Financial experts often depart from standard financial principles and practices in recommending the appropriate rate of return for public utilities. But ratemaking draws from many fields, not just...
NY Accepts Vertical Disintegration
Finding the present industry structure incompatible with effective wholesale or retail competition, the New York Public Service Commission (PSC) has issued for comment a set of regulatory principles designed to guide the transi-tion to a more competitive electric industry (Docket C94E0952/94086). It said that the transition requires vigorous fair trade safeguards and forward-looking labor/management relations. Where monopoly exists, performance-based regulation is preferable to traditional rate cases.
The principles were developed in the PSC's proceeding on competitive opportunities for electric service, initiated in 1993. The first principle states that prices should accurately reflect resource costs, and all consumers should have a reasonable opportunity to realize savings and other benefits from competition. The PSC stressed the importance of avoiding rate shock, but added that market-based means or public programs must be developed to preserve environmental and energy-efficiency goals. The PSC also said utilities should have a reasonable opportunity to recover prudent and verifiable expenses made pursuant to their legal obligations, although they should be responsible for mitigating transition costs. (em LB
Lori A. Burkhart is an associate legal editor and W. Lynn Garner is senior writer of Public Utilities Fortnightly.
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