Utility Rate Base
How a Dollar of Capex Becomes Earnings
Net invested capital serving customers: plant in service plus construction work, minus accumulated depreciation. Every prudently incurred capex dollar lands here.
Commissions set a hypothetical capital structure. Recent US electric averages sit near 50 percent equity.
The allowed ROE (2024 US electric average roughly 9.7 percent) applied to the equity share of rate base. This is the profit line.
Actual interest cost passed through to customers at cost, with no markup.
Recovered dollar-for-dollar. Fuel typically flows through automatic adjustment clauses with no profit attached.
The sum becomes the revenue the utility may collect, divided into tariffs per customer class in a rate case.
Grow rate base 7 percent a year at a constant allowed ROE and earnings grow roughly 7 percent, less dilution from new equity. This is why utilities guide to rate base CAGR.
Allowed ROE vs 10-Year Treasury
Investor-Owned Utility Capex
Five-Year Capex Plans by Utility
Net Plant Growth by Utility
Gas LDCs sit at the top because pipe-replacement programs grow plant without needing new load. Sempra is near zero because Oncor is not consolidated.
EPS Growth Guidance by Utility
Leverage and Interest Coverage by Utility
Bar length is leverage; colour is interest coverage. The dashed line marks 6x debt to EBITDA, around where rating agencies start to press on a regulated utility.
Dividend Payout Ratios by Utility
The dashed line marks 70% of earnings, the top of the sector's conventional comfort zone. Where the earnings bar runs far ahead of the cash-flow bar, the cause is usually a depressed accounting year rather than a dividend under strain.