Energy
Dictionary

 


rate base

The asset (property) value of a given utility. Rate base is used as a benchmark value to determine how much a utility can be permitted to earn (its rate of return). Whether public or private, utilities will likely have debts investments that must be repaid over time, and without a rate base, it is impossible to determine how much income a public utility will require to sustain itself. Rate bases may also used to determine the point at which a private utility in a regulated environment graduates from reasonable profitability to obscene profitability, or to calculate a utility's worthiness for funds which may be needed for expansion or upgrading of equipment.

See also:

public utility, rate base