[BETA] Fortnightly

The transmission superhighway still needs major investments. Rate incentives were working -- until FERC started backing away from them. FERC should assert its authority more aggressively to promote the vision of a robust interstate grid.

Fortnightly’s annual rate case survey is designed to give readers a look at rates of return on equity (ROE) awarded in state-level retail base rate proceedings for electric and natural gas utility companies. An examination of the reasoning and commentary contained in these orders provides a glimpse into economic factors considered by regulators as they seek to balance the interests of investors and consumers when authorizing utility ROEs.

Data and experience show that serving customers well translates into better rate case outcomes. Conversely, poor performance starts a downward slide. J.D. Power and Associates research shows the correlation between customer service and financial returns.

Conditions are ideal for utility financing—but not forever. Although interest rates remain low, policy changes weigh on capital structures.

(September 2012) Our annual financial ranking shows some remarkable shifts among the industry’s shareholder value leaders. Despite flat demand and low commodity prices, investor-owned utilities are investing heavily in capital assets. Investment discipline and operational excellence distinguish leaders on the path to financial performance.

The industry’s slow-and-steady pace of mergers seems to be picking up speed, as larger and well-positioned players overtake smaller and weaker targets. Realizing the greatest value from consolidation requires companies to assess their strengths and weaknesses and focus on performance improvement—both before and after a deal gets done.

An alternative measure of performance - not based on dividends, earnings growth or P/E ratios.

How to place a value on a utility company? That is the question.

The traditional models no longer work very well. Dividend discount models will not work well if utilities cut dividends and buy back stock to return capital to the shareholders. Earnings growth offers no reliable performance gauge either, as utilities acquire or divest large amounts of capital. Restructuring charges often become necessary to shift resources to their best use.

Investors are taking stock

of utility exposure to price competition.The utility trade press and even the general financial press have featured the views of regulators, utility executives, legislators, and various consumer advocates on the stranded-cost question. Stranded costs easily represent the most contentious issue facing the electric industry as it moves to an era of competition.