The association between a regulated utility's allowed revenue increase and future operating cost: Some evidence from Florida

Abstract

Using rate case data from the Florida Public Service Commission, this study examines the relationships between a public utility firm's requested revenue increase, the revenue increase granted by the regulator, and the firm's increase in future operating costs. Although statistically significant positive associations of the firm's requested revenue increase with its future operating cost increase and its allowed revenue increase are found, the analysis fails to detect a statistically significant relationship between the firm's allowed revenue increase and the increase in its future operating cost. This suggests that projected operating cost increases communicated via the firm's revenue increase request do not underlie the regulatory determined revenue increase for the firm.