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Michigan Upholds Price-cap Plan

Fortnightly Magazine - March 15 1996

The Michigan Public Service Commission (PSC) has upheld a 1995 decision permitting Sault Electric Co. to switch to a price-cap rate plan. The plan allows the utility to roll its existing power-supply adjustment clause into base rates to set initial rates; later rate reductions are permitted with only 30 days written notice to the PSC (see, Edison Sault Electric Co., 164 PUR4th 1 (Mich.P.S.C. 1995)). In a petition for rehearing, the state's Attorney General claimed that a new state law, not the PSC, should govern flexible regulation of rates for telecommunications carriers.

The PSC ruled that the state's public utility laws did not define the methods to be used in setting rates. In addition, the method adopted for Sault Electric Co. protected ratepayers because it started with rates already found reasonable and allowed only rate decreases without a hearing. The PSC further ruled that reference to the new telecommunications law was misplaced because the rate reforms took place "well before the effective date of the amendments." Re Edison Sault Electric Co., Case No. U-10923, Dec. 20, 1995 (Mich.P.S.C.).

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