But the lower returns on equity don't necessarily result from gen selloffs or moves toward stand-alone distribution.
A survey of utility rate decisions affecting authorized rates of return on common equity (ROE), as issued by state public utility commissions (PUCs) during the period Sept. 30, 1998 to Sept. 30, 1999, indicates a small but discernible trend toward lower returns. There is no clear evidence, however, that PUCs are rethinking their assessment of utility investment risk to reflect divestitures of generation assets or a retrenchment of utility functions toward the model of a stand-alone wires or distribution company.
CONVENTIONAL WISDOM SAYS that power generation entails greater risk than the remaining distribution and transmission service components in the electric industry. Some parties have argued, however, that stripped of its generation and transmission monopolies, a distribution-only company loses strength and faces greater risk in meeting the threat of competition from distributed generation and other forms of system bypass.