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Return on Equity: A Survey of Recent Rate Cases From State PUCs

Ratemaking Special Report
Fortnightly Magazine - November 2004
  1. Standards No. 130 (Reporting Comprehensive Income) which required company to disclose a contingent minimum pension liability.
  2. Utility required to file cost of service update pursuant to prior ruling approving a merger to determine if rate reduction is required.
  3. PSC finds no rate decrease necessary. Rates capped through 2006 pursuant to prior approved merger agreement.
  4. Initial rate increase serves as basis for newly approved performance-based rate plan.
  5. Rate increase shown offset by $3.09 million elimination of universal service fund interim rate, $21.68 million gas cost adjustment, $0.73 million transitional energy facility adjustment, $6.78 million temperature adjustment clause rate adjustment, and $6.64 million gas supply service rate roll-in.
  6. Three-year rate settlement approved 10/25/01. Commission approved rate plan modification 6/14/04 extending rate for 2 years to 6/06. ROE remains at 10.3% as decided in prior ruling. Prior ruling includes revenue sharing as follows: 100% to shareholders from 10.3% to 11.3% - 50/50 sharing of earnings from 11.3% to 14% - Above 14% 100% to ratepayers.
  7. Commission updates revenue sharing plan. New sharing points as follows: 100% to shareholders at 10.3% to 10.5% earnings level - 70% shareholders/ 30% ratepayers at 10.5% to 11.3% earnings - 65% shareholders/ 35% ratepayers at 11.3% to 14% earnings and 100% to ratepayers at 14% and above earnings.
  8. Proposed rates filed May 16, 2003. Utility also filed electric rate unbundling plan pursuant to prior order.
  9. Multi-year rate plan calls for rate freeze through 2008. PSC approves initial rate increases as shown through implementation of electric retail access surcharge and natural gas merchant function charge.
  10. Electric plan requires equal sharing with ratepayers of earnings above 12.25% threshold, while gas plan requires equal sharing above 12%.
  11. Rate case was settled - ROE was NOT settled. Staff refused to go higher than 10%. Company refused to go lower than 10.75. In the end, case was settled on dollar amount.
  12. Order approving agreement restricting ability of utility to seek future rate increase and reducing allowed ROE.
  13. Utility filed cost of service study pursuant to prior ruling.
  14. Proceeding follows finding by Department that sale of interest in nuclear facility by utility reduced revenue requirement.
  15. Department reduces 10.5% ROE included in settlement agreement finding lower rate better matched existing market conditions.
  16. Order approving application for authority to construct new generating facilities.
  17. Commission finds it reasonable to set the following financial terms for facility lease: 12.7% return on equity and capital structure of 55% equity and 45% debt.
  18. Final requirement unstated.
  19. Commission rejected 0.25% "Wyoming-specific" risk premium proposed by the utility to account for past disallowance of deferred power costs.

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