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Department of Public Service

03-E-0640: Revenue Decoupling Mechanism - Electric

(also see Case 06-G-0746)


On May 2, 2003, the Public Service Commission initiated a proceeding to investigate potential electric delivery rate disincentives against the promotion of energy efficiency, renewable technologies and distributed generation as part of an overall state program to facilitate customer access to existing and developing technologies for the clean production and/or conservation of energy. Subsequently in 2006, the Commission established a separate proceeding expanding its inquiry to include the gas utilities. A Notice of Proposed Rulemaking concerning each of the two proceedings was published in the State Register on July 12, 2006, in accordance with the State Administrative Procedure Act. Several interested parties filed comments in the proceedings.

Based upon a thorough review of the comments, on April 18, 2007, the Commission today determined that properly designed utility revenue decoupling mechanisms are needed at this time to address potential disincentives to utilities’ promoting and implementing more efficient energy use. The utilities will develop mechanisms that true-up forecast and actual delivery service revenues resulting in significantly reduced or eliminated disincentives caused by the ongoing recovery of utility fixed delivery costs via volumetric (per kWh) rates and marginal consumption blocks. The true-up would include, among other things, any net lost revenues attributable to the achievement of more efficient energy use. The true-up would be considered no less frequently than once per year.

The Commission required the utilities to file revenue decoupling proposals in ongoing and new rate cases so that the utilities, staff of the Department of Public Service, and interested parties may consider utility-specific circumstances and customer bill impacts within service classifications before their implementation. Also, the utilities are encouraged to continue to implement cost-based delivery rate design improvements and hourly pricing tariffs for commodity service where appropriate.

In addition to the implementation of broad-based revenue decoupling mechanisms that incorporate appropriate true-ups, the Commission stated that the promotion of customer sited renewable resources and distributed generation technologies should be addressed through greater vigilance on the part of the utilities regarding the proper application and administration of their interconnection rules and procedures, as well as the expanded application of existing electric and gas standby delivery rate structures.

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PSC Media Contact: James Denn, (518) 474-7080

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