Robert T. Zabors is a partner with Bridge Strategy Group in Chicago. He can be reached at firstname.lastname@example.org.
Better communication will be required in an environment of volatile and rapidly increasing commodity prices.
The utility industry is transitioning from its focus on “back to basics” to an emphasis on investment and consolidation—a shift some might describe as “déjà vu all over again.” In the near future, the majority of investor-owned electric utilities (IOUs) will request, and ultimately win, rate increases. For many, these will be the first significant increases in more than a decade. And in some areas, the completion of regulatory transition periods will enable utilities to claim increases they consider long overdue. Despite the length of time most utilities have taken between cases, it is unlikely that the rate-based component of increases will match the percentages of the 1970s and early 1980s.
Although these rate increases may be seen as reasonable and justified, rates are only part of the story. Consumers will see higher electric bills, which will result from a number of factors outside of traditional rate base and cost control. The confluence of these factors may catch some companies unprepared—pursuing the traditional argument of electric rate adequacy in what will be a public debate about total energy costs.