Re-starting the Big Build calls for revisiting cost-recovery mechanisms.
Sherman Elliott is an independent consultant and formerly was a commissioner on the Illinois Commerce Commission. Ralph Zarumba is a director in Navigant’s energy practice.
Many years ago when utilities were small and local control areas themselves, electric supply-side investing was relatively risk free. Growth was steady and predictable, as was regulatory recovery of investment to meet supply-side expansion. However, the recessions of the late 1970s and early 1980s, combined with inaccurate long-run load forecasts, led to overbuilding. In addition, changes in nuclear plant design mandated by the government after the Three Mile Island accident led to schedule delays and cost overruns. The regulatory response resulted in protracted prudence reviews and various approaches to mitigate rate shocks in rate proceedings.