Time-tested cost recovery mechanisms provide stable funding for infrastructure replacement.
Mark J. Kropilak is an attorney, technology entrepreneur, and former utility executive. Wendell F. Holland is former chairman of the Pennsylvania Public Utility Commission. Both practice as regulatory utility attorneys based in the Mid-Atlantic.
When a utility installs a major rate-base project, such as a generating plant, which will be used and useful starting at a certain point in time, the traditional rate case model can appropriately accommodate the project’s cost recovery aspects. When a utility implements an ongoing infrastructure replacement program, the traditional rate case model can be supplemented by a tracker surcharge that can provide more timely cost recovery, subject to provisions for rate caps, periodic reconciliations, and eventual transition into base rates.
For ongoing system improvement programs, the steady metronomic pace of a tracker can advance the public interest without the episodic spurts inherent in rate case filings.