Base-marginal approach to cost of capital for utilities

This article describes a new base-plus-marginal approach suggested by the author for determining a utility's cost of capital. In essence, it consists of measuring the marginal cost of new common equity and arriving at a weighted average with the utility company's current rate of return. The claim is made for this new method that it will avoid the overcharging of utility customers and unnecessarily high returns to stockholders on the one hand, and the undercharging of customers and loss of financial integrity of the utility on the other. 3 tables.