Restructuring Case to Define "Cost-Based" Rate Standard

In opening its investigation of electric utility restructuring, the Utah Public Service Commission (PSC) has begun by directing PacifiCorp to submit a legal analysis of the "cost-based standard" for ratemaking, as enunciated two years ago in a state supreme court opinion.

In 1994, the court had overturned an incentive regulation plan OK'd by the PSC for a local exchange telephone carrier because it ignored statutory cost-of-service principles. It explained then that the "just and reasonable" rate standard mandated by state law "means rates that are based on the costs, including all necessary operating and capital costs, of providing such services." (See, Stewart, et al. v. Utah PSC, 882 P.2d 141, 156 PUR4th 41 [Utah 1994].)