Much attention has been paid to revolutionary rate-reform plans advanced to meet perceived competition in energy markets. So much, in fact, that the increasing popularity of the special discount rate has gone virtually unnoticed. This traditional ratemaking mechanism has found new favor with state regulators as a tool to keep customers on the system.
Many states have allowed utilities flexibility to lower prices for large customers where they can show that the customer is likely either to move operations out of state or generate power on its own, usually through cogeneration. Gas utilities also have been granted permission to discount rates for customers with a demonstrated ability to switch to another boiler fuel, such as oil. Last year, the New York Public Service Commission (PSC) directly addressed the connection between the discount-rate phenomenon and the broader issues of industry restructuring. In an investigation of competition in electric and gas markets, the PSC adopted a set of general guidelines for electricity sales at flexible rates to customers with competitive opportunities. Re Competitive Opportunities Available to Customers of Electric and Gas Service, 154 PUR4th 19 (N.Y.P.S.C.1994). The PSC later explored a new regulatory regime for electric service in light of competitive opportunities available to customers. Re Competitive Opportunities Available to Customers of Electric and Gas Service, 154 PUR4th 35 (N.Y.P.S.C.1994).