Nearly every major rate case over the past several years focuses some attention on removing subsidies running between rate classes.
1994--The Year in Review
announced plans to sell electricity at retail to its would-be steam hosts, Alcan Rolled Products Co. and Liberty Paperboard L.P. Alcan is currently a Niagara customer; Liberty plans to locate a new paperboard recycling plant on the Sithe/Independence site, with a substantial capital contribution from the QF's parent. Niagara complained that the sale would lead to higher rates for its other customers, and that the QF would earn significant profits without the retail sales because both Niagara and Consolidated Edison Co. were required to purchase its output. The New York Public Service Commission (PSC) ruled that the retail sale made the QF a public utility. Re Niagara Mohawk Pwr. Corp., 150 PUR4th 113 (N.Y.P.S.C.1994). In a subsequent ruling, however, the PSC applied "something less than full utility-type" regulation to the sale, saying that extensive oversight of the QF's prices was not required because the sale was competitive. Re Niagara Mohawk Pwr. Corp., 150 PUR4th 438 (N.Y.P.S.C.1994).
While granting a certificate for the sale, the PSC addressed the stranded investment issue by requiring the QF to pay Niagara an "equalization fee" to mitigate the extent to which investment undertaken to serve Alcan and other local growth now falls on Niagara's other customers. It rejected the QF's arguments that payments to the utility under gas transmission and wheeling arrangements should offset the equalization charge. Re Sithe/Independence Pwr. Partners L.P., 155 PUR4th 149 (N.Y.P.S.C.1994). Later, the PSC set the equalization payment at $19.6 million over a 10-year period. Re Sithe/Independence Pwr. Partners L.P., Case 94-E-0136, - PUR4th - Sept. 29, 1994 (N.Y.P.S.C.).
The Rhode Island Public Utility Commission (PUC) has announced that it will consider on a case-by-case basis whether to regulate sales by nonutility power producers to a single customer within the service territory of a certificated electric utility. Narragansett Electric Co. had asked the PUC to issue a declaratory ruling that as a matter of law furnishing electricity to a single customer should trigger regulatory jurisdiction. The PUC found the suggested rule too broad, but added that the rate impact of the utility's losing its fifth-largest customer and the attendant load loss and stranded investment "must play a role" in its consideration. Re Narragansett Elec. Co., 154 PUR4th 304 (R.I.P.U.C.1994).
Slowly but Surely
State regulators moved slowly but surely toward a more open market structure for telecommunications in 1994. Although the U.S. Court of Appeals for the District of Columbia remanded to the Federal Communications Commission (FCC) its decision to require local exchange carriers (LECs) to permit competing enhanced service providers to "physically collocate" equipment in LEC switching facilities, regulators in several states have acted to open the local network. A well-publicized example occurred in New York where Rochester Telephone Corp. won approval for its plan to split into three separate companies and open its local service market to full competition. The company will separate into a holding company, a regulated provider of wholesale basic-exchange access services, and a competitive provider of retail local services. The plan includes a shift to incentive ratemaking, with a $21-million reduction in rates. Re Rochester