SENATE BILL REPORT

SB 5215

BYSenator Williams

Adopting provisions limiting the UTC's considerations in rate setting and valuation of gas, electrical, and water companies.

Senate Committee on Energy & Utilities

Senate Hearing Date(s):

Senate Staff:Glenn Blackmon (786-7455)

AS OF JANUARY 20, 1987

BACKGROUND:

State law provides that a regulated utility may not include in rate base a plant that is not "used and useful."  The Utilities and Transportation Commission has allowed companies to charge ratepayers for abandoned plant costs by including the cost as an operating expense, rather than including the investment in rate base.  The State Supreme Court upheld this practice and concluded that the Legislature granted the UTC broad authority to determine proper operating expenses.

Ratepayers of regulated electric utilities currently are paying about $35 million per year for two abandoned nuclear plants.  The UTC has been asked to include costs of a third nuclear plant, WNP-3, in rates.

In setting rates, the UTC considers the costs prudently incurred by the utility.  A utility is not explicitly required to choose the lowest cost resources, and a utility is not required to seek UTC approval before a plant is constructed.

SUMMARY:

The UTC is prohibited from considering any costs of a plant that is not used and useful or any costs that exceed the least cost resource portfolio.  Excess costs may be included if a utility receives approval from the UTC to build the plant and if the UTC states before construction whether ratepayers will be required to pay any excess costs.

Fiscal Note:      requested