Regulators and customers are holding utilities’ feet to the fire, when it comes to investing in advanced metering and smart grid systems—and rightly so. Making the most of investments requires a systematic approach to establishing standards and monitoring performance. But it also requires policy frameworks and cost recovery regimes that provide the right incentives.

The economy has put state commissioners and regulated utilities in precarious positions. Seven state chairmen explain how they’re applying fair rate treatment.

Two obstacles must be overcome to achieve true competitive markets: reversal of the long-term underinvestment in transmission, and greater clarity in the legal and regulatory environments. How can the industry make the most of a somewhat defensive regulatory posture?

On the Brink: Avoiding a Canadian California

 

 

Ontario's government has imposed substantial burdens on customers, with no benefits.

On a recent trip through Toronto's Pearson International Airport, I was stopped by an immigration official who, upon learning my business, snapped, "Why would anyone hire a Yank to advise on the Ontario electricity sector?"

(December, 2001) The results of our annual survey of authorized rates of return on common equity for state-regulated energy utilities show a continued reliance on traditional cost-of-service ratemaking in many states. At the same time the results also show that rate case filings do not dominate the field of economic regulation the way they might have in times of higher rates of inflation and prior to the advent of price cap regulation and market restructuring programs.

Gas Price Prudence: From Hedge-and-Hope to Best Practice

Utilities and regulators should follow the same ideas that govern risk management at the largest of commodity trading houses.

The July 5, 2001 issue of offered an update on what utilities and regulators are doing in the area of commodity price hedging for natural gas.

The headline read, "Dominion East Ohio Sales Customers Will Pay 29% Less in Gas Costs under PUCO-Led Encouragement of Hedging Plan...."

With competition looming, electric utilities increasingly resort to price discounts, both to retain customers and to alleviate some of the pressure to introduce retail competition. Performance-based ratemaking (PBR), which allows utilities greater flexibility in offering price discounts, is emerging as an integral component of many restructuring proposals.

However, flexible pricing can create inequity among ratepayers.

San Diego Gas & Electric (SDG&E) has filed comments to support the "majority proposal" by the California Public Utilities Commission on deregulating the electric utility industry, which calls for formation of a wholesale power pool.

SDG&E noted that while a key element of the proposal involved creating an independent system operator, the company would go further and set up a regional transmission company to own the grid.

For the past several decades, utility regulation at the state level dealt with secure local markets and truly captive customers. A regulatory compact flourished that offered reasonable prices to customers, while guaranteeing the monopolist the opportunity to earn a fair rate of return on prudently incurred investments.

One need only reflect upon the primary sponsors of current efforts to repeal section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) to begin to understand the folly of these efforts for the nation. The sponsors do not represent electricity ratepayers, who are claimed to be overpaying billions of dollars as a result of PURPA.