Business & Money

Credit-rating linkage harms certain power companies. Ring-fencing is the best answer for regulators.

In recent years, a persistent battle has developed between state public utility commissions (PUCs) and holding companies over the negative financial and operational impacts on regulated utilities of failed diversification investments. Ratepayers expect to compensate companies for the costs of providing utility service-not those costs associated with the unregulated activities of affiliated companies.

Unfortunately, the realities are often painfully different, and in some instances disastrous for the financial health of the utility. Moreover, ratepayers and politicians are highly sensitive and easily outraged by a utility attempting to recover costs associated with non-regulated companies in the regulated cost of providing utility service.