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A. Lawrence Kolbe

Dr. Kolbe's work focuses on applied financial economics and his projects address risk, return, and regulatory policy for rate-regulated industries; tax disputes; and firm, security, or project valuation questions in a wide variety of settings.

Clients for this work have included federal, state/provincial, and local government agencies; national research institutes; industry organizations; and private firms in various industries.

Dr. Kolbe is the co-author of three books and has published a number of articles. He has served as an expert witness in many venues in North America, as well as in The Hague, London, and Melbourne.

Before co-founding The Brattle Group, where he served as President and then Chairman for a number of years, he was a Director of Putnam, Hayes and Bartlett. Before that, he was a Vice President of Charles River Associates. Earlier, he spent 14 years on active duty in the U.S. Air Force.

Representative Engagements
Expert in income tax disputes
Served as an expert witness on behalf of the Tax Division of the U.S. Department of Justice or the Commissioner of Internal Revenue in a number of cases over the last decade involving sophisticated financial strategies that reduce income tax liability. His testimony has been cited in a number of judicial decisions that found that the strategies lacked economic substance apart from their tax consequences and/or that they lacked a substantial non-tax business purpose. Among these decisions are Jade Trading, U.S. Court of Federal Claims; Country Pine Finance, U.S. Tax Court; Fidelity International Currency Advisor A Fund, LLC, and Fidelity High Tech Advisor A Fund, LLC, consolidated, U.S. District Court, District of Massachusetts; K2 Trading Ventures, LLC, U.S. Court of Federal Claims, and Mark L. Kerman and Lucy M. Kerman, U.S. Tax Court, Affirmed, U.S. Court of Appeals for the Sixth Circuit. The Court of Appeals decision explicitly confirmed that Dr. Kolbe’s analytical approach was reasonable under the U.S. Supreme Court’s Daubert “gatekeeping” standard. (For clarity, Dr. Kolbe also has assisted taxpayers in disputes involving the same legal issues, but so far has not served as a witness on behalf of a taxpayer.)
Expert in Canadian arbitration
Recently served as an expert witness in a dispute over the economic interpretation of the risk-reward terms under which a power plant needed to be repaired. Details are confidential.
Risk and the fair return for regulated companies
Provided evidence in proceedings before Canada’s National Energy Board that has been cited in Board decisions that recognize that the required return on equity depends on the market-value capital structure (i.e., debt-equity combination) of the company in question. (See in particular the NEB’s Trans Québec & Maritimes decision, RH-1-2008, and its recent TransCanada Pipelines Limited et al. decision, RH-003-2011.) This can make a material difference in the appropriate allowed return on equity for rate-regulated firms when the book-value capital structure to which the return is applied differs from the market-value capital structures of the sample companies used in the analysis.
Publications
Book
Risk and Return for Regulated Industries
May 02, 2017
Published by Elsevier

This book establishes the principles and procedures for determining the fair rate of return on capital investment.

Presentation
Moving Toward Value in Utility Compensation: Shareholder Value Concept
June 13, 2016
Presented to the California Public Utilities Commission
Article
Reducing Rate Shocks
June 2013
Published in Public Utilities Fortnightly
Article
Shale Gas and Pipeline Risk
April 2012
Published in Public Utilities Fortnightly
Article
How to Value a Lost Opportunity: Defining and Measuring Damages from Market Foreclosure
December 2007
In The Economics of Antitrust Injury and Firm-Specific Damages, edited by Kevin S. Marshall, and published by Lawyers & Judges Publishing Co. Inc.
Article
Measuring Return on Equity Correctly: Why current estimation models set allowed ROE too low
August 2005
Published in Public Utilities Fortnightly
Report
The Effect of Debt on the Cost of Equity in a Regulatory Setting
April 2005
Published by Edison Electric Institute
Book
Capital Investment and Valuation
2001
Richard A. Brealey, Stewart C. Myers, with The Brattle Group, and A. Lawrence Kolbe
Published by McGraw-Hill
Article
The Impact of Stranded-Cost Risk on Required Rates of Return for Electric Utilities: Theory and an Example
1998
Published in Journal of Regulatory Economics
Article
Compensation for the Risk of Stranded Costs
January 1996
Published in Energy Policy
Article
Faulty Analysis Underlies Claims of Excess Card Profits
1995
Published in American Banker
Article
It Ain't In There: The Cost of Capital Does Not Compensate for Stranded-Cost Risk
1995
Published in Public Utilities Fortnightly
Report
The Utility Capital Budgeting Notebook
1994
A. Lawrence Kolbe, James A. Read, Jr., and Incentives Research Inc.
Published by Electric Power Research Institute (EPRI)
Book
Regulatory Risk: Economic Principles and Applications to Natural Gas Pipelines and Other Industries
1993
Published by Kluwer Academic Publishers
Article
Optimal Time Structures for Rates in Regulated Industries
1992
Published in Transportation Practitioners Journal
Article
The Duquesne Opinion: How Much ‘Hope' Is There for Investors in Regulated Firms?
1991
Published in Yale Journal on Regulation
Article
How Far Back Should Prudence Tests Reach?
1991
A. Lawrence Kolbe and William W. Hogan
Published in Public Utilities Fortnightly
Book
The Cost of Capital: Estimating the Rate of Return for Public Utilities
1984
A. Lawrence Kolbe, James A. Read, Jr., and with George R. Hall
Published by MIT Press
News & Events
August 02, 2017
U.S. Tax Court Cites Testimony of A. Lawrence Kolbe in IRS Tax Shelter Case Decision

In two recently-concluded U.S. Tax Court cases the judge cited the testimony of Brattle Principal Emeritus A. Lawrence Kolbe in his opinion, ruling in favor of the Internal Revenue Service (IRS).

May 02, 2017
Brattle Economists Author Risk and Return for Regulated Industries

Brattle Principals Bente Villadsen, Michael Vilbert, and Dan Harris, and Principal Emeritus A. Lawrence Kolbe have authored a new book that examines the topic of cost of capital for regulated industries.

June 17, 2014
Testimony by Principal Lawrence Kolbe Cited in Ruling to Uphold Decision in Offshore Portfolio Investment Strategy (OPIS) Tax Dispute

Principal Dr. Lawrence Kolbe provided testimony on behalf of the U.S. Internal Revenue Service that aided in upholding a favorable decision in an Offshore Portfolio Investment Strategy (OPIS) tax dispute.

Personal Interests

When not at work, Larry’s happiest times are playing with his grandchildren, Cece, 3 years old, and Ian, 1 year old. In recent years, he’s been working on his French via “field trips” to France and Québec and hopes to teach his grandchildren enough French so they can communicate when he and his wife of 43 years take them on vacation to France a few years from now. (Their parents would be welcome to come along too, of course, but the parents’ participation in the trip itself is by no means essential!)