7. Regulatory matters The Company’s regulated utility operating companies owned by Liberty Utilities are subject to  regulation by the respective public utility commissions of the states in which they operate, and the  FERC in some instances. The respective state public utility commissions have jurisdiction with  respect to rate, service, accounting procedures, issuance of securities, acquisitions and other  matters. These utilities operate under cost-of-service regulation as administered by these state  authorities. The utilities periodically file rate cases with their regulators. Rate cases seek to ensure that a  particular facility has the opportunity to recover its operating costs and earn a fair and reasonable  return on its capital investment as allowed by the regulatory authority under which the facility  operates. Regulated utilities use a test year in the establishment of rates for the utility and  pursuant to this method the determination of the rate of return on approved rate base and  deemed capital structure, together with all reasonable and prudent costs, establishes the revenue  requirement upon which each utility’s customer rates are determined. Liberty Utilities monitors current and anticipated operating costs, capital investment and the rates  of return in respect of each of its facility investments to determine the appropriate timing of a rate  case filing in order to ensure it fully earns a rate of return on its investments. Algonquin Power & Utilities Corp. – Consolidated Financial Statements ALGONQUIN POWER & UTILITIES CORP.  Notes to the Consolidated Financial Statements  December 31, 2012 and 2011   (in thousands of Canadian dollars except as noted and amounts per share)  2012 Annual Report 100