The Struggles of Ratemaking for Utility Regulators

Ratemaking is a leading regulatory function that reaches all facets of utility operations. The ratemaking process is complex and interactive, striving to satisfy or appease groups with diverse goals, interests and agendas. It also entails addressing several objectives, each of which has a distinct effect on the public interest. After all, a rate mechanism like a surcharge on utility bills 1 is desirable only if it is compatible with the objectives set out by regulators (e.g., advancement of energy efficiency; or lowering of risk to build large projects), assuming they satisfy public policy, and statutory and other legal requirements.