The Pennsylvania Public Utility Commission (PUC) has reaffirmed earlier rulings establishing performance-based rate mechanisms for Columbia Gas of Pennsylvania, Inc., citing its authority to implement modified versions of a capacity-release sharing mechanism and an incentive mechanism for purchased gas costs. The PUC also upheld the gas local distribution company's (LDC's) option to reject the modified mechanisms, stating that the experimental nature of the rate reforms was better served by a voluntary program.
Predicting that the programs would be overturned by the courts, PUC chairman David Rolka dissented, arguing that state law required adherence to "actual gas costs" in setting adjustment clause rates for LDCs. He also pointed out that the state's Public Utility Code explicitly permits alternative regulation only for telecommunications carriers. Pennsylvania PUC et al. v. Columbia Gas of Pennsylvania, Inc., R-00943029 et al., Mar. 16, 1995 (Pa.P.U.C.).
The PUC later acknowledged that most commentators found its authority to implement performance-based incentives for LDCs questionable. Nevertheless, its policy statement broadening the issue to include consideration of incentive programs under base rate regulations. Under the PUC's proposed guidelines, incentive mechanisms cannot raise rates more than 1 percent of an LDC's total gross annual operating revenues. The PUC pointed out, however, that rates might actually decrease due to cost reductions attributable to productivity and efficiency increases stimulated by the new rate plans. Re Performance-based Incentives for Section 1307(f) Local Distribution Companies, Docket No. M-00940604,
Mar. 30, 1995 (Pa.P.U.C.).