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Regulators Forum: Restructuring Rollback

State-policy turmoil reshapes utility markets.

Fortnightly Magazine - November 2007

the provisions of the Public Utility Code, and I believe that the concept should continue to be studied. An appropriately designed revenue-decoupling proposal may be in the public interest, if approved by the commission as part of a package of DSR, energy efficiency, and conservation measures.

Fortnightly: Are novel rate structures being presented to you for consideration?

Holland: The PUC is considering various alternative rate designs as we are seeing some demand charges discontinue and block rates decline. All of this is responsive to the energy-acquisition processes we are seeing as a part of our default-service provider plans.

The PUC also is challenged presently with having to make changes to rate design dictated by a Pennsylvania Commonwealth Court decision (Lloyd v. Pa PUC, 904 A2d 1010, 1020). In August, the court vacated the commission’s approval of a distribution-rate increase proposed by an EDC and ordered the commission to set nondiscriminatory rates. At issue is the tension between what’s appropriate from a cost-of-service perspective versus gradualism in rate design. This case attempts to redefine the fundamental question of gradualism. The lower court sided with a coalition of large commercial and industrial customers and the Office of Small Business Advocate in requiring the commission to recalculate how it apportioned an annual rate increase it granted in 2004.

The decision has forced the PUC to re-examine how to allocate a planned rate increase among various classes of customers. The Commonwealth Court’s action is impacting rate cases that are currently coming before the commission.

Fortnightly: The Pennsylvania commission is using binding polls to settle contested utility issues. How does the process work?

Holland: The commission uses polling in complex cases such as rate cases. Binding and non-binding polls are designed to provide a mechanism for the commission to resolve the contested issues of the case in a public forum.

Each commissioner is individually polled on each of the contested issues in the case. The commissioners base their findings on each issue on the record developed in the proceeding and the briefs and exceptions presented by the parties in the case. Staff then drafts an order based on the results of the poll.

A non-binding poll returns to the commission as a proposed order for final disposition. In a binding poll, a final order is drafted and entered based on the results of the poll.

Fortnightly: How is Pennsylvania dealing with the end of generation rate caps?

Holland: Aggressively and effectively. On May 10, 2007, as part of an overall strategy for preparing consumers for potential increases in generation costs, the commission adopted the final regulations and policy statement that establishes the rules for default service for electric generation. The PUC action also included a plan to prepare electricity customers for, and to mitigate, any potential significant price increases.

The commission is developing a comprehensive consumer-education campaign regarding energy efficiency, conservation, and demand-side response. Choice of electric generation supplier and low-income assistance programs also will be addressed as part of this initiative. The commission plans to request funding for this campaign as part of our Fiscal Year