J.Pollock Forecasts Continued Pressures for “Streamlined Regulation”

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Energy Advisors See Potential New and Complex Challenges for Consumers

J.Pollock, Incorporated, a leading energy advisory firm in both regulated and competitive markets, cautions energy consumers to be vigilant to insure that budget-strapped regulators set just and reasonable rates to achieve a proper balance between utility and consumer interests. This balance is being threatened by the high level of rate case activity (see chart).

“Streamlined ratemaking could fundamentally rewrite the regulatory compact,” warns Jeff Pollock, president of J.Pollock, Inc. “Without proper protections and oversight, regulated utilities can raise rates even though they are not experiencing higher per-unit costs. Consumers need to make sure that such mechanisms, if appropriate, use proper ratemaking practices and do not force consumers to bear risks that have traditionally been born by regulated utilities.”

Under traditional ratemaking, a utility cannot adjust rates without filing an application to the state regulatory commission or the Federal Energy Regulatory Commission (FERC) and going through evidentiary hearings. Depending on the jurisdiction, the time and expense of a general rate case may be extensive, with the entire process taking from nine months to well over a year. This time is known as “regulatory lag” and is part of the “regulatory compact” that ensures utility rates are just and reasonable for customers while providing the utility an opportunity to earn a reasonable return. Utilities are proposing to alter the regulatory compact to reduce regulatory lag, by implementing riders to allow recovery of costs without the need for rate cases.

“We believe riders should never replace full rate cases if regulation is to provide a proper surrogate for competition,” explains Pollock. “This ratemaking strategy means a utility has no incentive to minimize costs and every incentive to maximize shareholder profits. Prudence and reasonableness must continue to be prerequisites to cost recovery. Fewer rate cases could limit the opportunities for such reviews.”

J.Pollock advises consumers on a wide range of energy issues, assists clients to manage risk and finds solutions to energy problems. The firm is independent, with extensive experience and expertise in energy procurement, supply and market analysis, regulatory issues, expert testimony, and seminars.

About J.Pollock, Incorporated

J.Pollock, Incorporated assists clients to procure and manage energy in both regulated and competitive markets. J.Pollock has offices in St. Louis, Missouri and Austin and Houston, Texas. Clients include commercial, industrial, and institutional energy consumers. The J.Pollock team also advises clients on energy and regulatory issues. J.Pollock is a registered aggregator in the State of Texas (Certificate No. 80051). For further information contact jpi(at)jpollockinc(dot)com.

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Judy Goodman
Lents and Associates
314-968-3060
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