56-235.6 - Optional performance-based regulation of certain utilities.
§ 56-235.6. Optional performance-based regulation of certain utilities.
A. Notwithstanding any provision of law to the contrary, the Commission mayapprove a performance-based ratemaking methodology for any public utilityengaged in the business of furnishing gas service (for the purposes of thissection a "gas utility") or electricity service (for the purposes of thissection an "electric utility"), upon application of the gas utility orelectric utility, and after such notice and opportunity for hearing as theCommission may prescribe. For the purposes of this section,"performance-based ratemaking methodology" shall mean a method ofestablishing rates and charges that are in the public interest, and thatdeparts in whole or in part from the cost-of-service methodology set forth in§ 56-235.2.
B. The Commission shall approve such performance-based ratemaking methodologyif it finds that it: (i) preserves adequate service to all classes ofcustomers ( including transportation-only customers if for a gas utility);(ii) does not unreasonably prejudice or disadvantage any class of gas utilityor electric utility customers; (iii) provides incentives for improvedperformance by the gas utility or electric utility in the conduct of itspublic duties; (iv) results in rates that are not excessive; and (v) is inthe public interest. Performance-based forms of regulation may include, butnot be limited to, fixed or capped base rates, the use of revenue indexing,price indexing, ranges of authorized return, gas cost indexing for gasutilities, and innovative utilization of utility-related assets andactivities (such as a gas utility's off-system sales of excess gas suppliesand release of upstream pipeline capacity, performance of billing servicesfor other gas or electricity suppliers, and reduction or elimination ofregulatory requirements) in ways that benefit both the utility and itscustomers and may include a mechanism for automatic annual adjustments torevenues or prices to reflect changes in any index adopted for theimplementation of such performance-based form of regulation. In making thefindings required by this subsection, the Commission shall include, but notbe limited to, in its considerations: (i) any proposed measures, includinginvestments in infrastructure, that are reasonably estimated to preserve orimprove system reliability, safety, supply diversity, and gas utilitytransportation options; and (ii) other customer benefits that are reasonablyestimated to accrue from the gas or electric utility's proposal.
C. Each gas utility or electric utility shall have the option to apply forimplementation of a performance-based form of regulation. If the Commissionapproves the application with modifications, the gas utility or electricutility may, at its option, withdraw its application and continue to beregulated under the form of regulation that existed immediately prior to thefiling of the application. The Commission may, after notice and opportunityfor hearing, alter, amend or revoke, or authorize a gas utility or electricutility to discontinue, a performance-based form of regulation previouslyimplemented under this section if it finds that (i) service to one or moreclasses of customers has deteriorated, or will deteriorate, to the point thatthe public interest will not be served by continuation of theperformance-based form of regulation; (ii) any class of gas utility customeror electric utility customer is being unreasonably prejudiced ordisadvantaged by the performance-based form of regulation; (iii) theperformance-based form of regulation does not, or will not, providereasonable incentives for improved performance by a gas utility or electricutility in the conduct of its public duties (which determination may include,but not be limited to, consideration of whether rates are inadequate torecover a gas utility's or electric utility's cost of service); (iv) theperformance-based form of regulation is resulting in rates that are excessivecompared to a gas utility's or electric utility's cost of service and anybenefits that accrue from the performance-based plan; (v) the terms orderedby the Commission in connection with approval of a gas utility's or electricutility's implementation of a performance-based form of regulation have beenviolated; or (vi) the performance-based form of regulation is no longer inthe public interest. Any request by a gas utility or electric utility todiscontinue its implementation of a performance-based form of regulation mayinclude application pursuant to this chapter for approval of new rates underthe standards of § 56-235.2 for a gas utility or pursuant to § 56-585.1 foran investor-owned incumbent electric utility.
D. The Commission shall use the annual review process established in §56-234.2 to monitor each performance-based form of regulation approved underthis section and to make any annual prospective adjustments to revenues orprices necessary to reflect increases or decreases in any index adopted forthe implementation of such performance-based form of regulation.
(1996, c. 350; 2006, c. 574; 2007, cc. 888, 933.)