A multiobjective financial planning model for electric utility rate regulation

Abstract

The interests of the three parties to the regulatory process—investors in an electric utility, consumers, and regulators—are often in conflict. Investors are concerned with shareholder wealth maximization, while consumers desire dependable service at low rates. If the desired end product of regulation is to establish rates that balance the interests of consumers and investors, then a financial planning model is needed that accurately reflects the multi-objective nature of the regulatory decision process. This article develops such a multi-objective programming model for examining the efficient trade-offs available to utility regulators in setting rates of return.