Stay-Out Adjustments and Multi-Year Regulatory Rate Plans

29 Pages Posted: 4 Dec 2015 Last revised: 4 Sep 2018

See all articles by Ryan J. Davies

Ryan J. Davies

Babson College - Finance Division

Kathleen T. Hevert

Babson College - Finance Division

Date Written: August 31, 2018

Abstract

Multi-year regulatory rate plans are becoming more common. An agreement to "stay out" of the rate revision process removes an option for the utility company or regulatory commission to request a modification to tariff rates in response to changes in interest rates. We develop an objective approach to adjust the utility’s required return on equity to account for these lost options.

Keywords: stay-out premium; multi-year rate plans; rate of return regulation; rate freeze; utilities

JEL Classification: K23, L9, G23, G38

Suggested Citation

Davies, Ryan J. and Hevert, Kathleen T., Stay-Out Adjustments and Multi-Year Regulatory Rate Plans (August 31, 2018). Available at SSRN: https://ssrn.com/abstract=2698396 or http://dx.doi.org/10.2139/ssrn.2698396

Ryan J. Davies (Contact Author)

Babson College - Finance Division ( email )

220 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-5345 (Phone)
781-239-5004 (Fax)

HOME PAGE: http://faculty.babson.edu/rdavies/

Kathleen T. Hevert

Babson College - Finance Division

121 Tomasso Hal
Babson Park, MA 02457-0310
United States
781-239-4630 (Phone)

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