Funds collected for cost-of-removal liabilities could finance capital spending.
Michael J. Majoros Jr. is a principal with Snavely King Majoros & O’Connor Inc., an economic consulting firm based in Washington, D.C. Karl R. Pavlovic is a senior consultant and John Legieza is a consultant with the firm.
Last year Public Utilities Fortnightly noted that recession-related demand destruction was pressuring industry operating margins and financial returns in the electric industry and that conservation and environmental demand destruction were likely to continue that pressure for the foreseeable future. The author correctly concluded that “companies that aren’t earning their allowed return on equity (ROE) due to depressed energy sales are looking to regulators to make them whole. Going forward, rate treatment largely will determine who the winners will be (see “The 40 Best Energy Companies,” September 2009).