Public Utility Regulatory Policy Act of 1978: electric utility rate reform

Titles I and III of the Public Utility Regulatory Policies Act of 1978 (PURPA) are examined with a focus on the economic bases and implications of retail sales by electric and natural gas utilities. Title I outlines the requirements and procedures for setting retail electricity rates. Six ratemaking standards and the various arguments in favor of rate reform are examined. Rate issues are traditionally argued at the state level, but PURPA directs the states to examine federal standards and ratemaking issues in terms of cost-effectiveness. The legislative history of the Act and the major compromises made are described. The states that have been reluctant to consider rate reforms may be encouraged to adopt cost-effectiveness criteria sooner, while the more-progressive states may find the legislation has slowed the process. If state commissions fail to serve national goals in their rate reform, the Federal government can assume a retail ratemaking role for the interstate market. (DCK)