California Set ROE for 1996

Fortnightly Magazine - February 15 1996
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Energy utilities in California will be permitted to set charges at a level high enough to earn an 11.6-percent return on equity (ROE) for 1996. Pacific Gas and Electric Co. was also awarded a separate 50-basis-point risk premium (12.01 percent) for the 70/30 debt/equity ratio associated with its natural gas pipeline expansion project.

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The award reduces the ROE for all of the state's utilities except Sierra Pacific Power Co., which operated under an ROE allowance of 11.3 percent last year. Both Southwest Gas Corp. and PacifiCorp were exempted by prior order from this year's annual cost-of-capital investigation. While approving the ROE award contained in a settlement agreement in the case, the California Public Utilities Commission (CPUC) rejected a separate proposal to hold the ROE allowance to an even 10 percent to drive the utilities' market-to-book ratio to one.

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