In this issue of Infrastructure, we feature three very fine articles from long-time contributors. From the West Coast, Charlie Read writes about five recent developments in California that could pose very serious regulatory risks for utilities. The five “innovations” in regulatory policy that he covers are interesting in their own right. However, they are especially relevant insofar as they foreshadow the possible emergence of new, disruptive regulatory policies that, because of California’s outsized influence on other states, could broadly affect utilities wherever they do business. The threats are different in origin but common in their shared assumption that capital markets and the returns shareholders expect on their investments can be, at least to some degree, disregarded in the pursuit of popular community goals. Of course, no one in the utility industry believes in disrespecting community goals, and utilities work very hard to reconcile those goals while managing regulatory risk and the demands of maintaining their financial integrity. However, utilities can be expected to struggle to access capital on reasonable terms if they are asked to perform the impossible, such as spreading the risk of casualty events that are not insurable.
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