Performance-based ratemaking (PBR) departs from the cost-of-service standard in setting just and reasonable utility rates, but that departure isn't as easy as it looks.
Up until now, cost-of-...
The Massachusetts Supreme Court has vacated and remanded a Massachusetts Department of Public Utilities (DPU) decision on environmental externalities, agreeing with Massachusetts Electric Co. that the DPU had no authority to require electric utilities to select new power sources based on externality values that encompass costs ratepayers otherwise would not incur.
Although it agreed that the determination of a source's acceptability should consider potential costs to the utility in terms of environmental pollution, the court ruled that the DPU lacked authority to justify rate increases based solely on the potential effects of pollution on society. The court said such issues fall under the jurisdiction of the legislature and environmental regulators, and remanded the case to the DPU for further consideration. Massachusetts Electric Co. v. Department of Public Utilities, No. SJC-06483
(Dec. 22, 1994).
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