Investors should consider the investment objectives, risks, charges and expenses of the funds carefully before investing. By creating, expanding, and improving upon public utilities, a governmental body may attempt to improve its image or attract investment. A utility's capital structure may have a significant debt component, which exposes the company to interest rate risk. Rate of return regulation: regulators let the firms set and charge any price, as long as the rate of return on invested capital does not exceed a certain rate.
For example, if the rate of return is set at five percent, l'ange straightener then the firm can charge a higher price simply by investing more in capital than what it is actually needed (i.e., 5% of $10 million is greater than 5% of $6 million).
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