In theory the state government can pass compliance laws that would force them to spend the money on upgrades. Thousands of miles of cast iron pipe has been removed over the past several years with regulatory muscle and incentive. I believe a motivated legislature could make it happen. But will they? I doubt it. Lobby $$$...
Of course, the public must accept that any money put into the upgrades/winterization will show up on their bills. But should it? Again, in theory the dividends are on the bill because where do they get the money to pay to the shareholders? Debt to pay a dividend? No... it's the weighted average cost of capital imbedded in the rates. That's the problem. How does a large company acquire capital? Debt and equity. Money requires a return and a dividend (in part along with interest and the assumed uplift of the stock price itself) is that rate of return. So winterization is new spend and hopefully it would be capitalizable (the legislature could classify these types of expenditures as regulatory assets with special depreciation recovery rates) so the rate payers would only pay the rate of return (plus the depreciation and tax effects of this incremental spend) on their bills.
-
Hot x 1
Last edited: Oct 20, 2022