Effects of resource acquisitions on electric-utility shareholders

摘要

The purpose of this study is to see how shareholders fare when the utility acquires different kinds of resources. The resources considered are utility-built, -operated, and -owned power plants with different combinations of construction and operation costs; purchases of power; and DSM programs. We calculated the net present value of realized (cash) return on equity as the primary factor used to represent shareholder interests. We examined shareholder returns for these resources as functions of public utility commission regulation, taxes, and the utility's operating environment. Our treatment of regulation considers the frequency and type (future vs historic test year) of rate cases, inclusion of construction work in progress in ratebase vs allowance for funds used during construction, ratebase vs expensing of DSM programs, book and tax depreciation schedules, possible disallowances of ''excess'' power-plant or DSM capital costs, and possible lack of adjustment for ''excess'' fuel or purchased power costs. The tax policies we studied include the existence and rates for property, sales, and income taxes and the existence and regulatory treatment of deferred taxes. The utility's operating environment includes the overall inflation rate, load-growth rate, escalation in nonproduction expenses, and nongeneration construction (capital) requirements. Finally, given the increasingly competitive nature of electricity markets, we briefly considered alternatives to traditional cost-of-service regulation. We examined shareholder returns for the resources described above in an environment where the utility competes with other suppliers solely on the basis of electricity price.