While designing rates for Southern California Edison Co., the California Public Utilities Commission (CPUC) has reaffirmed its commitment to marginal-cost ratemaking "in light of electric industry restructuring." The CPUC used the cost-allocation and rate-design findings to set new rates based on an overall 4.4-percent decrease in revenues adopted in earlier revenue requirement proceedings. Residential ratepayers receive an average 1-percent rate decrease; rates for some larger customer classes, such as agricultural time-of-use service, decline by as much as 16 percent.
The CPUC focused on "short-run pricing signals" in setting marginal costs, explaining that in a dynamic competitive market its ability to moderate price fluctuations and administratively determine a long-run equilibrium price will be both inappropriate and impractical.