Some utilities are seeking regulators’ preapproval of massive grid modernization projects, including advanced metering functionality. Near-term preapproval to invest in broad grid-modernization projects will not occur unless utilities focus on developing — jurisdiction by jurisdiction — the most critical requirement for regulatory preapproval: a compelling business case.
Regulators are not typically the entity making investment decisions. Traditionally, utility executives make investment decisions. Later, regulators allow cost recovery in rates if investments can be shown to be prudent and used and useful (among other requirements). This system provides essential ratepayer protection, but the risk of disallowance can render utilities reluctant to make capital-intensive investments.
