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2009 Regulator's Forum: Walking A Tightrope

The economy forces tough decisions.

Fortnightly Magazine - November 2009

ability to pay its utility bills even in this climate must be met. As such, the department must insure that all new initiatives from the legislature or the utilities provide significant value to ratepayers. Policies that raise rates and lead to even higher defaults aren’t only devastating to a customer, but also have serious negative implications for the provider of utility services.

Lee Beyer, Oregon: The decision to make capital improvements by and large is a decision for the utility that the commission evaluates for prudence in a ratemaking proceeding. With the economic downturn, utilities are delaying some capital improvements as loads placed on their system have declined.

James H. Cawley, Pennsylvania: Since the economic downturn has occurred, Pennsylvania has seen only one base-rate case submitted, which is currently under consideration.

The commission has been encouraging utilities to seek federal stimulus monies as well as tax-exempt opportunities available through state revolving-loan programs and other low-cost financing mechanisms. Also, the commission is working with the Pennsylvania general assembly to create a system-improvement charge to facilitate natural gas and wastewater system infrastructure improvements.

Doug Everett, Georgia: Since 1998, the Georgia commission has set electric base rates on a three-year cycle. At the same time, the Georgia commission has approved a separate rider for the recovery of major capital costs associated with environmental compliance at electric generating facilities. The rider is levelized for the three-year period and any over or under recovery will be addressed in the 2010 rate case.

The commission and [Georgia Power] also agreed to delay a fuel-cost recovery proceeding due to the downturn in the economy. Also the commission has accepted a recent proposal by Atlanta Gas Light Co., the major regulated gas utility in Georgia, to delay the filing of a rate case by at least six months. The rate case was originally set to be filed on Nov. 1, 2009 but has been delayed until at least April 1, 2010.

Charles E. Box, Illinois: Several of the energy utilities in Illinois are in the midst of rate case and other proceedings to permit accelerated investment in natural gas mains using CWIP and to allow cost recovery of automated metering and smart grid [investments] through riders. While I can’t comment specifically, the commission recognizes the importance of balancing the need for new investment while minimizing ratepayer impact during these difficult economic times.

Bob Anthony, Oklahoma: Historically, Oklahoma’s major electric utilities have out-performed the Dow Jones utility average while maintaining rates that are among the lowest for fossil-fueled generation. To achieve this, the commission utilizes alternative ratemaking methodologies to reduce the impacts of additional rate-base investments. Performance-based rates (PBRs) are used for natural gas utilities to encourage efficiency by allowing the company to share in earnings that exceed the allowed rate of return. Riders reduce volatility and carrying costs by allowing pass-through of approved expenses closer to real time. Discretionary spending by utilities is discouraged, while the emphasis on capital expenditures is focused on projects that will lead to ratepayer savings. For example, system-hardening activities will reduce outages and repair costs.