Opinion ID: 695143
Heading Depth: 2
Heading Rank: 1

Heading: The Matching Principle

Text: 14 The Commission follows a general ratemaking principle of matching, by which ratepayers are charged with the costs of producing the service they receive. 61 F.E.R.C. at 62,214. The Commission's overall goal in authorizing the switch to accrual accounting is to conform the practice to the matching principle. The accrual method charges current customers for the costs associated with present employment. Under the pay-as-you-go method, by contrast, the matching principle is consistently violated, because current ratepayers are paying for retiree medical costs associated with past service. 15 The transition obligation, however, entails some violation of the matching principle. Under the new accrual method, the costs of the transition obligation are now deemed to have accrued in the past, and thus are associated with past service. The Commission recognized that [c]harging current ratepayers for the transition obligation is unquestionably charging for costs incurred to provide service to other, earlier ratepayers. 61 F.E.R.C. p 61,331 at 62,215. It concluded, however, that the transition obligation was not fatal to the switch because (1) the switch to the accrual method is overall more faithful to the matching principle, and (2) under Commission policy, some violation of the matching principle is acceptable when ratemaking conventions involving future expenses change. In particular, when ratemaking conventions change to recognize a previously unrecognized cost, some of which has already accumulated, the Commission allows the utility to make up for the amount that has already accumulated: the make-up provision is a permissible way to make a utility whole for properly deferred, prior period costs. Id. 16 The Commission has consistently allowed make-up provisions for prior deferred expenses similar to the one at issue here. For instance, the Commission has authorized utilities to amortize over ten years the costs of disposing of previously spent nuclear fuel once the utilities realize that the fuel must be disposed of rather than reprocessed as originally planned, see Virginia Electric & Power Co., 15 F.E.R.C. p 61,052 at 61,105, modified, 17 F.E.R.C. p 61,150 (1981), and has done the same with respect to previously unrecognized nuclear decommissioning costs. 61 F.E.R.C. p 61,331 at 62,215 (citing cases). Thus, the Commission's treatment of the transition obligation is squarely within Commission precedent, which allows exceptions such as this one to the general matching principle.