Discounts Defined

Fortnightly Magazine - July 15 1996
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Flexible pricing schemes generally fall into four categories:

Load Retention Rates. Can prevent a customer from exiting system, either by relocating or choosing to self-generate. If retail competition is allowed, load retention rates can prevent customers from choosing a different generation company.

Economic Development Rates. May attract new customers to a service territory, or encourage existing customers to expand operations and boost demand. Differ from load retention rates by purporting to create jobs.

Flexible Rates (Flexrates). Similar to load retention rates, but

utilities enjoy greater flexibility and discretion. May escape regulatory review. No separate tariff needed for each rate or customer; instead, rates must adhere to established guidelines.

Performance-based Rates (PBR). Most common form includes single price cap for all customers, or separate caps for customer classes.Cap stays in place for predetermined period (e.g., five years), giving incentive to utility to trim costs below level implied by the cap. Below-cap discounts allowed for certain customers, as long as prices to other customers do not exceed the overall (or class) cap.

To date, at least 41 states have allowed economic development rates, 34 states have allowed load retention rates, 4 states have established flexrates, and 5 have ok'd some form of broad-based PBR (see Table 1).


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