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HLP Tariff Must Recover Marginal Cost

Fortnightly Magazine - August 1995

By a 2-1 vote, the Texas Public Utilities Commission (PUC) has placed a condition on approval of Houston Lighting and Power's (HLP) experimental tariff for special contract pricing (Rate Schedule SCP) with industrial customers whose electric power needs are or can be served by alternative sources of power: The floor of the rates must be designed to recover marginal costs (Docket No. 12957). The order on rehearing affirmed an earlier PUC decision shortening the term of the contracts from the proposed 7 to 10 years to 5 to 10 years. It also established graduated markups to the progressive stream-of-payment range, based on the year of the contract and its duration (HLP had proposed 105 percent above marginal cost):s 5- and 6-year contracts: 1995-1999, 13 percent; 1996-2000, 11 percent; 1997-2001, 9 percent

s 7-year contracts: 1995-2001, 9 to 10 percent; 1996-2002, 8 to 9 percent; 1997-2003, 7 to 8 percent

s 8 to 10-year contracts; 1995-2005, 6 to 8 percent; 1996-2006, 6 to 8 percent; 1997-2007, 6 to

8 percent.

Commissioner Patrick Henry Wood III dissented, expressing concern over the lack of a counterbalancing open-access requirement. He wanted to tie the effective date of the SCP tariff to that of a tariff allowing affiliate wheeling. Although no affiliate wheeling tariff was approved in the docket, the administrative law judge had recommended that the HLP tariff become effective as soon as an affiliate wheeling tariff was filed. t

Lori A. Burkhart is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.

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