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Flexible Pricing and PBR: Making Rate Discounts Fair for Core Customers

Fortnightly Magazine - July 15 1996

2. Price discrimination occurs, in general, when a rate differential between customers does not reflect costs.

3. For example, a customer can provide an economic assessment of the benefits of moving, as well as blueprints, permits, and contracts for constructuring a new facility in a different service territory.

4. In addition, 26 state require that lost-revenue recovery be determined at the next rate case, which may cause utilities to absorb some, or all, of the lost revenues.

5. See, Re Standards for Off-Tariff Rate Agreements, Docket No. EX95070320, Oct. 27, 1995, 165 PUR4th 193 (N.J.B.P.U.); Re Competitive Opportunities Available to Customers of Electric and Gas Service, Case 93-M-0229, Opinion No. 94-15, July 11, 1994, 154 PUR4th 19 (N.Y.P.S.C.); Re Pacific Gas & Elec. Co., Decision 95-10-033, Application 91-11-036, Oct. 18, 1995, 164 PUR4th 484 (Cal.P.U.C.).

6. The issue of sharing strandable costs is broad, controversial, and beyond the scope of this article. For a further discussion of this issue, please see "Linked Generation Pricing: Providing All Electricity Customers with the Benefits of Competition," Tellus Institute, June 1996.

7. Utilities could continue to offer discount rates priced below market to selected customers, but should be required to absorb all resulting lost revenues. The California and New York commission have decided that once direct access is allowed in the state, lost revenues resulting from discount rates must be absorbed 100 percent by utility shareholders. See note 5, supra, for citations.

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