It is often said that ratemaking is as much art as science.
It is the process of setting a return on equity that is fair to both shareholders and consumers that demonstrates the art and science practiced by regulators. One case reported here provides a good glimpse at the entire range of issues put before regulators: a decision by the Michigan Public Service Commission setting electric rates for Consumers Power Company.
Understanding how PUC rate case findings differ from a utility’s financial reports.
(November 2015) Setting an allowed return on equity has consistently proven to be the most contentious and subjective part of a rate case proceeding.
Interest rates not always controlling for return on equity.
(November 2014) Our annual survey of rates of return on common equity authorized by state public utility commissions in recent rate cases for electric and gas retail distribution utilities.
Regulators weigh interest rate climate and future Fed policy in setting allowed return on equity.
(November 2013) Consumer advocates argue for lower allowed utility returns, to reflect lower financing costs. Our rate case survey shows mixed regulatory responses.
Utilities face rate pressure as financing costs hit rock bottom.
(November 2012) 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.
Despite market turmoil, state commissions refuse calls for an ROE boost.
(November 2011) Our annual survey of rate cases shows that despite volatility in financial markets, state regulators are holding utilities to a high standard for boosting their returns on equity (ROE). The latest data is added to Fortnightly.com's exclusive online ROE survey database, the largest free source of rate case information anywhere on the Web.
Rate case risk in a climate of declining sales.
(November 2010) Data from 2010 ROE Survey documents the industry’s struggle to reconcile rate trackers and decoupling provisions in utility rate cases.
Volatile economic conditions push regulators in new directions.
(November 2009) Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year are those in which regulators explored the limits of their discretion.
Economic uncertainties raise doubts about utility returns.
(November 2008) 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.
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.