Branko Terzic & Associates

12/29/2025

UNBUNDLING OF SMALL-CUSTOMER GAS SERVICES: NEW CHALLENGES FOR STATE PUBLIC UTILITY COMMISSIONS
Energy Law Journal, Volume 18, No. 1. 1997
Kenneth W. Costello
J. Rodney Lemon
https://www.brankoterzic.com/unbundling-of-small-customer-gas-services/

The evolution of competition in the U.S. natural gas industry has followed a predictable course. Wellhead deregulation stimulated pipeline restructuring, which in turn has provoked a debate over gas-service restructuring at the retail level. Over the last several years, almost all local gas distribution companies (LDCs) in the U.S. have established stand-alone transportation service allowing industrial customers to purchase gas supplies in the open market. By all accounts, service unbundling to large retail customers has achieved significant cost savings to these customers.

12/26/2025

Consistent Regulation – Branko Terzic
https://www.brankoterzic.com/consistent-regulation/

🔍 Why Consistent Regulation Matters for Energy & Utilities
Predictable regulation isn’t just a policy goal—it’s a business necessity. When similar cases lead to similar outcomes, companies can plan confidently, reduce risk, and lower capital costs.
But inconsistency—delays, unpredictable decisions—creates uncertainty, drives up financing costs, and discourages investment. This challenge isn’t limited to the U.S.; it’s global.

✅ Solution: Regulators should prioritize clear accounting standards and minimize procedural uncertainty. The result? Stronger markets, investor confidence, and fairer prices for consumers.
Key takeaway: Stability in regulation = stability in the energy future.

12/24/2025

🎄 A Christmas Wish from Branko D. Terzic ✨

This season, Branko reminds us that the greatest gift isn’t under the tree — it’s hope for children affected by war and displacement. As a former child refugee, his heartfelt request is simple:

✨ Support charities that bring relief and care to those in need:
https://my.care.org
https://donate.doctorswithoutborders.org
https://iocc.org

Let’s make this Christmas about compassion, peace, and generosity.
Merry Christmas, Happy New Year, and Happy Hanukkah!

https://www.brankoterzic.com/a-christmas-request/
https://www.brankoterzic.com/santa/

12/22/2025

From Luxury to Necessity: The Story of Utilities
By Branko Terzic
https://www.brankoterzic.com/public-utility-services-from-luxury-to-necessity/

In 1907, electricity and telephones were luxuries—only 8% of U.S. homes had power, and phone service cost up to $5/month when wages were $17!
State regulation began that year, paving the way for fair rates and universal access.
Appliances and radio turned electricity into a must-have, transforming modern life.

https://www.brankoterzic.com/public-utility-services-from-luxury-to-necessity/

12/19/2025

The Commissioner’s Question: Why not more Debt?
By Branko Terzic
https://www.brankoterzic.com/yes-commissioner-series-3/

[Fiction]
Commissioner Throckmorton C. Cummings, a newly appointed Public Service Commission (PSC) member, was reviewing the thousand pages of pre-filed testimony and exhibits in the most recent electric utility rate case. He had a yellow highlighter in hand and was marking sections for later consideration. He looked up as his advisor Dr. Benjamin Payne entered his office. Cummings, a former State Senator, was familiar, as many legislators were, with some recent utility-related legislation but not with the details of utility ratemaking. For that reason, he relied on Payne who had been an economist on the PSC staff before Cummings appointed him as his advisor.

“Ben, I have been reviewing the public testimony is this case and I found something really interesting that makes common sense.”

“What is that Commissioner?”

“Well, a number of public witnesses have observed that utility debt is much less expensive than equity and wonder why the utility does not take on more debt.”

“Commissioner,” responded the adviser, “I think you may find the answer in the pre-filed testimony of the rate-of-return expert witnesses. It’s probably covered in the testimony of both the utility’s witness as well as that of the staff witness. Let me see if I can find a reference in the pre-filed testimony.”

“While you are looking, can you give me the Cliffs Notes version?”

“No need, here it is in one of the expert’s pre-filed testimonies” Payne pointed to a page in the binder.

Q. "Isn't debt less expensive than equity?"

A. "Yes, other things equal, debt is less costly than equity. Nevertheless, regulators and financial markets recognize that too much debt is inherently risky. A firm with a significant degree of indebtedness also has lower quality debt, and therefore, higher fixed financing costs, greater interest payments, and/or liabilities. Such firms generally have lower debt ratings and, as a result, higher interest costs. Moreover, a more highly leveraged firm (e., one with more debt) will have more expensive equity, in part because investors view highly leveraged firms as risky investments.”[i]

“There is more but that is the gist of it.” Payne concluded.

“So, he claims that both debt and equity costs increase with more debt. Then what is the objective here?” Cummings continued as he perused the pre-filed volume.

“Commissioner, as you will read and hear in testimony there are differences of opinion as to the impact of increased debt on the cost of capital.” Responded Payne, “Our objective as regulators is to estimate the combination of debt and equity which will provide the minimum rate of return (ROR) or weighted average cost of capital which will still attract debt and equity in capital markets to fund the necessary electric assets needed to provide service.”

“And we get the debt and equity cost estimates from the capital markets?” asked Cummings.

“Yes, Commissioner,” Payne hesitated and the added “you can cross examine the witnesses on that when you have them on the witness stand and for a general discussion of regulation and capital markets, I’ll get you a copy of the 2018 NARUC report The Interface between Utility Regulation and Financial Markets.”

[i] Cicchetti, Charlles Prefilled Direct Testimony, Puget Sound Energy, April 5, 2004

Read this commentary and more at https://www.brankoterzic.com/yes-commissioner-series-3/

12/17/2025

A Dispatch from McCaughey – Branko Terzic
https://www.brankoterzic.com/a-dispatch-from-mccaughey/

Telephone call in 1996:
Me: “Hi John, how’s it going? Any news?”
John: “No, old chap, not a new!”

That phone call was a typical one following the daily fax (some of you may remember what that was) from my friend the late John McCaughey (1947-2008). At the time I was living in Farmington Connecticut and John, a well-known Irish-American energy journalist, lived in Alexandria Virginia. The fax would be a handwritten note in broad pen strokes, it was usually followed by a brief telephone call. One never knew what the daily topic would be in these short commentaries.

Read the commentary at https://www.brankoterzic.com/a-dispatch-from-mccaughey/

12/15/2025

The Commissioner’s Question: A Guaranteed Return?
By Branko Terzic
https://www.brankoterzic.com/yes-commissioner-series-2/

[Fiction]
Commissioner Throckmorton C. Cummings, a newly appointed Public Service Commission (PSC) member, was reviewing a thousand pages of pre-filed testimony and exhibits in the most recent electric utility rate case when his advisor Dr. Benjamin Payne entered his office. State law requires the commissioners to read the full transcript before making any decisions. Cummings, a former State Senator, was familiar, as many legislators were, with some recent utility-related legislation but not with the details of utility ratemaking. For that reason, he relied on Payne, who had been an economist on the PSC staff before Cummings appointed him as his advisor.

“Ben” Cummings asked “Some intervenors claim this commission “guarantees” a rate of return in setting rates? Do we? If not, where does that notion come from?”

“Well, commissioner, a return on investment is not guaranteed to the utility.” Explained the advisor “However, because this state has had stable regulation for years and the utilities have earned some return level for a long time, some observers have interpreted that to be a “guarantee.”

“But it's not?” asked Cummings.

“No, it’s not! Electric utilities in other states have gone onto bankruptcy even under our type of regulation.” Payne continued. “Part of the confusion may come from the fact that the rate order issued by the PSC uses a specific number for the “authorized” rate of return. That number is published and readily available as part of the annual revenue requirement estimate used in the rate case by the PSC. Rates are then designed based on estimates pf future customer numbers and sales which would allow the utility an opportunity to earn that authorized return in the future. That is, if all the estimates match the reality of the actual year the rates are in effect.”

Cummings interrupted “So, some people see a return ‘authorized’ by the PSC in its order and assume its guaranteed?”

“Yes, some may.” Continued Payne, “Remember that, at the end of the first year the new rates are in effect and every year after that the utilities report their ‘earned return’ as an actual audited number.”

“So, the actual ‘earned return’ reported at the end of the year could be the same or above or below the authorized return in the PSC order.” Commings observed.

“That is correct, Commissioner.”

“What happens if the earned return is below the authorized return?” Cummings continued.

“Well, the utility management then needs to decide whether it can continue with the authorized rates in the future. Management must decide whether the next year will result in more normal conditions and whether the current rates are likely to produce an adequate return next year.”

“How do they reach that decision?” Cummings asked.

“The approved rates are applied to sales in a “normal” year with respect to weather and other factors. Other costs are normalized as well. If this “normalization” shows an adequate return in a normal year, no further action is needed by either the utility or the PSC. The same process holds true if the utility reports a return higher than that authorized in the rates. Thus, there is no refund if the utility over earns and no surcharge to customer if the utility does not earn its authorized return.” Payne concluded.

“Are there exceptions to this practice?”

“Alas, as with much utility ratemaking there are exceptions based on the law, precedent and individual circumstances.”

“Thanks Ben, I think that’s enough for me to think about now.” Concluded Cummings.

“Yes, Commissioner.” Replied Payne.

Read this article and more https://www.brankoterzic.com/yes-commissioner-series-2/

12/12/2025

Travels with Charlie – Branko Terzic
https://www.brankoterzic.com/travels-with-charlie/

Dr. Charles J. Cicchetti passed away November 19, 2025 after a long struggle with cancer. He was a graduate of Colorado College and earned a PhD. in Economics from Rutgers University. He was a friend and mentor.

I first met Charlie when he was Chairman of the Wisconsin Public Service Commission (WPSC) from 1977 to 1980. He had earlier served as Wisconsin “energy czar” in the administration of Governor Patrick Lucy during the Carter era “Energy Crisis”.

I served as a Commissioner on the WPSC from 1981 to 1987 during which Charlie was a tenured professor at the University of Wisconsin - Madison. Charlie was a very popular lecturer. His environmental economics lecture was broadcast on Wisconsin Public Radio in the afternoons, and I remember scheduling my seventy-mile Madison to Milwaukee commute to coincide with his lectures. It was well worth it.

Charlie Cicchetti’s fifty-seven-page resume documented his six-decade career as an academic, entrepreneur, consultant, expert witness, author and speaker.

In 1993 I resigned from the Federal Energy Regulatory Commission (FERC), and Charlie offered me a position as managing director in the Washington DC office of Arthur Andersen Economic Consulting.

Later that year Charlie and I were invited to fly to Houston to meet with Ken Lay the CEO of Andersen’s most important client the energy giant Enron. The purpose of the meeting, set up the Andersen account partners, was to brief Ken, whom both Charlie and I knew, on recent developments in the electricity and natural gas industries. At the time, 1993 Enron was flying high and lauded by Forbes and Fortune. Enron’s troubles would not appear until a Fortune article in 2001.

Charlie and I showed up at Enron’s Houston headquarters ready for the briefing. We were dressed as usual, Charlie in an Italian tailored suit with alligator shoes and me in my double-breasted blazer with charcoal slacks. Charlie had once remarked that given our names clients didn’t expect us to look like the usual dark suit white shirt consultants.

Upon being escorted to Ken Lay’s office we entered and were warmly welcomed by Ken who introduced us to his number two Jeff Skilling.

After we sat down Skilling launched into a long lecture on the “new” structure of the energy industries, gas and electric, and why everything Charlie and I knew about these industries was incorrect or obsolete. Ken Lay just periodically nodded in agreement.

After about three quarters of an hour of listening to Skilling I leaned forward as if to say something but Charlie cut me off by thanking Ken and Jeff for the meeting and their hospitality.

As we walked out of the Enron building, I looked over at Charlie and said, “What was that all about?”

“Don’t worry about it. The Andersen partners wanted us to meet with Lay and we did.” Charlie replied.

“But. We didn’t get a word in edgewise?”

We kept walking.

“Think of it this way,” Charlie summarized “Enron just paid us a thousand dollars each to hear a one-hour speech by Jeff Skilling!”



Charlie was right, as usual. There was nothing more to be said or done. We headed to our respective homes.

Read this article and more: https://www.brankoterzic.com/travels-with-charlie/

Branko Terzic & Associates December 11, 2025 Branko Terzic 0 Comments Travels with Charlie By Branko Terzic   Dr. Charles P. Cicchetti and Branko Terzic Dr. Charles J. Cicchetti passed away November 19, 2025 after a long struggle with cancer. He was a graduate of Colorado College and earned a PhD. ...

12/10/2025

Bureaucracy and Innovation: It Can Be Done – Branko Terzic
https://www.brankoterzic.com/bureaucracy-and-innovation/

Innovators face an uphill battle. They always have. That new political or management ideas will inevitably face opposition was observed in the sixteenth century by the astute strategist, political philosopher and diplomat Niccolo Machiavelli. Consider Machiavelli’s statement of the problem in The Prince (published in 1532).

“It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them.”

Read this article and more https://www.brankoterzic.com/bureaucracy-and-innovation/

12/08/2025

A Sample of Universal Bureaucratic Excuses – Branko Terzic
https://www.brankoterzic.com/a-sample-of-universal-bureaucratic-excuses/

The British TV show “Yes, Minister” was broadcast in the U.S. on public television in the early 1980’s after it had been a hit in England. At that time I was a young Commissioner on the State of Wisconsin Public Service Commission where, like the British cabinet, “Ministers/Commissioners” were appointed to serve with the civil service. The tension was between commissioners who would come and go and a permanent, but necessary, bureaucracy. That was the premise of the show and what I was experiencing. I would often come home and after watching an episode of “Yes, Minister” turn to my wife Judy and say with dismay “I just lived that episode today!”

Too few of those now engaged in politics are familiar with the 1980’s British TV comedy “Yes, Minister.” That’s unfortunate as the program, ostensibly a comedy, but described to me by Lord Leon Brittan as a “documentary”, contained insightful observations of politics and politicians at work.

A book based on the series was published in the UK in 1981 and in the USA in 1987. “The Complete Yes, Minister: The Diaries of s Cabinet Minister by the Right Hon. James Hacker MP” was “edited” by Jonathan Lynn and Anthony Jay (creators of the TV series,) (Salem House Publishers, Topsfield MA 1987).

Among the gems in this humorous survey of British political institutions including the Civil Service, with foibles applicable to bureaucracies around the globe, global are these explanations of the “Civil Service’s five standard excuses” for why things went wrong. The original Yes, Minister explanation, in italics, is followed with some US examples.

Read this article and more at https://www.brankoterzic.com/a-sample-of-universal-bureaucratic-excuses/

12/05/2025

The Commissioner’s Question: Who paid?
By Branko Terzic
https://www.brankoterzic.com/yes-commissioner-series-1/

[Fiction]

The newly appointed Public Service Commission (PSC) member Commissioner Throckmorton C. Cummings was scratching his head with his left hand while reading from a letter held in his right hand as his advisor Dr. Benjamin “Ben” Payne entered his office. Cummings had served as a State Senator for over a decade and was familiar, as many legislators were, with some recent utility-related legislation but not with the details of utility ratemaking. Ben Payne had been an economist on the PSC staff and Cummings had appointed him to the one advisory position available to each commissioner.

Looking up at his aide Cummings said “Ben, I’ve been reviewing some consumer letters, and this one caught my attention.”

“Go ahead commissioner, what’s the issue?”

“Well, the topic in this one complaint is the “meter charge” on his electric bill. This customer says that he’s been paying a “meter charge” for more than twenty years and therefore he must have already “paid for” that meter. So why the continuing charge? How much is an installed meter anyway?”

“I’ll check with Consumer Affairs on the customer’s billing history. I think a residential meter full installation is between $1,200 and $2,000.”

“So, at $5 a month, he could be right?” Observed Cummings after doing some quick simple math.

“Not really Commissioner, under our regulatory system the customer pays for electricity service which is a combination of having available capacity and delivering energy on demand. The electric utility assets which provide the service, are financed by the utility from debt and equity, then constructed and added to the rate base before they provide services.” Payne explained.

“But once they are in ‘rate base’ they are paid for by the customer, right?” replied the Commissioner.

“Commissioner, not exactly. Customer tariffs, rates, are based on an annual revenue requirement which includes all the operating and maintenance expenses, depreciation on the assets while they are providing service, all the taxes as well as a return on the debt and equity used to finance the assets. Customers are not asked to provide capital; Assets are financed on the balance sheet with debt and equity like any other business.”

“Well Ben, what happens of the meter needs to be replaced. Is the customer charged for the new meter?”

“No, Commissioner, If the existing meter needs to be replaced the utility makes the replacement with no new charge to the individual customer.”

Commissioner Cummings put down the letter and removed his eyeglasses.

“So, Ben, let me see if I get the right. The assets were “paid for” by the utility before they went into rate base and started delivering services. The customers pay only for electric service delivered by the assets.” Commissioner Cummings looked directly at his aide.

Ben hesitated for a moment. He considered bringing up the subject of “construction work in progress in rate base” which, subject to commission approval, had customer pay for “service” from unfinished projects. Then he thought it would be better to leave it for another time.

“Yes, Commissioner.” He finally replied.

This reader is directed to my earlier Weekly Commentary which introduced the British TV series “Yes, Minister” which appeared in the US in the early 1980’s on PBS. I mentioned to Lord Brittan that I enjoyed this comedy series, and he remarked “It’s a documentary, you know.” https://www.brankoterzic.com/a-sample-of-universal-bureaucratic-excuses/

Read this article and more at https://www.brankoterzic.com/yes-commissioner-series-1/

12/03/2025

Gravity To the Rescue
By Branko Terzic
https://www.brankoterzic.com/gravity-to-the-rescue/

The simple use of gravity may be one answer to the problem of large scale storage of energy from electricity. Pulling a weight from a lower height to a higher elevation results in energy stored as potential energy. Energy Vault Holdings Inc (NYSE: NRGV) is one new company with a long duration energy storage option based on lifting weights of concrete by crane in a special built structure.

How does it work?
https://www.brankoterzic.com/gravity-to-the-rescue/