Cost-of-service indexing: right in some cases, wrong in others
On July 8, 1977, the New Mexico Public Service Commission denied a request by Gas Company of New Mexico, a company of Southern Union Gas Company, of Dallas, Texas, for cost-of-service indexing (Case No. 1301). This was the second such application before this commission; the first being Case No. 1196, filed by Public Service Company of New Mexico, at which time the regulatory methodology known as cost-of-service indexing (COSI) was adopted. This provides for automatic, quarterly adjustments in a utility's base service rates in response to net increase in its actual book cost for furnishing jurisdictional service. The rate of return on common equity capital sets the prescribed range for company earnings. In Case 1301 the commission was asked to apply COSI to another utility under its jurisdiction, Gas Company of New Mexico, a vertically integrated natural gas utility which is a division of a larger company, Southern Union Company. Prior to addressing the question of whether the commission should apply COSI to Gas Company, two threshold questions not discussed in Case 1196 were addressed: (1) under what conditions or circumstances will the commission consider applying COSI to other utilities under its jurisdiction, and (2) what is the burden of proof that a utility must meet in order for the commission to apply COSI. In reference to the conditions or circumstances in which this commission will apply COSI to other utilities, it is believed that the ''end result'' doctrine governs--striking the balance between the interests of the consumer, the public, and the utility investor.
- Research Organization:
- New Mexico Public Service Commission
- OSTI ID:
- 7286560
- Journal Information:
- Public Util. Fortn.; (United States), Vol. 100:4
- Country of Publication:
- United States
- Language:
- English
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