Nowhere are the failings of traditional utility regulation more evident than on Long Island. The New York Public Service Commission (PSC) has raised rates for the Long Island Lighting Co. (LILCO)...
PUC consider itself bound to approve it, since it could cut rates for consumers, the third-party beneficiaries in all of this?
The answer, I believe, is "no." When reading over the 1996 restructuring act, I found an interesting clause. Essentially, it appears to say that if the distribution utility complies with the rate freeze, it should receive immunity from the sort of margin-hunting tactics seen in this case:
"If an electric distribution utility rolls its energy cost rate into base rates at a combined level that does not exceed¼ rates which have been approved by the commission¼ [i.e., the utility complies with the rate freeze]¼ the utility shall not be required to reduce its capped rates below the capped level upon the complaint of any party if the commission determines that any excess earnings achieved under the cap are being utilized to mitigate transition or stranded costs for the benefit of ratepayers." (House Bill 1509, "Electric Generation Customer Choice & Competition Act," sec. 2804(4)(v).)
In other words, if the utility can maintain the rate freeze, recover stranded costs and still make a buck, more power to it.
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