Our nation's gas and electric utilities: time to decide

A look at the current energy-utility regulatory and financial environment reveals three distinct aspects of the deteriorating financial health of US utilities: (1) energy prices will rise unless returns on equity are increased, (2) the US is moving into a period of competitive disadvantage in worldwide markets, and (3) despite the need for long lead times, utility construction projects face institutional inertia at the state regulatory level. A path of enlightened economic regulation could put US energy utilities back into the business of investing, marketing, and otherwise satisfying consumer needs. Such a path would require that (1) utilities explain their investment objectives in order to get rate relief, (2) returns on equity be raised above the interest on new debts, (3) the practice of diluting the value of stock holdings in order to generate new financing be stopped, (4) regulators grant accelerated depreciation to past investments, and (5) energy prices reflect today's costs.