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Authorized ROE for US electric utilities ticks up in 2017

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Authorized ROE for US electric utilities ticks up in 2017

After remaining flat in 2015 and 2016 at 9.6%, the average authorized return on equity for U.S. electric utilities rose slightly in 2017 to 9.68%, according to an S&P Global Market Intelligence analysis.

Authorized ROE on 2017 electric rate case decisions

Alaska Electric Light and Power Co. received the highest authorized ROE in 2017, at 11.95%. The utility, an Avista Corp. subsidiary, provided electricity to 16,853 customers in and around Juneau, Alaska, in 2016, of which 86% were residential customers. The ROE, along with a $3.4 million base rate increase, was approved Nov. 15, 2017, following a settlement between the company and the Regulatory Affairs Public Advocacy section of the Office of the Alaska Attorney General filed about a month prior. Alaska Electric is required to file its next rate case before Aug. 30, 2021.

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Southern California Edison Co. received the second-highest authorized ROE in 2017, at 10.30%, exactly what the company had requested. The California Public Utilities Commission in September 2017 authorized SoCalEd's ROE for 2018, reducing it from the previously approved level of 10.45%, effective Jan. 1, 2018. As part of the approved petition, the cost of capital application filing date has been extended to April 22, 2019.

Authorized ROE on 2016 electric rate case decisions

Among companies that received a ruling on their electric rate cases in 2016, Florida Power & Light Co. and Duke Energy Progress LLC were granted the highest authorized ROEs at 10.55% and 10.10%. respectively.

FPL serviced about 4.2 million residential customers, accounting for 89% of its total customers for 2015. The settlement adopted by the Florida Public Service Commission specifies a four-year rate plan covering 2017 through 2020 under which the company is to increase rate base by $811 million.

On Dec. 21, 2016, a written order was published by the Public Service Commission of South Carolina to authorize the rate increase for Duke Energy Progress. The commission authorized $56.2 million as part of a two-step rate increase. A $37.7 million increase became effective Jan. 1, 2017, and the remaining $18.5 million increase went into effect Jan. 1, 2018.

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Earned ROE on 2015 electric rate case decisions

Out of the companies whose electric general rate cases were completed in 2015, CMS Energy Corp. subsidiary Consumers Energy Co. had the highest earned ROE in 2016, at 10.73%. Consumers served about 1.8 million customers in Michigan in 2016, approximately 88% of which were residential customers.

On Nov. 19, 2015, the Michigan Public Service Commission issued a recommendation to authorize a $126.4 million, three-step net permanent electric rate increase. Consumers also has a pending vertically integrated electric rate case in front of the Michigan PSC, in which the company has requested a rate increase of $147.7 million. A decision is expected March 31.

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DTE Energy Co. subsidiary DTE Electric Co. had the second-highest earned ROE in 2016, at 10.68%. In its initial order Dec. 11, 2015, the Michigan PSC authorized a $238.2 million permanent rate increase but, after a rehearing, boosted that total to $242.7 million, which came into effect March 1, 2016.

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View a list of utility rate cases and use SNL Energy's Utility Financial Profile, Rate Cases – Pending and Past and Rate Case Statistics and Graphs templates to browse Regulatory Research Associate's database of utility rate cases and analyze trends in rate case decisions.

RRA commission profiles and rankings can be found here

For an update on rate case activity in 2017, refer to RRA's Major Rate Case Decisions Quarterly Update.