Ratepayer Advocates Cry Cost-of-Capital “Ouch”

By Published On: August 10, 2012

While feeling regulatory pressure to decrease the degree to which investments may qualify for interest payments by ratepayers, investor-owned utilities submitted plans to reduce their rates of return--but they’re not low enough, according to the Division of Ratepayer Advocates. Ratepayer advocates singled out Southern California Edison in an Aug. 6 filing, calling proposed returns “unfair.” The utility proposed an 11.1 percent return on equity investments--down from the current 11.5 percent. Compared to 34 utilities nationwide, Edison’s request “far exceeds the median.” DRA proposes an 8.75 percent return on equity. San Diego Gas & Electric is requesting an 11 percent return on equity, down from 11.1 percent. SoCal Gas is asking for regulators to authorize equity returns of 10.9 percent up from 10.82 percent. Pacific Gas & Electric wants 11 percent, down from 11.35 percent on equity investments. The consumer advocate urges regulators to notch the other utilities’ requests for return on equity down: SDG&E to 8.5 percent, SoCal Gas to 8.5 percent; PG&E to 8.75 percent Return on equity investments is the highest available interest rate utilities may earn. Return on preferred stock runs about 5 percent less.

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