Regulators use rate cases to craft incentives for capital spending.
(November 2007) Fortnightly's annual rate-case analysis reveals a new trend at state PUCs involving return-on-equity rate allowances. Regulators increasingly are giving utilities an earnings incentive to pursue preferred investments.
Despite a favorable outlook for utility finance, cost pressures are straining rate structures.
Utilities are bringing monumental capital-expenditure plans before rate regulators just as they’re dealing with a barrage of rising costs—for fuel and other commodities, as well as labor, pension-fund obligations, and interest payments. Ten energy-finance luminaries elaborate on the industry’s fortunes.
Tackling climate change is a monumental challenge. Power-company CEOs discuss long-range plans for a climate-friendly energy economy.
Seven CEOs—from Exelon, Great Plains Energy, National Grid, NRG Energy, Duke Energy, FPL Group, Great River Energy—explain how global warming is affecting their customers, shareholders, and employees.
Policymakers are setting sights on new challenges facing utilities.
Utilities in the United States are heading into uncharted territories, and the regulatory landscape is changing accordingly. To learn what it takes to tame this new territory, we spoke with three FERC commissioners, a state regulator, and a Western governor.
Why competitive markets are scaring regulators.
If the underlying wholesale electricity markets from which supplies are procured are competitive, then the remaining concerns regarding price levels and volatility can be addressed through regulatory policies.
Climate risks are entering the calculus for utility investment strategies.
Utilities are eager to invest in new power capacity—in part to build rate base and in part because they recognize the danger of relying too much on a single fuel source. Environmental issues, however, are adding greater complexity to company strategies for achieving fuel diversity.
During the 1980s and early 1990s, integrated resource planning (IRP) was a required practice for many utilities. Then competitive wholesale markets, merchant generation, and restructuring initiatives led many utilities to abandon IRP.
While wholesale competition generally has been successful, the regulatory process changes it brought were less so. And utilities now are getting back into long-term resource planning studies to provide decision support for their “back to basics” business strategies.
FERC risks going overboard in easing penalties for generation imbalances.
What good is a penalty that does nothing to deter the crime? For wind turbines, generation imbalances are caused primarily by variations in weather. Even if these imbalances are indeed a bad thing, no $100 penalty will make them go away.
Windpower is caught in a vicious cycle of Washington politics. Escaping the cycle will require visionary leadership in Congress and the utility industry.
The need for additional generation to compensate for wind variations is disappearing.