Utility Revenue Research Articles

A descriptive model of electricity consumption

The purpose of the model is to give corporate planning personnel, particularly ratemakers, or marketing people, a tool to evaluate quickly how many customers are included in a definite block of energy consumption within some limits of power demand. This will allow them to evaluate the number of customers that will be affected by any proposed rate schedules and, then, to evaluate the resulting effects on utility's revenue. Moreover, this model can, in any time, become a part of a larger model that could be used for financial planning, market analysis, or any other econometric model.

HANDLING REVENUE AND COST ELEMENTS IN RATE SETTING

The authors graphically present the mechanism of rate‐making, with emphasis on the importance of the plant superintendent to the other professionals—the engineers, financial men, and accountants who specialize in the utility field, especially water—in setting rates that will yield required income.

Constitutional Law. Fourteenth Amendment. A Statute Limiting the Franchise in a Referendum concerning the Issue of Municipal Public Utility Revenue Bonds to Residents Who Have Paid a Property Tax Does Not Deprive Residents Who Own No Real Property of Equal Protection of the Laws

Constitutional Law. Fourteenth Amendment. A Statute Limiting the Franchise in a Referendum concerning the Issue of Municipal Public Utility Revenue Bonds to Residents Who Have Paid a Property Tax Does Not Deprive Residents Who Own No Real Property of Equal Protection of the Laws

Regulatory Philosophy—A Regulator Speaks

T HIS ARTICLE will attempt to outline briefly how we go about regulation in Illinois, as well as to sketch in broad terms some of the activities and philosophy of the Illinois Commerce Commission. This analysis also reviews some of the efforts that have contributed to the economic robustness of Illinois. The Commission consists of five members, including the Chairman, who are appointed by the Governor for five-year terms. The appointments are subject to confirmation by the State Senate. The Illinois Public Utilities Act provides that no more than three members shall be of the majority party at the time of appointment. I have a deep conviction, developed during nearly four years of service, that first-class regulation is so important that we can afford to have only competent, adequately compensated people on the job. This is a conviction I hope will gain in currency, particularly among the gentlemen who can do something about the Commissioner compensation phase. We believe we have the competence now, but it can be continued in the years to come only by material recognition of the worth of the work. So, with our Governor's blessing and the support of most local utilities, a bill was prepared to provide the funds necessary, and the last Illinois General Assembly passed it-an .08% tax on gross revenues of utilities. With this additional revenue, we are now able both to make Commission staff work more attractive to qualified people, and to intensify our efforts in various areas. Our Commission is set up on functional lines, including sections for general administration, hearings and orders, engineering, accounts and finance, rates and

Fifty Years' Experience With Water Utility Costs and Revenues

commission,, but other state regulatory bodies were not yet in existence. Most of the midwestern public water systems had been built in the two decades from 1880 to 1900, and many were originally constructed by private companies operating under franchise, usually running for a 20-25-year period. Frequently these franchises prescribed rates as well as conditions of service, both of which were considered firm

Effects of a Depression on a Utility

WOULD HAPPEN TO YOUR REVENUES if We should have a slight depression? That seems to be a popular question to throw at utility managements these days. One writer has given a clue to his view of the magnitude of this depression and its effect on revenues: . . there is little doubt that utility revenues could decline 10% from a peak established prior to a reversal of boomtime economic conditions. I do not want to be counted among those who talk themselves into a depression. I really do not believe that a man-sized depression exists in the foreseeable future. I -do not even expect a 10 percenter. But the question has been raised and should be answered, and I have tried to do this for the company with which I am connected, Consolidated Edison Company of New York. This is a case study, based on the only utility for which adequate data were available to me. I hope that similar studies may be made for other companies.

The Critical Issue of Depreciation in Public Utility Valuation

The problem of reconciling depreciation as an operating expense with the depreciation to be deducted in valuation constitutes one of the most important problems of public utility regulation under normal circumstances. Depreciation expense, on the average, takes up approximately ten per cent of the operating revenues of gas and electric utilities and a somewhat larger percentage of the revenues of telephone utilities. Assuming straight line depreciation accounting,' the depreciation reserves of stable, mature utilities should theoretically approximate fifty per cent of the value of the depreciable property. Under existing conditions in a young and dynamic industry where much of the property is comparatively new it would not be unreasonable to expect reserves of thirty per cent, assuming that the depreciation allowances made in rate cases were actually credited to the reserve account. The reserves would represent the normal excess accumulation of these credits over property retirements during the past life of the utility property.2 The funds represented by the credit balance of the reserve have almost always been invested in property extensions. To the extent that such excess accumulations have been made, the ratepayers have contributed to the capital of the utility. This is the equitable basis of deducting the reserve in determining the rate base. By virtue of the prevailing judicial doctrines and other circumstances, however, the complete amounts of such reserves are seldom if ever deducted in determining the rate base. Actual deductions are usually but a fraction of the reserves. If, for example, the plant and property is financed to the extent of 30 per cent by reserve accumulations, a deduction of only 10 per cent results in a rate base inflated by 28.6 per cent over the investment made by the utility