In opening its investigation of electric utility restructuring, the Utah Public Service Commission (PSC) has begun by directing PacifiCorp to submit a legal analysis of the "cost-based standard" for ratemaking, as enunciated two years ago in a state supreme court opinion.
In 1994, the court had overturned an incentive regulation plan OK'd by the PSC for a local exchange telephone carrier because it ignored statutory cost-of-service principles. It explained then that the "just and reasonable" rate standard mandated by state law "means rates that are based on the costs, including all necessary operating and capital costs, of providing such services." (See, Stewart, et al. v. Utah PSC, 882 P.2d 141, 156 PUR4th 41 [Utah 1994].)
In its new restructuring case, the PSC has now asked for a definition of the cost-based standard to ascertain what forms of alternative regulation it might impose on the electric industry. It asked PacifiCorp to address the following question: "Can rates be set in a just and reasonable manner without specific reference to the current costs incurred or profits earned by the utility?" It also asked the utility to consider what legislation might be needed to allow alternate forms of regulation found inconsistent with the court's 1994 cost-based standard. Re Changes in the Structure of the Elec. Util. Industry, Docket No. 96-999-01, Jan. 31, 1996 (Utah P.S.C.).
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