Stay-Out Adjustments and Multi-Year Regulatory Rate Plans
29 Pages Posted: 4 Dec 2015 Last revised: 4 Sep 2018
Date Written: August 31, 2018
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: Suggested Citation