The Ohio Public Utilities Commission (PUC) has proposed regulations to allow electric utilities to use fuel-cost clauses to recover gains or losses from trading Clean Air Act emission allowances....
Ratepayers Fund Losses, Write-offs, but Not Catastrophes
In two recent rulings, the New York Public Service Commission (PSC) has authorized electric utilities to call upon ratepayers to help cover losses from rate discounts and write off sunk investment in nuclear power plants. Ratepayer contributions in each case will come through incentive clauses by which revenues or losses are shared on an 80-20 basis between customers and company stockholders.
Rate Discounts. In one case, the PSC allowed Niagara Mohawk Power Corp. to recover from ratepayers 80 percent of a recent decline in revenues from to increased rate discounting to retain existing load and thus support the state's manufacturing base. (The losses had exceeded the company's projection by $29.8 million.) The decision appears consistent with earlier PSC generic findings on revenues and discounting, and with the utility's prior rate case, in which the PSC approved an 80/20 sharing plan between customers and shareholders. A surcharge was not needed, the PSC explained, since the utility had recently collected enough unanticipated revenues from sales for resale to offset the revenues lost to increased discounting.
Sunk Nuclear. Two days later, the PSC modified a similar, existing 80/20 earnings sharing plan for Rochester Gas & Electric Corp. (RG&E) to help write down sunk investment in nuclear assets. It reduced the triggering threshhold (return on equity) for earnings sharing from a 14.5 to 11.2 percent; the additional earnings thus earmarked for ratepayers (80 percent of the difference between 11.2 and 14.5 percent) will help fund the nuclear writedown. The PSC explained that the sharing plan would "facilitate the movement toward a competitive market for electric generation."
RG&E will also eliminate both its existing fuel-cost adjustment clause (incorporating fuel costs into base rates) and its Electric Revenue Adjustment Mechanism (ERAM) (em the latter having been proposed initially to encourage the utility to invest fully in demand-side management programs.
Catastrophe. At the same time, however, the PSC approved a new adjustment mechanism to protect RG&E against costs due to: 1) any new governmental mandates (including the PSC's own market restructuring rulings) or 2) "catastrophic" events in the utility's service territory. The new clause would allow RG&E to defer costs if any single governmental mandate or catastrophic event should exceed a threshold level of 3 percent of "actual regulatory electric common earnings" during any rate year. Re Niagara Mohawk Power Corp., Case 96-E-0709, Sept. 24, 1996 (N.Y.P.S.C.); Re Rochester Gas & Elec. Corp., Case Nos. 95-E-0673 et al., Sept. 26, 1996 (N.Y.P.S.C.).
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