Planning the strategy of rate cases

Conflicting consumer, environmental, and industry pressures complicate the structuring of utility rates and indicate the need for a careful strategy for dealing with rate cases. In each case the utility must justify the need for a specific increase that will recover the revenues sought. Individual steps in this process are outlined and explained. A credible presentation for justification includes confirmed forecasts of peaks and energy and a voluntary audit of management and operational performance. Information on revenue needs include current construction, the utility's rate of return on equity, capital structure, depreciation reserve and anticipated life of equipment, and income taxes. Cost presentations offer several possibilities for rate designs and cost of service among customer classes, but cost-based rates and revenue stability are the most sound management approach. Analysis of the utility company's relations with the commission, customers, employees, media, and stockholders is needed in order to understand some of the external factors affecting rate cases. (DCK)