How Utilities Make Money inside the United States

  • ID: 4318259
  • Training
  • 2 Hours
  • Enerdynamics
1 of 2
An Uncomplicated Study of Regulated Utilities and the Unique Way in Which They Earn a Profit

A surprising number of utility employees do not understand how their utility makes money! How Utilities Make Money explains the basics in simple and easy-to-understand terms. The course introduces basic financial concepts for a non-regulated company (a lemonade stand) and then compares these concepts to those that apply to a regulated utility. The course also explains the basic concept of utility regulation and why a utility operates under rules different from non-regulated companies. It also explains how rates are set such that the utility has the opportunity to collect enough to cover projected expenses as well as a reasonable return on its equity. The course concludes with real world examples of how ultimate results can differ from what was authorized by the regulator. It includes practical examples and exercises to help learners understand basic financial concepts and the unique way in which utilities earn a profit.

This course comprises the following modules:

  • Introduction
  • Business Basics for Competitive Companies
  • How and Why Utilities Are Regulated
  • Business Basics for Regulated Utilities
  • How Utility Rates and Earnings Are Determined
  • How Utilities Can Exceed or Fall Short of Authorized Earnings

How Utilities Make Money explains the basics of utility profitmaking in simple and easy to understand terms. The course introduces basic financial concepts for a nonregulated company and then compares these concepts to those that apply to a regulated utility. The course also explains the basic concept of utility regulation and why a utility operates under rules different from non-regulated companies. It also explains how rates are set to provide utilities the opportunity to collect enough to cover projected expenses plus a reasonable return on shareholder’s equity investment. The course concludes with real world examples of how ultimate results can differ from what was authorized  by the regulator.

WHO SHOULD TAKE THIS COURSE?

  • Those who work for a regulated utility or anyone needing to learn the basics of how utilities make money
  • Employees of companies providing services to utilities who need a better understanding of a utility’s business motivations

WHAT YOU WILL LEARN

  • How non-regulated, competitive companies create revenue, earnings and return on equity investment
  • Basic utility concepts such as revenue, earnings, rate of return, capital, and depreciation
  • How and why the utility industry is regulated
  • How regulated utilities create revenue, earnings and return on equity
  • How utility earnings can exceed or fall short of what the regulator authorizes

Course Length: 2 hours

Price is for a Subscription of 45 Days

READ MORE
Note: Product cover images may vary from those shown
2 of 2

Loading
LOADING...

3 of 2

Business Basics for Competitive Companies

  • Capital expenditures vs. expenses
  • Sources of capital
  • The concept of debt/equity (capital structure)
  • Pricing for non-regulated companies
  • What are earnings?
  • How does a non-regulated company measure success (concept of return on equity)
  • How a non-regulated company can increase earnings

How and Why Utilities Are Regulated

  • What is regulation?
  • How regulation affects utility earnings
  • Who are state and federal regulators
  • The regulatory compact
  • Functions and goals of regulation

Business Basics for Regulated Utilities

  • Why capital investments are important to utilities
  • Utility expenses and why they are important to distinguish
  • Sources of capital
  • Pricing (rates) for regulated utilities
  • How revenues and earnings are calculated
  • Utility return on equity
  • Why a regulated utility is different from a non-regulated, competitive company

How Utility Rates and Earnings Are Determined

  • Cost-of-service ratemaking concepts
  • Rate base
  • How depreciation affects the value of utility rate base
  • Not all investment goes into rate base
  • Rate of return and how it is set in a cost-of-capital proceeding
  • What is fair and reasonable return on equity (ROE)?
  • How rates are set
  • Details of the regulatory process
  • The revenue requirement and how it is allocated among customer classes and charge types
  • Incentive regulation (performance-based and market-based)

How Utilities Can Exceed or Fall Short of Authorized Earnings

  • Earnings and expenses
  • How energy deliveries affect revenues
  • The role of capital investment in rate base and authorized ROE in utility earnings
  • How utilities can earn extra profit by offering additional services
  • Incentives
  • Cost of debt
  • Decoupling
  • How earnings can be increased under cost-of-service ratemaking
  • Earnings risks for utilities
  • Example of how utility earnings are calculated
Note: Product cover images may vary from those shown
4 of 2
Note: Product cover images may vary from those shown
Adroll
adroll