Gas Price Prudence: From Hedge-and-Hope to Best Practice
Utilities and regulators should follow the same ideas that govern risk management at the largest...
The Utah Test
Defining a test period to overcome controversies and inaccuracies.
The PSC generally has attempted to decide issues on a case-by-case basis. This process is developing, perhaps slowly, a body of decisions that can provide some precedential value. For example, although the Utah statute allows a party to forecast out 20 months in a rate case, it currently appears that such a relatively lengthy forecast period is unlikely to be approved by the PSC. This has resulted in quickly arriving at a stipulation between the utility and intervenors regarding the test period for the most recent rate case. 9 The other issues remain somewhat a work in progress, although one utility’s application to move to a comprehensive power cost adjustment mechanism, if implemented, might mitigate some of the forecasting issues as well as the frequency of rate cases and overlapping test-period problems. 10
The regulatory treatment of the test period clearly involves risk sharing and risk shifting of regulated energy between the regulated energy utility and its ratepayers. If the Utah experience is any indicator, then settling these issues may involve a lengthy process of experimentation and give-and-take among utility companies, regulators and intervenors.
1. Order Approving Test Period Stipulation , Docket No. 04-035-042, Utah PSC, Oct. 20, 2004, p. 4.
2. Lowell E. Alt, Energy Utility Rate Setting , 2006, p. 25.
3. See Direct Testimony of Dr. Joni S. Zenger, Docket No. 07-035-93, Utah Division of Public Utilities, January 2008.
4. Utah Code Annotated 54-4-4(3 ).
5. Docket No. 07-035-93.
6. Utah Code Annotated 54-7-12(3) provides that the Utah Public Service Commission must issue an order on revenue requirement within 240 days following the date of an application for a rate change.
7. In a brief filed in a recent rate case, an intervenor stated the following: “As very eloquently explained [by the Division], updates have been and continue to be a problem. Updates have become such a problem as a result of the Utility’s insistence on filing forecasted test [periods] (which also aggravated the problems with the cost of service study). Updates will continue to be a serious point of contention in the future as long as forecasted test [periods] are filed unless a rulemaking is conducted to finalize their treatment in general and single-item rate cases.” Docket No. 09-035-23, brief filed by UIEC, Jan. 21, 2010.
8. Report and Order , Docket No. 84-035-01, Sept. 13, 1984, p, 6.
9. Report and Order on Test Period Stipulation , Docket No. 09-035-23, June 1, 2009.
10. Docket No. 09-035-15.