement conferences beyond the four already held, which could increase the time devoted to settlement preparation and participation.
• Changes in FERC policy or regulations requiring additional analysis and tariff revisions, including further rulemaking proceedings under Order No. 2222, new or revised greenhouse gas regulations affecting cost recovery or rate design, or other policy developments that affect the legal and regulatory framework applicable to the proceeding.
• Complex issues arising from the interconnection cost allocation dispute with ATPC. The current positions of the parties are as follows: ATPC advocates a 50/50 cost split, under which each party would bear $11.15 million of the total $22.3 million interconnection cost; Ridgeline's proposal allocates 34.1% ($7.6 million) to Ridgeline and 65.9% ($14.7 million) to ATPC. If this dispute is not resolved through negotiation and requires full litigation, the associated costs could be significant.
• Multiple rounds of extensions of time beyond those already contemplated. As of March 4, 2024, three extensions have been granted. Additional extensions, if required, could extend the timeline of the proceeding and increase costs in Phases V and VI.
• Interactions with Ridgeline's lenders and noteholders regarding regulatory covenant compliance. The $400 million term loan (lead lender: Pinnacle National Bank; participating lenders: Granite Trust Company and Lakeshore Capital Bank) and the $150 million second lien notes (holders: Harborview Capital Management and Sentinel Ridge Fund) contain regulatory covenants that may require analysis and correspondence as the proceeding progresses, particularly in connection with the revised rate design and ROE proposals. Increased lender engagement could add to the cost of Phase V and subsequent phases.
C. Factors That Could Decrease Budget
The following factors, among others, could cause actual fees and expenses to be lower than the budget estimates:
• Early settlement of all or a subset of the issues in the proceeding, particularly if settlement is reached prior to the commencement of the evidentiary hearing in Phase VI.
• Stipulated resolution of the interconnection cost allocation dispute with ATPC, which would eliminate the need for litigation of that issue and reduce the hours devoted to interconnection-related work in Phases V and VI.
• FERC acceptance of the redesigned tariff without further hearing, which would significantly reduce the costs of Phases VI through VIII.
• Narrowing of the contested issues through partial settlement agreements, stipulations, or Commission orders resolving specific issues prior to hearing, thereby reducing the scope and duration of the evidentiary proceeding.
VIII. Billing Partner Arrangements and Dual-Role Considerations
Patricia Dunmore serves as the billing partner for this engagement in her capacity as a Senior Partner of Calderwood & Harkness LLP. Ms. Dunmore simultaneously serves as the Founder, Chairperson, and 72% controlling shareholder of Dunmore Energy Holdings Ltd., the client in this engagement.
All time recorded by Ms. Dunmore in connection with this matter will be billed at her standard engagement rate of $1,350 per hour, as set forth in Section IV above. Ms. Dunmore's time entries are subject to the same billing procedures, recording standards, and invoice review processes as those applicable to all other timekeepers on the engagement.
The dual role of Ms. Dunmore as both billing partner and controlling shareholder of the client entity has been fully disclosed, analyzed, and addressed in accordance with the applicable Rules of Professional Conduct and C&H's internal policies. A separate Conflict Waiver Memorandum documents the analysis and the informed consent obtained from both parties:
(a) Client Consent. DEH's board of directors, with Ms. Dunmore recused from the relevant deliberations, independently reviewed the dual-role arrangement and provided informed written consent to the representation on the terms set forth in the Engagement Letter and the Conflict Waiver Memorandum.
(b) Firm Consent. C&H's internal Ethics and Conflicts Committee reviewed the dual-role arrangement and determined that the arrangement is permissible under the applicable professional conduct rules, subject to the safeguards described in the Conflict Waiver Memorandum.