Rate case
Encyclopedia
A rate case is the formal process which industries that have the legal designation of public utility
are mandated to go through in order to set the rate at which they are allowed to charge consumers for their service. Rate cases serve as one of the primary instruments of government regulation
of such industries.
, where many industries classified as public utilities are either private businesses or publicly traded corporations, a rate case is typically carried out through the authority of a state or federal regulatory body whose jurisdiction includes the territory that the industry in question services.
services, the railroad industry to the delivery of milk
have been classified as public utilities and thus have been legally mandated to go through the process of a rate case in order to determine the allowable service charges for their industry. Although the classification of businesses as public utilities has seen different criteria for inclusion over the history of such legal designation, typically such businesses must constitute a de facto monopoly
for the services they provide within the jurisdiction in question. In the past such businesses have included railroads (before the advent of interstate highways), natural gas
production (wellhead
pricing) and the telecommunications industry (substantially the historical monopoly of AT&T
on plain old telephone service
landlines). Technological innovation and economic changes have often left industries that were at one time characterized by monopoly character open to more competitive market environments. Since the advent of technological innovations in the telecommunications industry and the competition of interstate highways for railroad business typically the only industries subjected to the rate case process are the electric power industry, the natural gas
industry and the water industry
, although aspects of the natural gas industry have changed since the mid 1980s seen phased deregulation
and attempts have been made to deregulate the generation aspects of electric utility
service.
. In addition, any interested parties may intervene in electric utility rate cases. Typically those intervenors will be industry consortiums representing industrial users or other large scale consumers of electricity, or other dedicated advocacy groups. Rate cases proceed via an administrative law
format.
In the United States
the regulation of rates typically occurs at the state level under the jurisdiction of a state public utilities commission
although the Federal Energy Regulatory Commission
(formerly the Federal Power Commission
) also exercises authority over questions of intrastate wholesale sales of electric power.
.
Public utility
A public utility is an organization that maintains the infrastructure for a public service . Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies...
are mandated to go through in order to set the rate at which they are allowed to charge consumers for their service. Rate cases serve as one of the primary instruments of government regulation
Regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
of such industries.
Overview
In the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, where many industries classified as public utilities are either private businesses or publicly traded corporations, a rate case is typically carried out through the authority of a state or federal regulatory body whose jurisdiction includes the territory that the industry in question services.
History
Historically, many different classes of business, ranging from harborHarbor
A harbor or harbour , or haven, is a place where ships, boats, and barges can seek shelter from stormy weather, or else are stored for future use. Harbors can be natural or artificial...
services, the railroad industry to the delivery of milk
Milk
Milk is a white liquid produced by the mammary glands of mammals. It is the primary source of nutrition for young mammals before they are able to digest other types of food. Early-lactation milk contains colostrum, which carries the mother's antibodies to the baby and can reduce the risk of many...
have been classified as public utilities and thus have been legally mandated to go through the process of a rate case in order to determine the allowable service charges for their industry. Although the classification of businesses as public utilities has seen different criteria for inclusion over the history of such legal designation, typically such businesses must constitute a de facto monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
for the services they provide within the jurisdiction in question. In the past such businesses have included railroads (before the advent of interstate highways), natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
production (wellhead
Wellhead
A wellhead is a general term used to describe the component at the surface of an oil or gas well that provides the structural and pressure-containing interface for the drilling and production equipment....
pricing) and the telecommunications industry (substantially the historical monopoly of AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
on plain old telephone service
Plain old telephone service
Plain old telephone service is the voice-grade telephone service that remains the basic form of residential and small business service connection to the telephone network in many parts of the world....
landlines). Technological innovation and economic changes have often left industries that were at one time characterized by monopoly character open to more competitive market environments. Since the advent of technological innovations in the telecommunications industry and the competition of interstate highways for railroad business typically the only industries subjected to the rate case process are the electric power industry, the natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
industry and the water industry
Water industry
The water industry provides drinking water and wastewater services to residential, commercial, and industrial sectors of the economy. The water industry includes manufacturers and suppliers of bottled water...
, although aspects of the natural gas industry have changed since the mid 1980s seen phased deregulation
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
and attempts have been made to deregulate the generation aspects of electric utility
Electric utility
An electric utility is a company that engages in the generation, transmission, and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a major provider of energy in most countries. It is indispensable to factories, commercial establishments,...
service.
Electric power industry
In the electrical utility industries, rate cases are typically held between the regulated utility and a state public utilities commissionPublic Utilities Commission
A Utilities commission, Utility Regulatory Commission , Public Utilities Commission or Public Service Commission is a governing body that regulates the rates and services of a public utility...
. In addition, any interested parties may intervene in electric utility rate cases. Typically those intervenors will be industry consortiums representing industrial users or other large scale consumers of electricity, or other dedicated advocacy groups. Rate cases proceed via an administrative law
Administrative law
Administrative law is the body of law that governs the activities of administrative agencies of government. Government agency action can include rulemaking, adjudication, or the enforcement of a specific regulatory agenda. Administrative law is considered a branch of public law...
format.
In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
the regulation of rates typically occurs at the state level under the jurisdiction of a state public utilities commission
Public Utilities Commission
A Utilities commission, Utility Regulatory Commission , Public Utilities Commission or Public Service Commission is a governing body that regulates the rates and services of a public utility...
although the Federal Energy Regulatory Commission
Federal Energy Regulatory Commission
The Federal Energy Regulatory Commission is the United States federal agency with jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates...
(formerly the Federal Power Commission
Federal Power Commission
The Federal Power Commission was an independent commission of the United States government, originally organized on June 23, 1930, with five members nominated by the president and confirmed by the Senate...
) also exercises authority over questions of intrastate wholesale sales of electric power.
Railroads
In the United States, railroad rate cases are handled by the Surface Transportation BoardSurface Transportation Board
The Surface Transportation Board of the United States is a bipartisan, decisionally-independent adjudicatory body organizationally housed within the U.S. Department of Transportation. The STB was established in 1996 to assume some of the regulatory functions that had been administered by the...
.