New Regulatory Frameworks
Resources for Members and Policy Makers
- Are new frameworks consistent with cost of service regulation?
Cost of Service Regulation In the Investor-Owned Electric Utility Industry: A History of Adaptation, Dr. Karl McDermott, June, 2012
A 48 page history that traces the evolution of cost of service regulation, demonstrating that while the core structure of COSR has changed little since Hope, the rate making policies by which it is administered have changed a great deal as markets have evolved.
- What is the problem?
New Regulatory Frameworks for Electric Infrastructure Investment (pdf) - EEI, May 2011
A four page brochure whichprovides an overview of key policy tools which can be configured to form new regulatory frameworks (i.e., CWIP, cost trackers, rate and revenue caps, revenue decoupling, formula rate plans, future test years).
Forward Test Years for U.S. Electric Utilities (pdf) - Pacific Economics Group, August 2010
A comprehensive, if dense, explanation of the key role unit cost plays in driving the need for utility rate increases. Explains how input price inflation, productivity, and average use affect changes in unit cost.
- What do new regulatory frameworks look like?
New Regulatory Frameworks for Electric Infrastructure Investement (pdf) - EEI, May 2011
A four page brochure which explains that the coincidence of rapid capital spending with slowing sales growth is putting pressure on rates, utility credit worthiness; and ultimately, the whole regulatory process. Suggests that new regulatory frameworks can alleviate these pressures.
- What's out there already?
Alternative Regulation for Evolving Utility Challenges: An Updated Survey (pdf) - Pacific Economics Group, January 2013
A survey of recent state regulatory innovations designed to address regulatory lag, a problem which is gaining urgency as slowing sales growth takes away revenues which used to offset the lack of timely cost recovery. Reflects precedent involving cost trackers, CWIP in rate base, multiyear rate and revenue caps, various kinds of revenue decoupling, formula rates, and forward test years.
Alternative Regulation for Infrastructure Cost Recovery (pdf) - Pacific Economics Group, January 2007
A monograph explaining how, in today’s electricity markets, traditional regulatory policies and practices create barriers to needed new investment. Describes precedent involving new regulatory approaches, both in the U.S. and abroad, which are designed to support needed infrastructure investment, both continuous small plan additions, and major plant additions.
- What's been the experience with new regulatory frameworks?
Case Study of Alabama Rate Stabilization and Equalization Mechanism (pdf) - Susan Parker, former member, Alabama Public Service Commission, June 2011
An eight page case study that describes the design, operation, and experience with Alabama’s Rate Stabilization and Equalization mechanism. Includes key lessons learned.
- What do investors say?
Recovery Mechanisms Help Smooth Electric Utility Cash Flow and Support Ratings, Standard & Poor's, March 2009 (pdf)
A three page statement which explains why S&P expects innovative ratemaking techniques and alternatives to traditional base rate cases will become increasingly critical to utility cash flow and credit worthiness.
Power & Utilities: Capital Complications, Lehman Bros., May 2007 (pdf)
An 87 page research report, lead by one of the foremost equity analysts, which finds that regulatory lag during a period of heavy capital expenditure causes investor-owned electric utilities to earn less than their allowed return on equity.
- EEI Staff Contact
Eric Ackerman, Director, Alternative Regulation, 202-508-5528
Cost of Service Regulation In the Investor-Owned Electric Utility Industry: A History of Adaptation, Dr. Karl McDermott, June, 2012A 48 page history that traces the evolution of cost of service regulation, demonstrating that while the core structure of COSR has changed little since Hope, the rate making policies by which it is administered have changed a great deal as markets have evolved.