Utilities face rate pressure as financing costs hit rock bottom.
Phil Cross is Fortnightly’s legal editor. Email him at pcross@pur.com
(November 2012) Fortnightly’s annual rate case survey is designed to give readers a look at rates of return on equity (ROE) awarded in state-level retail base rate proceedings for electric and natural gas utility companies. An examination of the reasoning and commentary contained in these orders provides a glimpse into economic factors considered by regulators as they seek to balance the interests of investors and consumers when authorizing utility ROEs. Recently these factors have included the state of the economy and utilities’ profit margins, as well as reminders of financial distress facing consumers during the current recession. Some key issues cited by regulators in recent years appear to have faded, such as the precipitous drop in stock prices several years ago. And some others—such as the effect on risk associated with increasingly popular revenue decoupling plans and other automatic rate adjustment mechanisms—remain in the forefront. (See, Hawaii Electric Light Co., Docket No. 2009-0164, Decision and Order No. 30168, Feb. 8, 2012, 296 PUR4th 1.)