A recent article published in the Pittsburgh Post-Gazette’s PowerSource reports that the traditional method used by electric utilities to recover their costs in rates is changing. Many experts have noted increased reliance by electric utility companies on surcharges, rate mechanisms designed to allow a utility to recover in rates specific cost items outside of a traditional rate case, such as damage to distribution lines or the development of new, smarter technology.
Utilities can’t profit on the sale of electricity as a fully regulated business as much as they have in the past, the article reports. As a result, they’re under increased pressure to recover their costs in in rates timely and to ensure their expenses are not underestimated in the surcharge mechanisms.
“When you're no longer looking at sales to increase revenue, then you’re much more inclined to ask for recovery through a rider or surcharge,” Buchanan Ingersoll & Rooney Energy Shareholder Alan M. Seltzer tells the publication. “We’ve moved away from the classic energy and fuel charges to a whole host of things…you basically have piecemeal rate-making, without looking at the overall business.”
Read the full article - “As Revenue Declines, Power Companies Lean on Surcharges and Less on Rate Hikes” (August 25, 2015, Pittsburgh Post-Gazette PowerSource)