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Gary VerDouw, a former American Water employee and now an independent rate and regulatory consultant, discusses the often misunderstood process of setting rates for investor-owned water utilities. Gary has tremendous experience having worked on investor-owned water utilities in multiple jurisdictions and having testified on rate cases before no less than seven public utility commissions. Gary does a tremendous job filling you in on the how, what, why and where of investor-owned water utility rates.
In this session, you’ll learn about:
- How investor-owned utilities set rates differently than municipal utilities
- What are the four numbers required to set investor-owned utility rates
- Where the real fight usually is in investor-owned utility rate cases
- How an investor-owned utility’s rate base is determined
- How cost of common equity is determined
- How the weighted cost of capital is determined
- What is an investor-owned utility’s net operating income
- How net operating income is calculated
- What single tariff pricing is and why it’s beneficial
Resources and links mentioned in or relevant to this session include:
- Gary’s LinkedIn page
- Wikipedia Page on Utility Ratemaking
- The SCOTUS decisions that are the bedrock of utility rates: Federal Power Commission v. Hope Natural Gas Co. (prudently incurred expenses are recoverable) & Bluefield Water Works v. Public Service Commission (investors entitled to opportunity to earn fair rate of return on investment)
- Blog Post from UNC’s Environmental Finance Center: Myths about Water Rate Setting
- TWV #121: Anatomy of Municipal Rates with Scott Miller
Thank You!
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