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Calculating the realized investment returns of U.S. electric utilities.
- Source :
-
Utilities Policy . Dec2023, Vol. 85, pN.PAG-N.PAG. 1p. - Publication Year :
- 2023
-
Abstract
- Investor-owned utilities in the U.S. are not guaranteed to earn the amount approved by regulators, and actual returns are not trued up against regulated levels. This paper develops a simple metric for firms' actual returns (their "realized" return on investment) that parallels the parameter set in cost-of-service regulation. Based on financial data for 177 major investor-owned utilities over 27 years, the analysis documents a downward trend in companies' realized returns over the last two decades, from a high of 12.6% in 2002 to 6.1% in 2020, on average (a decrease of over 51%). The decline appears to hold across company size and region of the country and is driven by a stagnation in revenue coupled with a nearly two-fold increase in investment. As a result, changes to utility practices or regulatory policy may be warranted. • The actual returns of electric utilities can differ from authorized amounts. • The analysis indicates a decline in the actual returns of major utilities over time. • The fall reflects an increase in utility investment and a flattening of revenue. • Further research is needed to understand the implications of utility rate base growth. [ABSTRACT FROM AUTHOR]
- Subjects :
- *ELECTRIC utilities
*RATE of return
*BUSINESS size
*DEPRECIATION
*HOLDING companies
Subjects
Details
- Language :
- English
- ISSN :
- 09571787
- Volume :
- 85
- Database :
- Academic Search Index
- Journal :
- Utilities Policy
- Publication Type :
- Academic Journal
- Accession number :
- 174104738
- Full Text :
- https://doi.org/10.1016/j.jup.2023.101684