Aug. 02 2018 — The average return on equity authorized electric utilities in rate cases decided in the first two quarters of 2018 was 9.65%, somewhat below the 9.74% average for cases decided in calendar 2017. There were 26 electric ROE determinations in the first six months of 2018 versus 53 in the full year 2017.
This data includes several limited issue rider cases; excluding these cases from the data, the average authorized ROE was 9.58% in rate cases decided in the first half of 2018, somewhat below the 9.68% average for the full year 2017. The difference between the ROE averages including rider cases and those excluding the rider cases is largely driven by ROE premiums of up to 200 basis points approved by the Virginia State Corporation Commission in riders related to certain generation projects.
For vertically integrated electric utilities, the average ROE authorized was 9.72% in cases decided during the first half of 2018 versus 9.8% for cases decided in calendar-2017. For electric distribution-only utilities, the average ROE authorized in the first half of 2018 was 9.18% versus 9.43% in all of 2017.
The average ROE authorized gas utilities was 9.55% in cases decided during the first two quarters of 2018 versus 9.72% in full year 2017. There were 13 gas cases that included an ROE determination in the first six months of 2018, versus 24 in full year 2017. RRA notes that the 2017 data includes an 11.88% ROE determination for an Alaska utility. Absent this “outlier,” the 2017 gas ROE average is 9.63%.
In the first six months of 2018, the median authorized ROE in all electric utility rate cases was 9.6%, unchanged from full year 2017. For gas utilities, the median authorized ROE in cases decided in the first six months of 2018 was 9.5% versus 9.6% in 2017.
Over the past several years, the persistently low interest rate environment has put downward pressure on authorized ROEs. As shown in the graph below, the annual average ROE has generally declined since 1990 and has been below 10% for electrics since 2014, and below 10% for gas utilities since 2011.
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