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Special Contract Rate Trend Continues

Fortnightly Magazine - January 15 1996

Mw, and accounts for more than 9 percent of its retail sales. Consumers said it would serve General Motors at rates above variable costs, and that it was not currently requesting a change in cost of service to other customers.

The PSC cited benefits to all parties (em the utility, General Motors, ratepayers, and the general public (em especially in light of the utility's commitment to bear the burden of showing, should it seek to raise rates for other customers, that the discounts are based on cost of service or that it is more beneficial to ratepayers to retain General Motors as a customer than to lose the sales. The PSC said that the commitment by Consumers Power was apparently patterned after requirements set forth in an earlier order approving a similar rate discount plan for services provided to the automobile industry by Detroit Edison Co. Re The Detroit Edison Co., 160 PUR4th 132; order on rehearing 162 PUR4th 163 (Mi.P.S.C.).

As was required for Detroit Edison, the PSC directed Consumers Power to account for the contract as a separate rate class in future cost of service studies. It said that this requirement, along with annual reports by the utility showing actual contract revenues as well as hypothetical tariff rate revenues using the same billing determinants, would guarantee protection for other ratepayer classes. Re Consumers Power Co., Case No. U-10961, Oct. 25, 1995 (Mi.P.S.C.).

The Ohio Public Utilities Commission (PUC) has approved a comprehensive rate plan for Ohio Edison Co. designed to enhance economic development within its service territory and to provide stable, long-term competitive pricing of energy services. The plan acknowledges the PUC's ongoing effort to introduce more competition within the electric industry in the state and provides a schedule for the retirement of "stranded investment costs" should the plan be terminated as a part of a wider restructuring. Under the settlement agreement, however, the company may seek recovery of stranded costs from customers that might cancel bundled electric service.

The plan calls for a rate freeze and scheduled rate reductions combined with inflation-indexed fuel-cost adjustment clause reforms and authority to accelerate amortization or depreciation of generating station investment and deferred regulatory assets. In addition, the utility is granted preliminary authority to dispose of or alter its present investments in generating stations, subject to notification requirements and the possibility of further PUC review of individual transactions. (In late 1992, the PUC approved an initial plan with similar objectives that included a rate freeze through 1996, an antibypass rate tariff, efficiency and job development programs, as well as cost deferrals and amortization schedules aimed at providing the utility with an opportunity to develop a long-range competitive pricing strategy.)

The newly approved plan results from a review of utility operations under initial rate stabilization

efforts as well as meetings between the company, PUC staff, and customer groups. The plan calls for a rate freeze until January 1, 2006, as well as a phased reduction in residential rates of approximately $600 million during the plan period. The rate plan also permits the utility to