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The Cost of Equity in Muni Utility Rates

September 7, 2009

From the archives, I found this article that I wrote a few years ago.  It was first published in the Rocky Mountain Section of the AWWA/WEA magazine.  The article speaks to how much the ratepayers of a utility should expect as a return for the equity they provide as part of a utility’s capital structure.   We have since tied the notion of return on equity to the phenomenon we call “rate shock” (the negative reaction of ratepayers when faced with a sudden increase in user charges); StepWise has theorized that rate shock is largely a result of failing to meet the ratepayers (owners) expectations for return on investment.  More on this topic to come in the days ahead.  In the meantime, here’s the article.

  The Cost of Money, Part 2 (by Jason Mumm, 2006)

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