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Gas Distribution: Now a Higher-Risk Business

The rise in equity risk premiums for local gas utilities may come as a surprise.
Fortnightly Magazine - September 1 2002
  1. Valuation Edition 2001 Yearbook, page 65.
  2. For ratemaking purposes, the return determined by a quarterly DCF calculation (the effective rate) may need to be adjusted to a nominal rate. See C.M. Linke, and J.K. Zumwalt, "Estimation Biases in Discounted Cash Flow Analyses of Equity Capital Cost in Rate Regulation." Financial Management, Autumn 1984, p. 15-21, and M. Cicchetti, "The Quarterly DCF Model, Effective and Nominal Rates of Return and the Determination of Revenue Requirements for Regulated Public Utilities," National Regulatory Research Institute Quarterly Bulletin, Fall 1989, p. 249-259.
  3. See E.F. Brigham, D.K.Shome, and S.R. Vinson, "The Risk Premium Approach to Measuring a Utility's Cost of Equity," Financial Management, Spring 1985, p. 33-45.

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