Utility diversification and federal rate regulation of inter-affiliate transactions
Jurisdictional utilities (natural gas companies regulated under the Natural Gas Act and electric utility companies regulated under the Federal Power Act) have shown interest in diversifying into non-utility unregulated businesses. This is certain to spawn an increasing number of transactions between utility companies and affiliated firms, and to raise questions about the no-profits-to-affiliates (NPA) rule that disallows jurisdictional rate coverage to certain profits paid to affiliates. The NPA rule is analyzed in the context of four questions: (1) What is the rule, and how was it developed. (2) Why is the rule applied to disallow affiliate profits from a utility's rate structure. (3) Does the NPA rule govern rate treatment of the affiliate profit component or fuel and purchased gas costs as well as other operating and maintenance expense. (4) Are there corollaries of the rule that should influence utility decisions and affect regulatory treatment of transactions between diversified utilities and their non-utility officials. The authors conclude that regulators should vigorously apply the NPA rule to prevent the abuses that attend a utility's doing business with itself, while regulated utilities should recognize the NPA rule as a fundamental tenet of original-cost ratemaking and assess the desirability of diversification and interaffiliate transactions in light of the rule and its purposes. 159 references.
- Research Organization:
- Federal Energy Regulatory Commission, Washington, DC
- OSTI ID:
- 6953416
- Journal Information:
- Va. J. Nat. Resour. Law; (United States), Journal Name: Va. J. Nat. Resour. Law; (United States) Vol. 2:1; ISSN VJNLD
- Country of Publication:
- United States
- Language:
- English
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