Nearly every major rate case over the past several years focuses some attention on removing subsidies running between rate classes.
Maine Finds Electric Price Cap Unnecessary
The Maine Public Utilities Commission (PUC) has decided to forgo a formal price-cap plan for Bangor Hydro-Electric Co. (BHE), an electric utility, finding that traditional regulation would better maintain the proper balance of shareholder and ratepayer interests. The PUC had approved a price-cap mechanism for Central Maine Power Co., another of the state's investor-owned electric utilities (see, Re Central Maine Power Co. 159 PUR4th 209 (Me.P.U.C. 1995)).
The PUC said that the utility's financial condition and the competitive pressures it faces make it "unlikely that any general rate increase will be sought by BHE through the end of the decade." Although it has favored formal price-cap plans in recent years, the PUC noted that changes in technology and the industry now give utilities sufficient incentive to increase efficiency and provide stable, "if not lower," rates.
At the same time, it rejected BHE's legal argument that the PUC lacked the authority to impose a price-cap mechanism without the utility's consent. The PUC pointed out that a 1995 state law explicitly authorized the commission to engage in "incentive ratemaking." It added that nothing in the new law can be read to impose a requirement that a utility must consent to an incentive mechanism otherwise found reasonable by the PUC. Re Bangor Hydro-Electric Co., Docket No. 94-125 (Phase II), July 10, 1996 (Me.P.S.C.).
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