Utilities and regulators are stuck in a rut, treating rate-base assets in a traditional way and depreciating their value according to a straight-line calculation. But alternative accounting...
An Indicator of Fairness
Ratable treatment of removal costs through depreciation should be favored.
is accomplished by reflecting removal costs in depreciation rates in a manner that causes the rates to appear to be for accrual treatment. This appearance can lead observers to falsely believe that the Ratable scenario is being proposed. These examples demonstrate that a thorough understanding of authorized treatments of removal costs might not be obtainable from regulatory decisions, and so will require delving into the depths of proceedings.
It’s evident that how regulators treat removal costs is an indicator of the fairness of regulation. Treatments other than the Ratable scenario impose substantial extra costs on ratepayers over the life of the property from which they are served. In addition to being detrimental to ratepayers, these extra costs increase future energy prices that will make the efforts of those involved with area development more difficult, especially when an energy-intensive business is being courted.