How Regulatory Environments Affect Utilities
Constructive regulatory environments can foster growth.
Andrew Bischof: We spend a lot of time differentiating utilities with constructive regulatory environments versus utilities that operate in more difficult regions. And this is important, as a company's regulatory environment is a key consideration in determining a utility's moat. So what is a constructive regulatory environment? It's an environment that allows its utility to earn an attractive and timely return, giving us greater confidence that a utility can earn a positive spread over its cost of capital. Utilities operating in regulatory environments that consistently put consumers' interests before shareholders' struggle to earn their costs of capital, highlighting the importance of regulatory stability.
Management also plays a key role in developing a utility's regulatory environment. A constructive regulatory environment is supported by management's ability to control operating costs and capital costs, as any overages are likely to come at shareholders' expense while greater efficiencies benefit both shareholders and customers and give leeway for further capital growth opportunities.
Andrew Bischof does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.