Detroit Edison Co. (DE) has received approval from the Michigan Public Service Commission for
10-year sole-supplier contracts for electric power and related services with Chrysler, Ford,...
While the pace of "full-blown" rate filings for review by public utility commissions (PUCs) remains slow the complexity of the ROE component of ratemaking may be on the rise. The Oregon Public Utility Commission brought attention to this point while setting rates for Portland General Electric Co., an electric utility faced with unprecedented increases in the cost of wholesale power in the region. It pointed out that even though the increase in wholesale power costs had been largely responsible for the unprecedented 35 percent increase in rates approved in the case, a large part of the total time it spent hearing the evidence was devoted to arguments over the proper ROE. The PUC said that given the inherent complexity of the issue it "may be impossible to devise a method to make the process of determining a reasonable ROE an agreeable one." Nevertheless, it offered a generalized set of guidelines for witnesses provided cost of capital recommendations in future rate cases. The commission set ROE for the utility at 10.50 percent which includes a 25 basis downward adjustment for reduced risk associated with the utility's above average equity ratio of 52.16 percent. .
How the Survey Was Conducted
This year's survey covers cost of equity capital determinations by state public utility commissions (PUCs) during the period Oct. 1, 2000 through Sept. 31, 2001. Survey methodology remains similar to past years with requests for information on the results of recent rate proceedings sent to both regulators and utility financial officials. In addition, direct examination of the commission rate orders, when available, provides additional information.
Performance-based rate plans, merger-related rate agreements, generic industry-wide ROE investigations, and special proceedings to determine revenue requirements for restructured electric "delivery-only" utility operations also contain findings about the appropriate ROE for utilities and are reported herein. Explanatory notes accompany most entries, and citations are provided for orders published in Public Utilities Reports, Fourth Series (PUR4th). Many of the unpublished orders are available on PURbase CD ROM, WESTLAW, and LEXIS.
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