| Competitive
Cost Studies Snavely King is an acknowledged authority on the
pricing and comparison of prices of intrastate and interstate telecommunications systems.
In recent studies for the Federal Government’s Aggregated System Procurements (ASP)
Snavely King developed models that derived the costs associated with the 7-year procurement of
Centrex, PBX and single line business services in over 40 states. In addition Snavely King performed
analyses of Individual Case Basis contracts for telephone services within those 40 states.
In a recent study of the Federal Government’s FTS2000 System, Snavely King
performed a cost effectiveness comparison of the world’s largest telecommunications
contract, a multibillion dollar 10-year procurement of Switched Voice, Dedicated
Transmission, Switched Data, Packet Switched and Video Services. In this study, Snavely King worked
with a committee of representatives of all of the Federal Executive Agencies and gathered
data from every major supplier of long-distance telecommunications services. Snavely King produced a
definitive report that was accepted by the agencies and submitted to Congress by the
Administrator of the General Services Administration.
Rate of Return, Capital
Structure, and Cost of Equity
Snavely King frequently evaluates capital structure and costs of equity and debt
for regulated service providers. In doing so, Snavely King analyses long- and short-term debt, debt
retirements, new issues of equity, capital costs, the composition of parent company
capital structures, and the impact that relative business risk can have on the capital
costs.
Valuation
Snavely King has substantial experience in performing valuation studies on a
variety of bases, including capitalized earnings, reproduction cost new less depreciation,
gross liquidation value, net liquidation value, and actual market value. The methodologies
are selected on a case-specific basis, depending upon the issues under consideration and
the purposes for which the valuation study is being undertaken.
Cost-of-Service and
Revenue Requirement Analyses
Snavely King analyzes cost-of-service and revenue requirements of telephone,
electric, gas, and water utilities. These analyses typically involve examination of
jurisdictional allocation, CWIP in rate base, rate base evaluation, depreciation rates,
sales and revenue forecasts, and affiliate relations and transactions. Also included in
the analyses are pro forma adjustments for taxes, wages, productivity, and working
capital.
Snavely King is an acknowledged authority on transportation costing as a result of
the firm's major contributions to the economic theory and methodologies underlying the
development of economically defensible costs for specific transportation movements. Snavely King is
experienced with the costing procedures devised by regulatory authorities for railroad,
water carrier, motor carrier, and pipeline operations. In addition, the firm has designed
and implemented a number of costing systems for specific applications not contemplated by
the regulatory costing procedures, including development of marginal costs and preparation
of detailed stand-alone cost studies.
Transportation
Negotiations
Snavely King has helped clients to same tens of millions of dollars in transportation costs
through negotiations. The firm's approach is based upon a "Win-Win"
negotiating strategy. Snavely King works with clients to 1) study current routings, rates,
costs, and other factors relevant to the negotiations; 2) analyze the interest of both the
shipper and the carrier; 3) develop and analyze transportation options; 4) evaluate
shipper costs and service; 5) prepare bid packages; and 6) assist with the negotiations.
Supply Chain Management
Snavely King has developed a suite of modeling tools that help companies to
optimize their logistics network. Among other issues, we can help shippers to
evaluate tradeoffs between suppliers, modes, routes, shipment sizes, and plant location.
Our supply chain model includes four basic modules, including an Inbound cost
module, Transfer cost module, a Distribution center cost module, and an Outbound cost
module.
Depreciation Studies
Several
members of Snavely King are nationally recognized experts in the field of
public utility and telecommunications depreciation, plant lives and capital
recovery. They have appeared as expert witnesses before federal regulatory
bodies and the regulatory commissions of almost every state in the country
and also in Canada. They prepare depreciation studies and evaluate the
studies of others.
Regulatory and
Management Audits
Snavely King provides regulatory and management auditing services to state public
utility commissions.
Revenue
Allocation and Rate Design
A number of states (e.g.,
California, New York, Illinois) have adopted marginal cost as the basis for customer class
revenue allocation and rate design. Snavely King senior staff members are familiar with the
conceptual and computational issues associated with marginal electric costs and
alternative approaches to reconciling these costs with a utility's overall revenue
requirement. In performing marginal cost studies, Snavely King specifically addresses alternative
generation capacity concepts such as the peak, planned additions, and perturbation
approaches, the minimum distribution grid approach to customer costs, system lambda energy
costs, inverse elasticity versus equiproportional reconciliation procedures, the role of
present value and levelized annuity calculations, and the use of constant versus current
costs.
Snavely King is a recognized authority on rate determination and revenue division.
members of the firm have been major participants in the development of cost-based
ratemaking formulas, minimum rate standards (using the concepts of marginal cost and
contribution to going concern value), and maximum rate standards. These development
activities have required procedures such as incremental costing and approximations for
Ramsey pricing that protect certain services from cross-subsidizing other services that
share common facilities.
Bankruptcy and
Reorganization
Snavely King has extensive experience providing clients with reorganization
planning services. Senior staff direct studies to determine the viability of continued
operation, to value assets on both a liquidation and a "going-concern" basis,
and to develop bases for allocation of asset values to security holders.
Market Analyses
Snavely King has undertaken a variety of market studies for both procedures and
consumers, including traffic diversion studies, tests of the sensitivity of demand for
individual goods and services to pricing and service factors, determination of the value
added to goods by transportation, and assessments of competitive market positions and
potential for market growth. Preparation of expert testimony often requires Snavely King to
determine the competitive characteristics of a particular service, the impact these
characteristics have on marketing, operating, and financial opportunities associated with
the service, and the competitive, economic, and public benefit impact of changes in
service contemplated by major providers.
Cost-of-Service
Separations Studies
Snavely King has reviewed the separations procedures used to establish
jurisdictional rate base, costs, and expenses for a variety of telecommunications clients.
These reviews include examining the extent to which traffic and other base studies have
been properly updated, determining whether minutes-of-use studies accurately reflect the
growth in jurisdictional traffic, and ascertaining whether the procedures are in general
compliance with Parts 36 and 69 of FCC rules.
Snavely King evaluates test-year studies of unseparated and separated costs and
revenues assigned to major service categories. These analyses specifically address the
portions of national and regional service organization functions deemed recoverable, the
assignment of the costs associated with these service organizations, network access costs,
assignment of working capital, treatment of deferred income taxes for rate design purposes
(including investment tax credits), and the separation of FS/CCSA costs in determination
of exchange costs. Snavely King also has experience in developing and testing alternative allocation
or cost assignment procedures.
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