(November 2006)Our annual return on equity (ROE) survey broadly shows a continuing decline in the level of debate over issues specific to restructuring of the electric market. It also...
Baked-In or Decoupled?
Rate case risk in a climate of declining sales.
typically will present in retail rate cases?
If so, then no downward adjustment to ROE would be required for a decoupled utility.
In fact, that issue actually did arise in the Delmarva rate case decided in Maryland. In that case, the commission rejected the utility’s argument that no downward ROE adjustment was needed because, as the utility claimed, “other commissions have baked [decoupling] adjustments into the published ROEs of comparable utilities.”
According to the commission’s rate order, the decoupling plan afforded to Delmarva “an enhanced opportunity to earn its rate of return, even though the company has not faced in any meaningful way the business risks the program is meant to mitigate.”