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What is a utility’s authorized “rate of return”?
A utility’s authorized “rate of return” is the percent return on shareholder equity that a utility is authorized to recover in utility rates. It is set by the PSC and is designed to fairly incent sufficient equity investment in Wisconsin utilities while keeping utilities’ cost of debt relatively low. Notably, the return is not guaranteed. If the utility does not adequately control costs it will earn a lower return for its shareholders. In recent years, authorized returns in Wisconsin have fallen from over 12% to just above 10%. The level of return allocated to shareholders for Wisconsin utilities is similar to returns approved for utilities in other states.
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