Utility Cost of Capital
January 29, 2018
Denver, CO

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This one-day course will lead participants through various financial elements involved in cost of capital determination such as risk and return, credit ratings, financial ratios and models, and  capital structure. The knowledge of basic financial concepts, relationships, and models would enable participants to better understand how authorized rate of return is set. Training materials will be provided.

Learning Outcomes

  • Examine Ratemaking Issues
  • Discuss Cost of Debt
  • Define Debt Ratings and Financial Ratios
  • Discuss Cost of Common Stocks
  • Discuss Models for Estimating Cost of Equity
  • Discuss Capital Structure



EUCI has been accredited as an Authorized Provider by the International Association for Continuing Education and Training (IACET).  In obtaining this accreditation, EUCI has demonstrated that it  complies with the ANSI/IACET Standard which is recognized internationally as a standard of good practice. As a result of their Authorized Provider status, EUCI is authorized to offer IACET CEUs for its programs that qualify under the ANSI/IACET Standard.

EUCI is authorized by IACET to offer 0.8 CEUs for this event.


Requirements for Successful Completion of Program

Participants must sign in/out each day and be in attendance for the entirety of the course to be eligible for continuing education credit.

Instructional Methods

Case studies and PowerPoint presentations will be used.


Monday, January 29, 2018

7:30 – 8:00 a.m. :: Registration and Continental Breakfast

8:00 – 8:15 a.m. :: Course Overview and Introduction

  • Course Objectives
  • Course Organization
  • Course Overview

8:15 – 9:00 a.m. :: Ratemaking Process Overview

  • Rate of Return Regulation
  • Governing Legal Standard
    • Bluefield and Hope Decisions
  • Revenue Requirement
  • Ratemaking Issues
    • Rate Base
      • Definitions
      • Components
    • Return on Rate Base
      • Weighted Average Cost of Capital (WACC)
      • Cost of Debt
      • Cost of Equity
      • Capital Structure

9:00 – 10:00 a.m. :: Bonds, Debt Ratings and Financial Ratios

  • Bonds
  • Cost of Bonds
  • Bond Rating
  • Quantitative Factors
  • Pre-tax Interest Coverage
  • Total Debt to Total Capital
  • Funds from Operations Interest Coverage
  • Funds from Operations Debt
  • Qualitative Factors
  • Bond Contract Terms
  • Other Qualitative Factors

10:00 – 10:20 a.m. :: Morning Break

10:20 – 11:45 a.m. :: Risk and Return

  • Principle
  • What is Investment Risk
  • Probability Distribution of Return
  • Expected Return
  • Stand Alone Risk
  • Standard Deviation
  • Coefficient of Variation
  • Risk on Portfolio Basis
  • Standard Deviation
  • Coefficient of Variation
  • Diversification Effects
  • Breaking down Stand-alone Risk
  • Market risk
  • Diversifiable Risk

11:45 a.m. – 12:45 p.m. :: Group Luncheon

12:45 – 2:00 p.m. :: Cost of Common Equity

  • What is Return on Equity (ROE)
  • Theoretical Principle Underpinning ROE
  • Models for Estimating ROE
    • Discounted Cash Flow (DCF) Model
      • Assumptions
      • Example
      • DCF in Practice
    • Risk Premium (RP) Model
  • Assumptions
  • Example
  • Methods of Estimation; Historical vs. Authorized RP

2:00 – 2:30 p.m. :: Networking Break

2:30 – 3:30 p.m. :: Capital Asset Pricing Model (CAPM)

  • Primary Assumptions
    • Rational Investors
    • Compensation for Risk
  • Security Market Line (SML)
    • What is Beta?
  • Calculating Beta
    • What is the Market Risk Premium?
  • Primary Conclusion
  • Factors that change the SML
  • Verifying the CAPM Empirically
  • More thoughts on the CAPM

3:30 – 4:00 p.m. :: Capital Structure

  • Capital Structure
    • The Effect of Debt on the Cost of Capital

4:00 – 4:30 p.m. :: Authorized ROE

  • Comparable Companies
  • Financial Risk
  • Business Risk
  • Regulator Risk
  • Examples

4:30 p.m. :: Course Adjourns


Maryam Ghadessi, Ph.D. has been working at the California Public Utilities Commission (CPUC) since 2000.  At the CPUC, she has prepared written testimony and recommendations and testified in a number of Cost of Capital proceedings.  In addition to working at the CPUC, Maryam Ghadessi has been teaching courses in Finance at San Francisco State University as an adjunct professor. 

Prior to joining the CPUC, Maryam Ghadessi, for a period of two years, held an assistant professorship position in the Department of Accounting and Finance at Monash University in Australia.  At Monash, Maryam Ghadessi was responsible for teaching courses in corporate finance, asset pricing, and financial market structure at undergraduate and graduate levels.

Maryam Ghadessi received a Master in Economics from University of New Hampshire and a Ph.D. in Financial Development & Econometrics from University of Utah.  


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