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Public Utilities Reports

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Cost-of-service

Performance-based Ratemaking

Phillip S. Cross

Performance-based ratemaking (PBR) departs from the cost-of-service standard in setting just and reasonable utility rates, but that departure isn't as easy as it looks.

Up until now, cost-of-service ratemaking has provided relatively stable rates, while enabling utilities to attract enormous amounts of capital. Of late, however, regulators appear to be heeding the argument that changing markets warrant a second look.

Rate of Return on Common Equity: Annual Survey of Electric Rate Case

Diane S. Boiler

Our 13th annual electric rate-case survey covers electric rate orders issued between

April 1, 1994, and March 31, 1995.

The survey tabulates rates of return on common equity (ROE) approved by state public utility commissions (PUCs) in major electric rate orders, but also includes some cases in which rate of return was not directly at issue, or where a rate adjustment resulted from a settlement agreement.

Cost of Service Ignores Load Factor

Jim Lundrigan

In his recent article, "Cost-of-Service Studies: Do They Really Tell Us Who's Subsidizing Who?" (Nov. 15, 1994), Mark Quinlan proposes an alternative cost-of-service methodology. He claims that under current cost-allocation methods (and given adequate capacity to meet demand) a rate class with increasing sales subsidizes a rate class with decreasing sales.

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