Shared support services costs: are you transparent?
How does it affect you?
Almost every utility has adopted some sort of shared services model in connection with its A&G support areas.
Whenever regulators disallow cost recovery, the impact goes directly to the utility’s bottom line. This means that shareholders take the hit.
To the extent that rate increases are related to rising costs associated with support services, there will be additional pressure from regulators to moderate the impact on ratepayers.
This could include:
- Reducing the allowed rate of return on common equity
- Phasing in rate increases
- Forcing utilities to agree to rate freezes or multiyear stay-out periods
These pressures could translate into negative shareholder value impact, lower returns and prospects for flat EPS growth.
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