return-on-equity (ROE) analyses.

The Missouri Public Service Commission (PSC) has approved an experimental alternative regulation plan for Union Electric Co., the largest regulated electric utility in the state. The new plan is part of a stipulation and agreement that includes a $30-million one-time customer refund and a $30-million annual rate reduction. The experiment (em scheduled to run between July 1, 1995, and June 30, 1998 (em involves a sharing of company earnings between ratepayers and shareholders.

Idaho Power (IP) has filed a notice of settlement with the Idaho Public Utilities Commission (PUC), its first step toward gaining approval to accelerate amortization of accumulated deferred investment tax credits (ADITC) when year-end return on equity (ROE) falls below 11.5 percent. If the PUC agrees, the agreement would remain in effect from 1995 through 1999.

Suppose you want to reduce emissions

of carbon dioxide to lessen the chance

of global warming. Should you (a) prohibit coal burning in electric power plants, (b) encourage coal use for power generation, or (c) force electric generators to pay an "externality" surcharge to reflect the cost of CO2 emissions?Here's another one. You are an independent power producer.

In a preliminary ruling, the Florida Public Service Commission (PSC) has proposed several changes to its rules for setting a generic rate of return on common equity (ROE) for water utilities. The proposed leverage formula produces a suggested ROE range of 10.18 to 11.88 percent, based on an equity ratio of 40 percent. The change represents an increase of 55 basis points over the midpoint indicated by the existing formula. According to the PSC, the update incorporates changes in underlying market conditions, including bond yields and required rates of return.

Regulation of the United Kingdom's 12 regional electricity distribution companies (RECs) has sought to promote efficiency through the use of price caps that are supposed to remain in place for five years without regulatory intervention. The benefits of cost reductions between reviews accrue to shareholders no matter how much earnings might rise. The idea was to provide more incentive than if earnings were subject to review whenever they exceed some specified level.

Productivity has increased enormously under this system.

Our 13th annual electric rate-case survey covers electric rate orders issued between

April 1, 1994, and March 31, 1995.

The survey tabulates rates of return on common equity (ROE) approved by state public utility commissions (PUCs) in major electric rate orders, but also includes some cases in which rate of return was not directly at issue, or where a rate adjustment resulted from a settlement agreement.

The question I am asked most frequently is "Who will emerge as the 'winners' and 'losers' among today's electric utility companies?" The short answer is painfully simple. The winners will offer the best prices (a.k.a., the low-cost producers). The losers will be unable to cut prices to meet the market (a.k.a., the high-cost producers).

Unfortunately, real-world answers rarely come in black and white. The electric utility industry enjoys less pricing flexibility than one might imagine.

The Illinois Commerce Commission (ICC) has approved a $303.2-million rate increase for Commonwealth Edison Co. In approving a rate of return on equity (ROE) allowance of 12.28 percent, the ICC chose an ROE presentation that "equally weighs the quarterly DCF and risk-premium based results." The increase reflects the ICC's finding that the company's Byron 2 and Braidwood 1 & 2 nuclear generating facilities are fully used and useful and eligible for rate recovery.