Utilities are facing rising operating costs and infrastructure needs that are prompting
them to seek more frequent rate increases. The electric industry is embarking on
one of the largest infrastructure/construction trends, if not the largest, in the
history of American utilities. It is estimated that utilities will need to spend
$1.5-2 trillion form 2010-2030 to maintain current reliability standards. (Brattle
Group for The Edison Foundation, 2008).
The recent global financial and economic crisis has heightened what had already
become a mounting financial challenge for utilities. This challenge appears to be
one that will remain with us for an undetermined period into the future. Wall Street
demands and expectations have dramatically increased while capital is less plentiful
and more costly as we face major build-out needs.
All stakeholders must assess how they can constructively address these challenges.
Utilities must move forward, but cannot foot the bill alone. Traditional ratemaking
methodologies can accommodate neither the scale nor the speed required for necessary
investments, making alternatives ratemaking mandatory. Failure to invest will result
in inadequate reliability for consumers. Failure to invest appropriately will result
in significantly higher costs for consumers.