ROE

Utilities and Regulators: A Search for Harmony

Ratemaking Special Report: Survey respondents weigh in with needed actions.

The utility regulatory process is prone to controversy, given the inherently adversarial roles and varied viewpoints among the utilities, regulators, and other stakeholders. Oft-heard pleas of "why can't you just see this issue my way" or "can't we all just get along" underscore the deep-seated frustrations of utility leaders and regulators in trying to find a common ground for addressing crucial issues surrounding the formulation of business strategies, establishment of responsible financial goals, and setting of operational performance standards for the regulated gas and electric distribution utility segments of the energy industry.

CFOs Speak Out: Looking Beyond Power

Chief financial officers discuss new strategies and the possibility of further convergence inside and outside the energy industry.

A whole new cast of characters is expected to enter the energy industry—overseas ventures, telecom firms, insurance companies, and financial-services groups. But even as the future seems to hold boundless opportunity, utility executives and industry experts continue to disagree on what sort of consolidation is right.

Grid Investment & Restructuring: Two Challenges, One Solution

FERC must align the immediate self-interest of profit-maximizing entities with its own view of what is in the public interest.

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?

Measuring Return on Equity Correctly

Why current estimation models set allowed ROE too low.

A material capital structure mismatch, which occurs frequently, can lead to material misestimates of the appropriate allowed return on equity, perhaps on the order of 2 percentage points. That is, a 9 percent estimate of the cost of equity can imply an allowed rate of return on equity of 11 percent.

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.

ROE: The Gorilla Is Still at the Door

Incentive regulation is not a cure-all for the continuing controversy over return on equity.

Incentive regulation can provide benefits both to utility shareholders and customers by encouraging greater efficiency. But even if incentive regulation supplants traditional COS regulation, regulators and utilities still will need to confront the same basic ROE questions that have vexed both for many years. Because the base ROE under incentive regulation will be an integral part of the incentive structure itself, it ought not to be done as an afterthought. The approach described here is one way to address this important issue.

A 75th Anniversary Retrospective

Let's look back over the past few years-what we got right and where we went wrong.

Let's look back over the past few years-what we got right and where we went wrong.

Do you recall how you felt at your last class reunion? Well, that's exactly what an editor feels when asked to reminisce in public about days gone by at the magazine to which he gave his best years.