Opinion ID: 2202769
Heading Depth: 2
Heading Rank: 3

Heading: The Rate Design

Text: The Commission permitted PEPCO to increase its revenues by $34,003,000 through an across-the-board rate increase, which was not really across the board because it excluded residential and street lighting customer classes. WMATA argues that this particular increase forces it to pay part of the cost of service for residential and master-metered apartment customer classes, that the rate of return it provides to PEPCO under the RT tariff is higher than the average rate of return under the GS tariff, and that the Commission used incorrect billing determinants in designing the RT tariff. [11] With respect to the first of these arguments, the Commission ruled: We cannot agree with WMATA that it should be exempted from bearing its proportionate share of the revenue gaps produced by the transfer of the master-metered apartments to the residential class and the introduction of the RAR rate. WMATA has offered no grounds for treating it differently than the other commercial classes. Order No. 7751 at 18. WMATA does not point to any evidence in the record, nor can we find any, which would support a different conclusion. [12] As for WMATA's contentions regarding the rate of return under the RT tariff as compared with that under the GS tariff, the Commission recognized that the across-the-board rate increase . . . [would] produce from WMATA a rate of return slightly higher than the average for the GS class. Order No. 7716 at 155. However . . . growth in energy use and demand requirements of the WMATA system have required an increase in average system cost above what they would have been without the increased WMATA usage. Id. at 156. In its order denying WMATA's application for reconsideration, the Commission concluded: WMATA's argument merely confuses relative size of class with relative class rates of growth. Contrary to WMATA's claim, Metro's disproportionately high rate of growth is entirely consistent with PEPCO's overall growth pattern, and it, together with Metro's peak-oriented consumption pattern, completely justify [ sic ] a rate of return from Metro slightly higher than that from the GS average. Order No. 7751 at 18. We agree. Finally, with respect to WMATA's argument regarding the inaccuracy of the billing determinants, the Commission said: WMATA . . . appears also to be confused regarding the establishment of its rates in our previous case, [Formal Case] No. 748. There we approved rates designed to equalize the RT and GS rates of return for the test year. It is no surprise that those rates, once approved, might produce somewhat different returns in the year subsequent to the test year. Billing determinants obviously will not remain constant, but this fundamental fact in no way undermines the validity of the authorized rates. Order No. 7751 at 18. Again we agree with the Commission. We see no legal error and no unfairness which would justify disturbing the Commission's ruling.