FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
PL94-4: Pricing for New Pipeline Construction
the views or opinions of Pacific Gas Transmission.
1. 71 FERC (pp 61,241.
2. Vintage rates refer to the rates that result from a vintage allocation of plant-related costs. The term "incremental" is not accurate because none of the other costs are allocated on the basis of incremental or marginal cost principles, as will be discussed more fully.
3. Great Lakes Transmission L.P., Dkt. Nos. RP91-143-000 et al., Oct. 31, 1991, 57 FERC (pp 61,140.
4. Great Lakes Transmission L.P., Dkt. Nos. RP89-186-000 et al., Oct. 31, 1991, 57 FERC (pp 61,141.
5. Battle Creek Gas Co. v. FPC, 281 F.2d 42 (D.C.Cir.1960), affirming Trunkline Gas Co., 21 FPC 704 (1959).
6. 71 FERC (pp 61,241.
7. As an example of the lack of guidance on this issue, some of the allocators that have been proposed (and are discussed in the next section) have been borrowed from methods used to allocate costs among pipeline functions (transmission, gathering, storage, etc.). There are few instances of allocations being developed specifically for the unique circumstances associated with vintage cost allocation on integrated transmission facilities.
8. James C. Bonbright, et al., Principles of Public Utility Rates, 1988, p. 513.
9. It should be noted that the FERC has long held cost incurrance as a necessary standard for cost allocation as shown in the following statement: "Despite the profusion of allocation methods we employ, there is a common thread that ties them together. That thread is the concept of cost responsibility or cost insurance." 23 FERC (pp 61,396.
10 Alfred E. Kahn, The Economics of Regulation: Principles and Institutions, 1970, p. 151.
11. Vickery, William S., "Some Implications of Marginal Cost Pricing for Public Utilities," American Economic Review, Papers and Proceedings, May 1955, Vol. 45, p. 620.
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