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Former utility analyst tells Utah PSC a 47.5% common equity ratio and ROE near 9.3–9.4% would be reasonable for Rocky Mountain Power
Summary
Charles Peterson, a former Division of Public Utilities staffer, told the Utah Public Service Commission that a hypothetical capital structure with roughly 47.5% common equity and a return on equity (ROE) in the low‑to‑mid 9 percent range is defensible in Rocky Mountain Power's general rate case.
Charles Peterson, who said he worked for 15 years on rate cases for the state division that reviews utility filings, told the Utah Public Service Commission in Cedar City that a hypothetical capital structure with a 45–50% common equity component is appropriate for Rocky Mountain Power and that a 47.5% common‑equity ratio is a reasonable compromise.
Peterson recommended an ROE decision range near 9.3–9.4% and said the commission could support the company's requested 9.65% only if it placed greater weight on expert testimony arguing for higher returns. "A range of 45 to 50% for common equity appears to be…appropriate," Peterson said. He summarized competing expert positions in the case and said consultant estimates above 10% were driven by aggressive growth-rate and market‑risk assumptions.
Peterson referenced classic regulatory literature — correcting a transcription error he noted in his remarks, he cited the work of James Bonbright on utility regulation — and argued that regulators historically have allowed utilities some latitude to earn premiums above book returns when market evidence supports those outcomes. He said that, as a rough rule of thumb, adding approximately 3 percentage points to the current market yield on utility long‑term debt produces a reasonable ballpark ROE under normal conditions; using recent yields he estimated an ROE consistent with the low‑to‑mid 9% range.
Why it matters: The commission's decision on capital structure and ROE affects the utility's cost of capital, which in turn influences the rates paid by all customers. Peterson's testimony gives the commission an independent, technical assessment designed to inform where within the contested expert ranges the commission might set ROE and equity ratio.
Peterson concluded by offering to answer questions; commissioners thanked him for the prepared analysis. The hearing included public comment from rural customers after Peterson's testimony and continues as part of the broader docket (24-035-04).
