Opinion: How the regulated electric utility business really works
Some Camera readers have asked me questions about how regulated monopoly investor-owned utilities like Xcel work in practice. Here is some background information. Xcel Energy is a holding company that owns regulated monopoly utilities in eight states, including Public Service Company of Colorado, which is regulated by our Public Utilities Commission. Xcel makes money by investing their own cash equity (plus money derived from bond sales) in building power plants, power lines, etc. These investments are then added to the “rate base” on which Xcel is granted a rate of return by the PUC. This return is calculated based on the bonds’ interest rates and a rate of return on the equity, which, per the relevant case law, is supposed to be, “commensurate with returns on investments in other enterprises having corresponding risks.” The bonds are paid off as they come due. The invested equity is paid off in equal payments over the lifetimes of the power plants and other infrastructure. In r...