(Answered) A typical rate formula for a public utility includes:A typical rate formula for a public utility…

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➤ Why do regulators include an allowed rate of return in utility rates?
Regulators set an allowed rate of return so utilities can attract capital and maintain reliable service. It compensates investors for debt and equity risk, covers the cost of capital, and is applied to the rate base to determine the return portion of the revenue requirement. The rate balances consumer affordability and utility financial stability.

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