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Used and Useful Principle: Still Relevant in Utah
January/February 2012
Utah Bar Journal, Vol. 25 No. 1

Within the framework of revenue requirement regulation, the principle of used and useful appears to have been somewhat forgotten in today's world of least cost planning and future test periods. However, the used and useful principle has a relatively long history in the regulation of electric utilities and there is little, if anything, to suggest that it has been legally overruled in Utah. The concept that capital assets must be physically used and useful to current ratepayers before those ratepayers can be asked to pay the costs associated with them is a fundamental principle of utility regulation. Failure to adhere to the principle of used and useful in the physical sense leads to a mismatch between the timing of capital cost recognition and the income effect that occurs when an asset is put into service. It also leads to a mismatch between the ratepayers who are paying for the service versus the ratepayers who are receiving the service.


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