Issue Description: What is the appropriate capital structure (i.e., the relative proportions of long-term debt, short-term debt, preferred equity, and common equity) to use in calculating MGEs cost of service?
Determining an appropriate capital structure for MGE is complicated by the fact that MGE is a division of Southern Union and does not issue its own debt or equity. Therefore, MGE does not have its own capital structure. As a substitute for its non-existent capital structure, MGE proposes to use a hypothetical capital structure consisting of 46% equity and 54% debt. MGEs proposed structure is as follows:[4] Common Equity 46% Long-Term Debt 44.09% Short-Term Debt 9.91% However, if the Commission does not adopt the proposed hypothetical capital structure, MGE is willing to accept the actual capital structure of Southern Union as of October 31, 2006.
