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Penn. Upholds Gas-cost Incentive Program

Fortnightly Magazine - August 1996

The Pennsylvania Commonwealth Court has upheld a ruling by the state Public Utility Commission (PUC) implementing a three-year, performance-based, gas-cost incentive program for Columbia Gas of Pennsylvania, Inc., a local distribution company (LDC). The program compares LDC spot-market purchases to the New York Mercantile Exchange (NYMEX) average, sharing any savings between the company and ratepayers. The court rejected allegations that state law forbids recovery in excess of prudently incurred actual costs. It affirmed the PUC's discretion to review LDC procurement activities in light of changes in the gas industry. The court noted that its rulings in the past had affirmed the PUC's right to adjust "actual costs" to correct forecasts or set rates based upon gas purchases that were not made, but should have been. Irwin A. Popowsky v. Pennsylvania Pub. Utility Commission, No. 942 C.D. 1995, May 13, 1996 (Pa.Commw. Ct.).

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