Return on

Autopilot Error

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.

2008 ROE Survey - Rates, Risks & Regulators

Economic uncertainties raise doubts about utility returns.

(November 2008) Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While reporting on this year’s rate cases, the author provides insight on what to expect as stock prices fall.

Capital Conundrum

The Big Build will test the industry’s access to Wall Street.

The era of easily available, affordable energy rapidly is ending and our society is realizing that our energy infrastructure is severely inadequate to supply the energy demands of the future. The major issue facing the sector today is how to fund and deliver this new climate-friendly infrastructure, which is currently estimated will cost almost $2 trillion between now and 2030.

Regulators Forum: Taming the Utility Frontier

Policymakers are setting sights on new challenges facing utilities.

Utilities in the United States are heading into uncharted territories, and the regulatory landscape is changing accordingly. To learn what it takes to tame this new territory, we spoke with three FERC commissioners, a state regulator, and a Western governor.

Total Shareholder Return: Planning a Future Perfect

Total shareholder return can not only be a measure of past performance, but it can be harnessed as the prime touchstone for planning future performance.

TSR is a paradox among financial metrics—dominant in assessments of past performance yet peripheral in plans for future performance. This paradox can be resolved.

Return on Equity: Gen Sector Issues

Ratemaking Special: A survey of recent retail rate cases for electric and gas utilities.

(November 2005) The results of annual survey of rates of return on equity authorized for major electric and natural-gas utilities—based on a sample of the retail rate cases conducted by state public utility commissions—show a vibrant and perhaps growing interest in traditional rate-of-return regulation.

Commission Watch

What everybody missed in setting up the regional grids.

Commission Watch

What everybody missed in setting up the regional grids.

While the electric utility industry has largely agreed on what elements to include in a standard market design (SMD) to govern wholesale power trading in a given region, recent experience shows that the regulators from time to time have overlooked a number of things.

Corporate Risk: What Does Management Really Know?

A short list of questions that every board member and senior manager should be able to answer.

“We pursue a disciplined approach to risk management" says the CEO of a major utility during the company's earnings call with analysts and investors. In this era of increased scrutiny over corporate governance, how can senior management and the board be certain that this statement is accurate, and where does the discipline begin?

Return on Equity: A Survey of Recent Rate Cases From State PUCs

Ratemaking Special Report

(November 2004) Fixing an appropriate rate of return on equity (ROE) for electric utility investors marks a fundamental component of the typical cost-of-service rate case conducted across the nation by state public utility commissions (PUCs). The following survey demonstrates the results of such cases, as observed over the past year.