Filed Expert Witness Testimony on Behalf of the North Dakota Public Service Commission

Provides Testimony on the fair and reasonable overall cost of capital that the North Dakota Public Service Commission should adopt in Montana-Dakota Utilities Co.’s application for an increase in its gas distribution service rates –  Case No. PU-15-90

An important issue in the case: should Montana-Dakota Utilities Co. receive a higher cost of equity because of its relatively small size.

Ibbotson Associates states “… Small stocks tend to outperform large stocks in general, but not for the most-liquid stocks. For the most-liquid stocks… the pattern is reversed”. In Aaron Rothschid’s testimony he shows that Montana-Dakota Utilities Co.’s parent MDU Resources is more liquid than the proxy group (9 publicly traded U.S. national gas distribution companies) used to calculate the cost of equity by the Company’s expert witness.

Mr. Rothschild recommends that the cost of equity for Montana-Dakota Utilities Co. should be 8.62% with based on the proxy group with no upward adjustment for the Company’s relatively small size.

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