As regulators continue to investigate industrywide restructuring as an answer to regional electric rate disparities and calls from large consumers for price reductions, the trend of dealing with...
CPUC Embraces Marginal-cost Ratemaking
While designing rates for Southern California Edison Co., the California Public Utilities Commission (CPUC) has reaffirmed its commitment to marginal-cost ratemaking "in light of electric industry restructuring." The CPUC used the cost-allocation and rate-design findings to set new rates based on an overall 4.4-percent decrease in revenues adopted in earlier revenue requirement proceedings. Residential ratepayers receive an average 1-percent rate decrease; rates for some larger customer classes, such as agricultural time-of-use service, decline by as much as 16 percent.
The CPUC focused on "short-run pricing signals" in setting marginal costs, explaining that in a dynamic competitive market its ability to moderate price fluctuations and administratively determine a long-run equilibrium price will be both inappropriate and impractical.
The CPUC also introduced a fixed, monthly, residential customer charge (em $2.00 for a single family residence; $1.50 for a multifamily residence (em but ruled that some movement toward residential rate unbundling was necessary to familiarize the smaller user with the process "as it unfolds under electric industry restructuring." The CPUC also ordered a phased elimination of the utility's tariffed 25-percent discount for employees, concluding that because the cost of the discount was fixed by tariff, utility management was shielded from accountability for managing the cost of the program or making explicit tradeoffs between the discount component of compensation and other available options. Re Southern California Edison Co., Application 93-12-025, I.94-02-002, Decision 96-04-050, Apr. 10, 1996 (Cal.P.U.C.).
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