Mitigating Rate Increases
Sector & Sovereign Research
September 2, 2019
Expanding Rate Base Without Raising Customer Bills; Which Utilities Have Done It and Which Can Do It Over the Next Five Years?
Utilities’ ability to limit the impact of rate base growth on customer bills is critical to the growth prospects of the industry and of the individual utilities in it. Since 2010, the aggregate electric rate base of U.S. investor-owned utilities has increased at a 6.3% compound annual rate, while the aggregate revenue requirement of the industry, calculated on a per customer basis, increased by only 0.3% p.a. How have utilities achieved this result, what are the prospects for them continuing to do so, and which utilities are best positioned? Among those utilities with rapid forecast rate base growth, we see AEP, AGR, WEC and ETR as best positioned to limit the impact on customer bills, while NEE may be most vulnerable to customer and ratepayer pushback after their current rate settlement expires.