While approving a $58.8-million annual rate increase for Puget Sound Power & Light Co., the Washington Utilities and Transportation Commission (UTC) has also agreed to terminate its experimental periodic rate adjustment mechanism (PRAM). The mechanism was designed to remove disincentives to conservation by decoupling revenues from sales levels and allowing dollar-for-dollar recovery of resource-acquisition costs.The UTC said that "rate adjustment mechanisms like the PRAM do not appear well suited to an electric utility industry evolving to accommodate greater competition in power markets and in electricity services provided by utilities." It noted that since the PRAM program began, the utility's rates increased $38.1 million in 1991, $66.4 million in 1992, $35.7 million in 1993, and $53.7 million in 1994. The UTC explained, however, that the increases resulted from an extraordinary combination of events: 1) the addition of new power sources, 2) extended drought conditions in the Columbia basin, 3) warmer than average winters, and (4) Puget's initiation of an aggressive conservation program.
Under the PRAM's "awkward marriage," the rate impacts of the resource-cost adjustment overwhelmed the rate impacts of the decoupling adjustment, making a fair comparison of decoupling with traditional ratemaking difficult. The UTC added that neither feature provided a clear incentive for the company to manage its acquisition of supply and demand-side resources at least cost, and that the PRAM shifted some degree of risk from the company to its customers. Washington Utilities and Transportation Commission v. Puget Sound Power & Light Co., Docket No. UE-950618, Sept. 21, 1995 (Wash.U.T.C.).
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