Fundamentals of Energy Regulation

Energy regulation experts, Jonathan Lesser, PhD, and Leonardo Giacchino, PhD, Expert Affiliates at Bates White, LLC, have teamed up to produce an important new reference guide for regulators, attorneys, rate analysts, economists, accountants, and students interested in this dynamic field.

In Part I, the authors of Fundamentals of Energy Regulation begin by explaining fundamental economic and regulatory concepts used in ratemaking and regulatory oversight worldwide. They explain how the revenue requirement concept underlies all forms of regulation, from traditional “cost-of-service” regulation to various types of “incentive” and performance-based regulation that are increasingly used in the United States and internationally. Using clear examples and case studies, the authors guide readers through the ways practitioners perform key—and often controversial—calculations that establish the baseline of revenues that regulated firms require to operate successfully. The authors carefully explain the methods used to measure and verify costs, determinations of the prudence of regulated investments, the role and calculation of depreciation costs, and the methods used to estimate regulated rates of return.

Drs. Lesser and Giacchino then tackle issues surrounding cost allocation, focusing especially on the methods used to allocate “joint and common” costs among different customer groups, as well as how those groups are themselves determined. The authors address the differences between short-run and long-run marginal costs, which often determine the overall structures of regulated rates and tariffs; conflicts between pricing for efficiency and pricing for equity, as well as broader “social policy” price goals; the establishment of “ready-to-serve” charges; the use of multipart price tariffs; and different methods to estimate tariffs. They conclude Part I by discussing different “pass-through” mechanisms that allow regulated companies to automatically adjust rates in response to changes in cost components over which they have no control.

In Part II, the authors present a wide range of topics, including the practical aspects of new regulatory structures, as well as a host of issues that have become increasingly critical, including: evaluation and prevention of market power in newly deregulated markets; the growing importance of environmental regulation, including regulation designed to address global climate change; investment decisions that can cope with increasingly volatile energy markets; methods to ensure reliable electric systems; and emerging issues in international energy regulation.

Fundamentals of Energy Regulation is available now at a special introductory price from the publisher, Virginia-based, Public Utilities Reports, Inc.: http://www.pur.com/view_news.cfm?id=66.

View Table of Contents.