Reducing Rate Shocks
Original-cost ratemaking doesn’t suit the challenges facing utilities today.
Levelized rates can serve customers’ interests, while also accelerating capital investment and providing an economic stimulus to the economy.
rate shock
Pre-Funding to Mitigate Rate Shock
Re-starting the Big Build calls for revisiting cost-recovery mechanisms.
As the industry resumes major capital-spending programs, utilities and their stakeholders are rightly concerned about the effects on prices. Traditional regulatory approaches expose utilities to risks and costs, and can bring rate shock when capital spending finally makes its way into customers’ bills. Pre-funding investments can provide a smoother on-ramp to bearing the costs of a 21st-Century utility system — but it also raises questions for utilities to address.