Avoiding the money saving rate increase

This is the last in a series of three articles discussing problems for utilities that arise in connection with inflation-swollen capital-investment costs. The first dealt with the problem of front-end loading of charges on capital projects and proposed a way of appreciating new plant at the rate of inflation and earning on the appreciated rate base in later years. The second examined methods of arranging the financing of new plant projects to avoid the incurrence of losses in their early years if the rate base is trended as recommended. This article addresses the question of how to avoid the necessity of a rate increase when placing into service new capital equipment whose purpose was to save ratepayers money. The outcome should be a new regulation on accounting. 2 tables.