PSC Chair Charlotte Lane explains ‘How a Rate Case Works’

By PSC Chairman Charlotte Lane,

With several rate cases pending before the Public Service Commission (PSC) this year, I thought it might be helpful to explain what happens when a utility applies for a rate increase. The original rate case filing consists of testimony from utility officials and documentation to justify the amount requested. That information includes an accounting of money the utility hopes to recoup and the estimated cost of future projects.

The Commission orders the utility to publish a legal notice stating the proposed new charges. It then issues an order that suspends the proposed rates until a certain date, so the utility cannot change its rates until the Commission rules on the case. The case must be decided by that date. As soon as the case is filed, Commission staff begins to audit the information provided. PSC staff includes accountants, engineers and attorneys who have specialized knowledge of the ratemaking process. Engineers assess whether proposed projects are viable and review completed projects and works in progress. Our accountants, who we refer to as utilities analysts, closely examine the utility’s reported costs and projections. They analyze whether any reported under- or over-recovery of revenue is accurate. Once the audit is complete, staff files their recommendations to the Commission.

Meanwhile, the Commission and other parties begin reviewing all of the materials filed. Staff, the Consumer Advocate Division and other intervenors ask the utility for more information and those questions and answers are reviewed by all of the parties. In some cases a settlement may be proposed and considered.

During this phase of the process, the Commission draws up a procedural schedule and arranges the time and place for any public comment hearings. Throughout the process, we receive and read written and online comments from the public.

Finally, an evidentiary hearing is held. All the evidence is entered into the record and the witnesses for the utility and the other parties are questioned and cross-examined. After all the information is received, the Commission analyzes all of the testimony, staff recommendations, and public comments. We discuss all possible solutions and finally make a decision that is set forth in our Final Order. If the rates change, the utility files a new tariff and the new rates go into effect.

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