Marginal Cost Drives Electric Rate Design

Fortnightly Magazine - October 15 1996
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Recharge the Economy with Renewable Energy Tax Credits

The Maine Public Utilities Commission (PUC) has approved a new multi-year revenue requirement and rate design plan for Maine Public Service Co. (MPS) designed to serve as "the starting point for MPS and its customers' participation in an increasingly competitive market."

The plan allocates an overall revenue increase of 4.4 percent to produce a 5.5-percent increase in residential rates and a 7.5-percent hike in commercial rates. Other customer groups will see smaller boosts in rates or slight reductions.

The new rate design reflects marginal-cost principles approved by the PUC over the past several years. As the PUC pointed out, however, the marginal-cost results must be adjusted to ensure that the utility recovers its entire approved revenue requirement:

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