The Public Service Commission’s recent ruling in an electric company case was an innovative approach believed to save ratepayers money, although a rate increase was granted.
Instead of fully litigating a proposed $188.4 million rate request, the commission decided to allow two moderate adjustments.
In doing so, it introduced into the ratemaking process what is called the “adjustment approach,” or AA, for short.
Without belaboring the details, suffice it to say that major utilities fairly regularly petition the commission for general rate increases. These are large, multi-faceted cases that involve lots of money and time, and higher rates.
In this case, the companies wanted what would have amounted to a 13 percent monthly increase in customer bills.
But by using the AA, the commission limited the increase impact to a total of 4.25 percent and spread those increases over two years instead of applying them all at once.
Additionally, in this approach, the companies agreed not to file an overall rate increase case before April 1, 2028.
Even if that is filed, this action means that these customers will not feel another rate increase until at least February 2029.
In effect, the commission agreed to allow the companies to have an inflation-based adjustment in their rates based on $1 billion they had made in investments in the state since 2022.
The companies argued they needed the $188 million to recover a number of costs and to account for inflation. While they would not have gotten all they asked for had the commission fully litigated these issues, the commission believes they would have been able to justify a substantial portion of that cost.
So, the commission settled on this approach instead. It recognizes that the companies are entitled to some recovery. But the primary aim was to ease the impact of this rate increase on the ratepayers.
The commission recognized in its ruling that this is a temporary measure based on the current circumstances.
This reduces what could have been the impact of the fully litigated case. It moderates the magnitude of future rate cases. It allows the companies a timely recovery of reasonable costs while encouraging them to control costs.
Lane believes it is worthwhile to quote from the decision, which sums up the commission’s thinking:
“This is a reasonable and worthwhile rate experiment. At a time when costs keep increasing, thereby causing rates to increase, we are trying to find new ways to establish rates for the companies that are reasonable and not discriminatory, that help the customers, and that do not require a base rate case every year or year and a half. It is a daunting effort, but we must try.”
