Fortnightly Magazine - May 2010
Why similar U.S and Canadian risk profiles yield varied rate-making results.
Cost of capital is often a contentious issue in utility ratemaking. This is due, in part, to the inexact nature of the tools available to financial analysts and the considerable room for divergent opinions on key inputs to cost-of-capital estimation. Perhaps for this very reason, and to achieve regulatory efficiency, Canadian regulators widely adopted a formulaic approach to setting return on equity (ROE). However, an unusual degree of rancor has evolved north of the border as allowed ROEs in Canada, once at parity, have fallen near 200-basis points below their U.S. peers.
New England grapples with excess capacity and rock-bottom prices.
“Corrosive.” “Seriously flawed.” On the “brink of market failure.”That’s what critics say about New England’s forward capacity market (FCM), whereby ISO New England conducts auctions to solicit offers from project developers to make electric capacity available three years into the future to meet anticipated regional demand.
Forecasting brings wind energy under control.
Advancements in forecasting have improved the reliability of day-ahead and hour-ahead estimates of wind generation. Wind never will behave like a base-load power plant. But as system operators integrate wind forecasts into their planning and market processes, they’re transforming intermittent wind energy into a variable but reliable resource.