In response to recent state legislation that explicitly provides for rate-regulated utilities to pursue multiyear rate plans, the Minnesota Public Utilities Commission adopted a set of guiding principles for the development of such plans. The law, passed in 2011, allows utilities to request multiyear plans, up to a maximum three-year rate-effective period, under which the rates to be charged in each year of the set period will be established in but a single rate proceeding. Multiyear rate plans are in contrast to the commission’s traditional rate-making approach, which has been to approve new tariffs in a general rate case that will remain in effect until the utility’s next rate filing. Despite the obvious benefits of forestalling rate shock, however, the commission acknowledged that multiyear plans are not without their disadvantages. For one, the commission said that because such plans are predicated on cost projections that are sometimes far into the future, there is greater difficulty in matching actual costs with the authorized revenue requirement. The commission thus conceded that multiyear rate plans may be more inherently error-prone. The commission nevertheless concluded that such potential detriments were outweighed by the administrative efficiencies and cost savings possible through reduced regulatory lag. (Docket No. E,G-999/M-12-587, Minn.P.U.C.). For more analysis, subscribe to URN. http://www.fortnightly.com/utility-regulatory-news-0
