Redefining the Regulatory Compact

Abstract

Over the past three decades, utility regulators have increasingly strayed from traditional methods of setting utility revenue requirements to improve performance, help achieve public policy goals, and reduce costs. Under the traditional regulatory compact, utilities are allowed to collect revenues from customers sufficient to cover the costs of providing services. This includes recovery of all operating costs, power purchase costs and other pass‐throughs, and return of and on investment necessary to maintain safe and reliable service to all customers regardless of size, type, or demands they place on the system. And utility services are to be provided at a fair and reasonable cost, as determined by regulators.