[BETA] Fortnightly

Levelized rates can serve customers’ interests, while also accelerating capital investment and providing an economic stimulus to the economy.

As utilities plan their capital budgets for the next few years, investments in advanced distribution systems face an uncertain future. Customers question the value—and propriety—of some programs, while long-term strategic goals depend on seamless integration. What will be the path forward for smart grid technology?

With a flurry of major new environmental regulations, the Environmental Protection Agency (EPA) is altering the power generation landscape. But will the new federal rules survive court challenges—to say nothing of next year’s national elections? Fortnightly's Michael T. Burr considers the controversy over new environmental standards. PLUS: Top Utility Lawyers of 2011.

With a recent flurry of gas pipeline rate investigations at the Federal Energy Regulatory Commission (FERC), many pipeline owners face the prospect of having their profits scrutinized to ensure their rates are just and reasonable. Understanding FERC’s approach will help companies ensure they’re not falling outside the zone of reasonableness.

FERC’s final rule authorizing new natural gas storage facilities seems to presume market power for pipelines and new storage. FERC should consider changing that presumption to more accurately reflect Congress’s intent in EPAct 2005.

These are challenging times for the electric and gas utilities. Reliability projects, renewable portfolio standards, greenhouse-gas emissions control, AMI, smart-grid investments, and conservation programs—all these things add to costs, but might bring in no additional revenue. Moreover, there will be unprecedented capital investment in transmission, renewable generation projects, and replacement of old facilities from the 1950s and 1960s. Thus, earnings likely will be more closely watched and traditional general rate cases might not be able to keep up.

Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While reporting on this year’s rate cases, the author provides insight on what to expect as stock prices fall.

What are some approaches to regulation adopted in recent decades by national governments, and the implications for management making international investment decisions?

This overview of ratemaking and rate-design principles should ease the myriad tasks awaiting new rate analysts and attorneys, while provoking nostalgia among industry veterans still manning the ratemaking stations.

The utility regulatory process is prone to controversy, given the inherently adversarial roles and varied viewpoints among the utilities, regulators, and other stakeholders. Oft-heard pleas of "why can't you just see this issue my way" or "can't we all just get along" underscore the deep-seated frustrations of utility leaders and regulators in trying to find a common ground for addressing crucial issues surrounding the formulation of business strategies, establishment of responsible financial goals, and setting of operational performance standards for the regulated gas and electric distribution utility segments of the energy industry.