Pennsylvania Regulators Disagree on ROE Award
A recent rate order by the Pennsylvania Public Utilities Commission (PUC) granting West Penn Power Co. a $53.7-million increase has generated some disagreement between the state's utility commissioners on the issue of rate of return on equity (ROE). Although the PUC reduced the utility's proposed ROE from 12.5 to 11.5 percent, PUC chairman David W. Rolka and vice chairman Joseph Rhodes, Jr. both claimed the ROE was too high. According to Rolka, the approved rate was based in part on a determination that the utility had exhibited superior management during the test period, when in fact the company's low rates by industry standards merely reflected an absence of high-cost nuclear generating capacity. He pointed to increased costs incurred by the utility in complying with Clean Air Act requirements as well as testimony about service outages in challenging the management performance award granted by the PUC. Rolka also pointed out that the administrative law judge in the case had set West Penn's ROE at 10.71 percent, while regulators in West Virginia had granted the utility's two sister companies an ROE of only 10.75 percent. Re West Penn Power Co., Docket No. 00942986, Dec. 15, 1994 (Pa.P.U.C.).
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