Rate Case Summary
Q2 2010
FINANCIAL UPDATE
QUARTERLY REPORT
OF THE U.S. SHAREHOLDER-OWNED
ELECTRIC UTILITY INDUSTRY
About EEI We Welcome Your Feedback
The Edison Electric Institute is the association of U.S. shareholder- EEI is interested in ensuring that our financial publications and
owned electric companies. Our members serve 95% of the ultimate industry data sets best address the needs of member companies
customers in the shareholder-owned segment of the industry, and and the financial community. We welcome your comments,
represent approximately 70% of the U.S. electric power industry. suggestions and inquiries.
We also have 79 international electric companies as Affiliate mem-
bers and more than 190 industry suppliers and related organiza- Contact:
tions as Associate members. Mark Agnew
Director, Financial Analysis
About EEI’s Quarterly Financial Updates
(202) 508-5049, magnew@eei.org
EEI’s quarterly financial updates present industry trend analyses
Aaron Trent
and financial data covering 63 U.S. shareholder-owned electric
Manager, Financial Analysis
utility companies. These 63 companies include 58 electric utility
(202) 508-5526, atrent@eei.org
holding companies whose stocks are traded on major U.S. stock
exchanges and eleven electric utilities who are subsidiaries of non-
Erin Hailes
utility or foreign companies. Financial updates are published for
Financial Assistant
the following topics:
(202) 508-5419, ehailes@eei.org
Dividends Rate Case Summary
Stock Performance SEC Financial Statements (Holding Companies) Future EEI Finance Meetings
Credit Ratings FERC Financial Statements (Regulated Utilities) 45th EEI Financial Conference
Construction Fuel October 31-November 3, 2010
Desert Springs JW Marriott Resort & Spa
For EEI Member Companies Palm Desert, California
The EEI Finance and Accounting Division is developing current
year and historical data sets that cover a wide range of industry EEI International Utility Conference
financial and operating metrics. We look forward to serving as a March 13-15, 2011
resource for member companies who wish to produce customized London Hilton on Park Lane
industry financial data and trend analyses for use in: London, United Kingdom
Investor relations studies and presentations For more information about EEI Finance Meetings,
Internal company presentations please contact Debra Henry, (202) 508-5496, dhenry@eei.org
Performance benchmarking
Peer group analyses
Annual and quarterly reports to shareholders
Edison Electric Institute
701 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2696
202-508-5000
www.eei.org
The 63 U.S. Shareholder-Owned
Electric Utilities
The companies listed below all serve a regulated distribution territory. Other utilities, such as transmission provider ITC Holdings, are not
shown below because they do not serve a regulated distribution territory. However, their financial information is included in relevant EEI data
sets, such as transmission-related construction spending.
Allegheny Energy, Inc. (AYE) FirstEnergy Corp. (FE) Puget Energy, Inc.
ALLETE, Inc. (ALE) Great Plains Energy Incorporated (GXP) SCANA Corporation (SCG)
Alliant Energy Corporation (LNT) Hawaiian Electric Industries, Inc. (HE) Sempra Energy (SRE)
Ameren Corporation (AEE) IDACORP, Inc. (IDA) Southern Company (SO)
American Electric Power Company, Inc. Integrys Energy Group, Inc. (TEG) TECO Energy, Inc. (TE)
(AEP) IPALCO Enterprises, Inc. UIL Holdings Corporation (UIL)
Avista Corporation (AVA) Maine & Maritimes Corporation (MAM) UniSource Energy Corporation (UNS)
Black Hills Corporation (BKH) MDU Resources Group, Inc. (MDU) Unitil Corporation (UTL)
CenterPoint Energy, Inc. (CNP) MGE Energy, Inc. (MGEE) Vectren Corporation (VVC)
Central Vermont Public Service MidAmerican Energy Holdings Company Westar Energy, Inc. (WR)
Corporation (CV)
NextEra Energy, Inc. (NEE) Wisconsin Energy Corporation (WEC)
CH Energy Group, Inc. (CHG)
NiSource Inc. (NI) Xcel Energy, Inc. (XEL)
Cleco Corporation (CNL)
Northeast Utilities (NU)
CMS Energy Corporation (CMS)
NorthWestern Corporation (NWE)
Consolidated Edison, Inc. (ED)
NSTAR (NST)
Constellation Energy Group, Inc. (CEG)
NV Energy, Inc. (NVE)
Dominion Resources, Inc. (D)
OGE Energy Corp. (OGE)
DPL, Inc. (DPL)
Otter Tail Corporation (OTTR)
DTE Energy Company (DTE)
Pepco Holdings, Inc. (POM)
Duke Energy Corporation (DUK)
PG&E Corporation (PCG)
Edison International (EIX)
Pinnacle West Capital Corporation (PNW)
El Paso Electric Company (EE)
PNM Resources, Inc. (PNM)
Empire District Electric Company (EDE)
Portland General Electric Company
Energy East Corporation (POR)
Energy Future Holdings Corp. (formerly TXU PPL Corporation (PPL)
Corp.)
Progress Energy (PGN)
Entergy Corporation (ETR)
Public Service Enterprise Group Inc.
Exelon Corporation (EXC) (PEG)
Companies Listed by Category
(as of 12/31/09)
Please refer to the Quarterly Financial Updates webpage for previous years’ lists.
G iven the diversity of utility holding company corporate
strategies, no single company categorization approach will be
useful for all EEI members and utility industry analysts. Never-the-
Categorization of the 58 publicly traded utility holding compa-
nies is based on year-end business segmentation data presented in
10Ks, supplemented by discussions with company IR departments.
less, we believe the following classification provides an informative Categorization of the five non-publicly traded companies (shown in
framework for tracking financial trends and the capital markets’ italics) is based on estimates derived from FERC Form 1 data and
response to business strategies as companies depart from the tradi- information provided by parent company IR departments.
tional regulated utility model. The EEI Finance and Accounting Division continues to
evaluate our approach to company categorization and business
Regulated 80%+ of total assets are regulated segmentation. In addition, we can produce customized categoriza-
Mostly Regulated 50% to 80% of total assets are regulated tion and peer group analyses in response to member company
Diversified Less than 50% of total assets are regulated
requests. We welcome comments, suggestions and feedback from
EEI member companies and the financial community.
Regulated (38 of 63) PG&E Corporation First Energy Corp.
ALLETE, Inc. Pinnacle West Capital Corporation Integrys Energy Group
Alliant Energy Corporation PNM Resources, Inc. MGE Energy, Inc.
Ameren Corporation Portland General Electric Company MidAmerican Energy Holdings
American Electric Power Company, Inc. Progress Energy NextEra Energy, Inc.
Avista Corporation Puget Energy, Inc. NiSource Inc.
Central Vermont Public Service Southern Company OGE Energy Corp.
Corporation TECO Energy, Inc. Otter Tail Corporation
CH Energy Group, Inc. UIL Holdings Corporation Pepco Holdings, Inc.
Cleco Corporation UniSource Energy Corporation Public Service Enterprise Group, Inc.
CMS Energy Corporation Unitil Corporation SCANA Corporation
Consolidated Edison, Inc. Vectren Corporation Sempra Energy
DPL, Inc. Westar Energy, Inc.
DTE Energy Company Wisconsin Energy Corporation Diversified (5 of 63)
El Paso Electric Company Xcel Energy, Inc. Constellation Energy Group, Inc.
Empire District Electric Company Energy Future Holdings
Energy East Corporation Mostly Regulated (20 of 63) Hawaiian Electric Industries, Inc.
Great Plains Energy Incorporated Allegheny Energy, Inc. MDU Resources Group, Inc.
IDACORP, Inc. Black Hills Corporation PPL Corporation
IPALCO Enterprises, Inc. CenterPoint Energy, Inc.
Maine & Maritimes Corporation Dominion Resources, Inc. Note: Based on assets at 12/31/09
Northeast Utilities Duke Energy Corporation
NorthWestern Energy Edison International
NSTAR Entergy Corporation
NV Energy, Inc. Exelon Corporation
Q2 2010
Rate Case Summary
HIGHLIGHTS
I. U.S. Rate Cases Filed (Quarterly)
I. Number ofElectric Output (GWh)
U.S. Shareholder-Owned Electric Utilities
■ Shareholder-owned electric utilities filed 19 new gen-
eral rate cases in Q2. Only three times in the more than 25
two decades have electric utilities filed more cases in a 20
quarter. 15
■ At 10.12%, the average awarded ROE in Q2 was at the 10
low end of a two-decade-long downward trend. 5
■ New infrastructure investments drove most of the fil- 0
ings in Q2. New generation made up the bulk of those
investments and, reflecting the new green awareness in
the industry and across society at large, included spend-
ing on wind farms, emission control facilities, and the Source: SNL Financial / Regulatory Research Assoc. and EEI Rate Department
conversion of plants from coal to natural gas.
■ The weak economy influenced some of the cases filed II. Average Awarded ROE (Quarterly)
and decided in Q2. Companies’ attempts to recover
U.S. Shareholder-Owned Electric Utilities
shortfalls caused by weak sales figured in several filed %
cases. Several case decisions phased in rate increases 13.5
while other decisions froze rates. 13.0
12.5
12.0
11.5
COMMENTARY 11.0
10.5
Shareholder-owned electric utilities filed 19 new general rate 10.0
cases in Q2, a number consistent with the trend of increasing 9.5
numbers of filed cases since the turn of the century. Only
three times in the more than two decades of EEI’s compiled
data have electric utilities filed more cases in a quarter than
they did in Q2 2010. New infrastructure investment was the Source: SNL Financial / Regulatory Research Assoc. and EEI Rate Department
primary driver of Q2’s filings, consistent with the trend in
recent quarters. Electric utilities’ attempts to implement (O&M) expenses, and administrative and general expenses
tracking mechanisms such as adjustments, riders and clauses (A&G) also figured prominently among the reasons for fil-
were also a major driver. Attempts to recover the cost of ings in Q2. And as has been the case for the past several
energy efficiency programs, operation and maintenance
1 EEI Q2 2010 Financial Update
2 RATE CASE SUMMARY
III. Average Requested ROE (Quarterly) IV. Average Regulatory Lag (Quarterly)
% U.S. Shareholder-Owned Electric Utilities Months U.S. Shareholder-Owned Electric Utilities
14.0 25.0
13.5
13.0 20.0
12.5
12.0 15.0
11.5
11.0 10.0
10.5
10.0 5.0
Source: SNL Financial / Regulatory Research Assoc. and EEI Rate Department Source: SNL Financial / Regulatory Research Assoc. and EEI Rate Department
V. 10-Year Treasury Yield rate case filing and decision — a rough proxy for the time
between when a utility needs funds and when those funds
U.S. Shareholder-Owned Electric Utilities
% are collected in rates. When costs are rising, as they cur-
16.0 rently are for many utilities, regulatory lag can keep a utility
14.0 continuously struggling to catch up with rising spending.
12.0 Commissions can allow utilities to moderate regulatory lag
10.0 in several ways, including adjustment clauses, interim rate
8.0 increases, construction work-in-progress (allowing the utility
6.0
to recover costs of construction before a project comes
4.0
online), and the use of projected costs to determine rates.
2.0
However, these are only partial solutions, inconsistently ap-
plied across the country. Commissions and legislators can
help support the financial health of electric utilities by pass-
Source: U.S. Federal Reserve ing laws and implementing regulations to help reduce regu-
latory lag.
quarters, attempts to recover for the effects of the poor
economy were also a factor in many filings. Filed Cases
New infrastructure investments drove most of the filings in
ROE Q2. New generation made up the bulk of those investments
At 10.12%, the average awarded ROE in Q2 was at the low — reflecting the new green awareness in the industry and
end of a two-decade-long downward trend. Only a handful across society at large ― and included spending on wind
of quarters over recent years have seen a lower average farms, emission control facilities, and the conversion of
awarded ROE. Declining interest rates have contributed to plants from coal to natural gas. MDU Resources filed in
this trend, as have attempts by commissions to keep rates North Dakota and Interstate Power & Light filed in Minne-
low, particularly during hard economic times for customers. sota to recover for new wind generation. Madison Gas and
At 11.12%, the average requested ROE during Q2 was also Electric in Wisconsin filed for recovery of costs associated
at the low end of a long-term declining trend, and for simi- with conversion of a plant from coal to natural gas, among
lar reasons. other environmental investments.
Efforts to implement tracking mechanisms were also a
Regulatory Lag foundation for case filings in Q2. MDU Resources in North
Average regulatory lag in Q2, at nine months, was a bit Dakota filed for a load management tracking adjustment to
lower than the 10-11 month average over the past two dec- recover costs of demand-side management (DSM) and con-
ades, and while this is good news, it probably does not sig- servation programs, a renewable resource cost recovery
nify a break in the trend. (The high volatility seen in the late rider, and a transmission cost recovery rider. MDU also pro-
1990s and early 2000s resulted from deregulation and re- posed to credit ratepayers 85% and retain 15% of wholesale
structuring.) We define regulatory lag as the time between a power margins recovered through the fuel clause. Appala-
EEI Q2 2010 Financial Update
RATE CASE SUMMARY 3
VI. Rate Case Data: From Tables I-V
U.S. Shareholder-Owned Electric Utilities
Number of Average Average Average Average
Quarter Rate Cases Filed Awarded ROE Requested ROE 10-Year Treasury Yield Regulatory Lag
Q4 1988 1 NA 14.30 8.96 NA
Q1 1989 4 NA 15.26 9.21 NA
Q2 1989 4 NA 13.30 8.77 NA
Q3 1989 14 NA 13.65 8.11 NA
Q4 1989 13 NA 13.47 7.91 NA
Q1 1990 6 12.62 13.00 8.42 6.71
Q2 1990 20 12.85 13.51 8.68 9.07
Q3 1990 6 12.54 13.34 8.70 9.90
Q4 1990 8 12.68 13.31 8.40 8.61
Q1 1991 13 12.66 13.29 8.02 11.00
Q2 1991 17 12.67 13.23 8.13 11.00
Q3 1991 15 12.49 12.89 7.94 8.70
Q4 1991 12 12.42 12.90 7.35 10.70
Q1 1992 6 12.38 12.77 7.30 8.90
Q2 1992 15 11.83 12.86 7.38 9.61
Q3 1992 11 12.03 12.81 6.62 9.00
Q4 1992 12 12.14 12.36 6.74 10.10
Q1 1993 6 11.84 12.33 6.28 8.87
Q2 1993 7 11.64 12.39 5.99 8.10
Q3 1993 5 11.15 12.70 5.62 11.20
Q4 1993 9 11.04 12.12 5.61 10.90
Q1 1994 15 11.07 12.15 6.07 13.40
Q2 1994 10 11.13 12.37 7.08 9.28
Q3 1994 11 12.75 12.66 7.33 11.80
Q4 1994 4 11.24 13.36 7.84 9.26
Q1 1995 10 11.96 12.44 7.48 12.00
Q2 1995 10 11.32 12.26 6.62 10.40
Q3 1995 8 11.37 12.19 6.32 9.50
Q4 1995 5 11.58 11.69 5.89 10.60
Q1 1996 3 11.46 12.25 5.91 16.30
Q2 1996 9 11.46 11.96 6.72 9.80
Q3 1996 4 10.76 12.13 6.78 14.00
Q4 1996 4 11.56 12.48 6.34 8.12
Q1 1997 4 11.08 12.50 6.56 13.80
Q2 1997 5 11.62 12.66 6.70 18.70
Q3 1997 3 12.00 12.63 6.24 8.33
Q4 1997 4 11.06 11.93 5.91 12.70
Q1 1998 2 11.31 12.75 5.59 10.20
Q2 1998 7 12.20 11.78 5.60 7.00
Q3 1998 1 11.65 NA 5.20 19.00
Q4 1998 5 12.30 12.11 4.67 9.11
Q1 1999 1 10.40 NA 4.98 17.60
Q2 1999 3 10.94 11.17 5.54 8.33
Q3 1999 3 10.75 11.57 5.88 6.33
Q4 1999 4 11.10 12.00 6.14 23.00
Q1 2000 3 11.08 12.10 6.48 15.10
Q2 2000 1 11.00 12.90 6.18 10.50
Q3 2000 2 11.68 12.13 5.89 10.00
Q4 2000 8 12.50 11.81 5.57 7.50
Q1 2001 3 11.38 11.50 5.05 24.00
Q2 2001 7 10.88 12.24 5.27 8.00
Q3 2001 7 10.78 12.64 4.98 8.62
Q4 2001 6 11.57 12.29 4.77 8.00
Q1 2002 4 10.05 12.22 5.08 10.80
Q2 2002 6 11.41 12.08 5.10 8.16
Q3 2002 4 11.25 12.36 4.26 11.00
Q4 2002 6 11.57 11.92 4.01 8.25
EEI Q2 2010 Financial Update
4 RATE CASE SUMMARY
VI. Rate Case Data: From Tables I-V (cont.)
U.S. Shareholder-Owned Electric Utilities
Number of Average Average Average Average
Quarter Rate Cases Filed Awarded ROE Requested ROE 10-Year Treasury Yield Regulatory Lag
Q1 2003 3 11.49 12.24 3.92 10.20
Q2 2003 10 11.16 11.76 3.62 13.60
Q3 2003 5 9.95 11.69 4.23 8.80
Q4 2003 10 11.09 11.57 4.29 6.83
Q1 2004 5 11.00 11.54 4.02 7.66
Q2 2004 8 10.64 11.81 4.60 10.00
Q3 2004 6 10.75 11.35 4.30 12.50
Q4 2004 5 10.91 11.48 4.17 14.40
Q1 2005 4 10.55 11.41 4.30 8.71
Q2 2005 12 10.13 11.49 4.16 13.70
Q3 2005 8 10.84 11.32 4.21 13.00
Q4 2005 10 10.57 11.14 4.49 8.44
Q1 2006 11 10.38 11.23 4.57 7.33
Q2 2006 18 10.39 11.38 5.07 8.83
Q3 2006 7 10.06 11.64 4.90 8.33
Q4 2006 12 10.38 11.19 4.63 8.11
Q1 2007 11 10.30 11.00 4.68 9.88
Q2 2007 16 10.27 11.44 4.85 9.82
Q3 2007 8 10.02 11.13 4.73 10.80
Q4 2007 11 10.44 11.16 4.26 8.75
Q1 2008 7 10.15 10.98 3.66 7.33
Q2 2008 8 10.41 10.93 3.89 10.80
Q3 2008 21 10.42 11.26 3.86 10.60
Q4 2008 6 10.38 11.21 3.25 11.90
Q1 2009 13 10.31 11.79 2.74 11.10
Q2 2009 22 10.55 11.01 3.31 9.13
Q3 2009 17 10.46 11.43 3.52 10.90
Q4 2009 14 10.54 11.15 3.46 9.69
Q1 2010 16 10.45 11.24 3.72 10.00
Q2 2010 19 10.12 11.12 3.49 9.00
NA = Not available
Source: SNL Financial / Regulatory Research Assoc. and EEI Rate Department
chian Power in West Virginia sought to implement a rider to advantage of a 40-basis-point adder to return associated
reflect RTO costs. Southwestern Public Service in Texas with energy efficiency initiatives.
wants to recover franchise fees through a separate charge As is often the case, recovery of O&M expenses played
and NOx emission allowances through the fuel clause. Cen- a significant role in the quarter’s cases. Equally prominent
terPoint Energy Houston wants to implement a rider to were efforts to recover A&G costs. Attempts to recover
recover reliability costs, such as system hardening, vegeta- higher pension costs were also a part of several filings.
tion management, pole and line inspections, and grid de- Southwestern Public Service in Texas filed to recover higher
ployment, among others. pension and healthcare costs. Public Service Company of
Energy efficiency and its effects played a role in many New Mexico filed in New Mexico for increases in post-
of the filings in Q2. Wisconsin Public Service in Wisconsin retirement medical and pension expenses. Commonwealth
filed to recover for demand shortfalls caused by increased Edison in Illinois filed for increased pension and employee
energy efficiency efforts by customers. Public Service Com- benefit costs.
pany of New Mexico filed in New Mexico for a pilot de- Nearly as prominent as O&M and A&G cost recovery
coupling program for residential and small commercial cus- were attempts to recover for the impact of the weak econ-
tomers. Sierra Pacific Power’s filing in Nevada includes an omy, as has been the case for the past several quarters.
incentive return on DSM as previously authorized by the Companies’ attempts to recover shortfalls caused by weak
commission. Commonwealth Edison in Illinois filed to take sales figured in several cases. Wisconsin Public Service filed
EEI Q2 2010 Financial Update
RATE CASE SUMMARY 5
in Wisconsin to recover for shortfalls caused by decreased Company of New Hampshire’s settlement requires the com-
usage due to the weak economy. Public Service Company of pany not to file any further distribution rate increases until
New Mexico filed in New Mexico to offset declining sales. June of 2015.
Otter Tail Power in Minnesota filed to recover for reduced Central Hudson Gas & Electric’s settlement in New
wholesale revenues. York also makes accommodations for the commission’s re-
Generally, utilities prefer higher fixed customer charges quest for austerity measures in response to “current adverse
than those approved by commissions. The utilities believe economic conditions” by disallowing costs associated with
that higher customer charges better represent the way costs the supplemental executive retirement plan, disallowing any
are created by average customer usage (i.e., that more costs rate recovery of executive salary beyond current levels
are fixed than is generally reflected in the rate schedules). through the end of 2010, eliminating or deferring some costs
Consequently, recovering rising fixed costs through variable associated with implementation of international financial
rate charges creates inaccurate recovery, difficulties in de- reporting standards, and capping other expenses above an
signing rates, and encouragement of uneconomic usage. On inflation adjustor of 1.7% for the second and third years of
the other hand, higher fixed charges reduce the incentive to the agreement. The settlement also requires the company to
conserve and are generally less popular with customers. continue to defer certain expenses, such as property taxes,
Commonwealth Edison in Illinois wants to recover interest on variable-rate debt, interest costs on new debt is-
more costs through fixed charges, such as the customer suance, pension expense, post-employment benefits other
charge, and wants the percentage of fixed costs recovered to than pensions, litigation costs related to asbestos exposure,
be 60% starting in June 2011, 70% in June 2012, and 80% in and research and development expenses.
June 2013. However, in the MDU Resources case, the Wyoming
commission said the company did not persuade the commis-
Decided Cases sion with the “argument that current economic conditions
Nearly three quarters of the cases decided in Q2 were ap- and the decline in the stock market have resulted in investors
proved settlements. Settlements are often silent on many rate requiring a higher rate of return as they perceive more risk in
case parameters, making them somewhat difficult to analyze. common stock investments.” The Washington commission
However, given the multitude of cases, we still have plenty similarly found the weak economy to be less compelling and
to consider: adopted, in Puget Sound Energy’s decision, a capital struc-
ture similar to the company’s capital structure before the
The Weak Economy financial crisis, finding that “disruptions in the capital mar-
The weak economy influenced some of the cases decided in kets have stabilized at levels similar to pre-crisis conditions.”
Q2 as several decisions phased in rate increases. Phase-ins
attempt to soften the effect of increases on customers and Tracking Mechanisms
many of these phase-ins resulted from a heightened sensitiv- Decisions on tracking mechanisms played a large role in de-
ity about over-burdening customers during times of eco- cided cases, as they often do. Southwestern Electric Power’s
nomic strain. Monongahela Power’s and Potomac Edison’s approved settlement in Texas allows a surcharge for vegeta-
approvals in West Virginia implement a rate increase in two tion management. Empire District Electric’s approved settle-
steps, as does Connecticut Light & Power’s decision in Con- ment in Kansas allows the company to implement a tracking
necticut. South Carolina Electric & Gas’s settlement stipu- mechanism for pension and other post-employment bene-
lates a three-step rate increase. fits. While the Missouri commission rejected several trackers
On the other hand, the Wyoming commission rejected a in the context of Union Electric’s settlement, it said that the
phase-in provision in MDU Resources’ settlement, saying company needs a fuel adjustment clause “to help alleviate the
“ratepayers will pay more if the phase-in is accepted” and effects of regulatory lag as net fuel costs continue to rise.”
that it would “cause customers to experience rate instability The commission added that, “In recent years, the company
as rates would be adjusted” that would “contribute to unnec- has been unable to earn its allowed rate of return, and in
essary customer confusion and serve little purpose [other] large part, that problem is due to fuel-related issues.”
than to remind customers that rates continue to increase.” Alternatively, some tracking mechanisms were rejected:
Similarly, Q2 decisions froze rates for several companies. Atlantic City Electric’s settlement in New Jersey does not
Central Hudson Gas & Electric’s settlement gives the com- allow two that the company had proposed. Union Electric’s
pany a 35 basis point bonus return for entering into a three- settlement in Missouri disallowed the company-proposed
year agreement. Monongahela Power’s and Potomac Edi- environmental cost recovery mechanism and the company’s
son’s settlement in West Virginia freezes rates until Septem- proposed tracker for storm restoration costs, among other
ber 2012, barring extenuating circumstances. Public Service adjustments. In New Jersey, Public Service Electric & Gas’s
EEI Q2 2010 Financial Update
6 RATE CASE SUMMARY
settlement requires the company to withdraw a proposed commissions. The utilities believe that the higher customer
pension expense tracking mechanism and capital infrastruc- charges better represent the way costs are caused by the av-
ture surcharge mechanism and to phase out a capital adjust- erage customer’s usage (i.e., that more costs are fixed than is
ment charge. Kentucky Power’s settlement in Kentucky generally reflected in the rate schedules). A few decisions
similarly rejected the company’s proposed transmission ad- during Q2 supported this cost-causation approach to rate-
justment mechanism. The Connecticut commission rejected making. Central Hudson Gas & Electric’s settlement in New
Connecticut Power & Light’s proposed revenue decoupling York eliminates time-of-use delivery rates, since these only
and pension tracking mechanisms, explaining that “it is rea- reflect delivery costs and not commodity costs. Mononga-
sonable to maintain decoupling for CL&P through rate de- hela Power’s and Potomac Edison’s settlement in West Vir-
sign” and that the mechanism “would act as a disincentive ginia raises the residential and small commercial customer
for improving investment strategies and for reducing ex- charge from $4.00 to $5.00. Kentucky Power’s settlement
penses.” increases the company’s customer charge from $5.86 to
$8.00. ■
Ratemaking Based on Cost Causation
As discussed above under Filed Cases, utilities prefer higher
fixed customer charges than those typically approved by
EEI Q2 2010 Financial Update