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Matanuska Electric Association8/23/2002
No. 5611
I. INTRODUCTION
Retroactive ratemaking by a utility is prohibited in Alaska, as it is in the majority of jurisdictions in the United States. The Regulatory Commission of Alaska compelled Chugach Electric Association to refund payments collected as a result of a miscalculation in the cost of generation and transmission line loss. The superior court, concluding that the commission's ruling constituted retroactive ratemaking, reversed the commission's order. We agree, and therefore affirm the decision of the superior court.
II. FACTS AND PROCEEDINGS
"To comprehend the rule against retroactive ratemaking [as well as the facts involved in a retroactive ratemaking case], it is necessary first to understand the process for the setting of public utility rates."
A. Background
The provision of electric service by Chugach Electric Association, Inc. (Chugach) and Matanuska Electric Association, Inc. (MEA) is governed by AS 42.05. Because Chugach and MEA are electrical cooperatives organized under AS 10.25, they come under the provisions of AS 42.05.
Chugach generates electricity and sells it wholesale to MEA. Chugach's rates have two components: a base rate and an adjustment to that rate known as a fuel surcharge. The base rate reflects the fixed costs of providing electric service, as well as other costs that tend to remain stable. The fuel surcharge is a fluctuating charge that operates to protect Chugach against those costs associated with purchasing and generating power that are not as stable.
A utility's rates and business practices are governed by the tariffs it has in effect with the Regulatory Commission of Alaska (commission). The filing or revision of a tariff is a complicated and lengthy process. As a means of expediting the procedure, Alaska state law allows utilities to utilize a simplified rate filing process. The simplified rate filing process allows utilities to modify their base rates through quarterly or semi-annual rate filings. Through this process, utilities are allowed to adjust their base rates, subject to certain limitations, without filing and litigating full rate cases.
While the simplified rate filing is a means for a utility to have an expedited procedure to establish its base rate, a Cost of Power Adjustment Filing allows the same expedited process for surcharges. The Fuel and Purchased Power Cost Adjustment Factors (fuel surcharge filing) is an adjustment Chugach filed with the commission to its base rate and is the focus of the present dispute. This surcharge is calculated through a procedure established in a tariff similar to the simplified rate filing process. Through this mechanism, the commission permits utilities such as Chugach to collect a surcharge designed to recover fluctuations in fuel costs relative to costs in the base rate. Fuel surcharge filings are not subject to the same review as the base rate, although there are some similarities between the fuel surcharge filing procedure and simplified rate filing procedure.
This appeal involves the use of an estimated generation and transmission system energy loss in Chugach's fuel surcharge filings. A generation and transmission line loss factor is an adjustment to the base rate to reflect the amount of electric energy that is lost through its generation and transmission. This amount varies and cannot always be accurately predicted. Because of the fluctuations, it is part of the fuel surcharge and is adjusted on a periodic basis.
Additionally, because the fuel surcharge is an estimate, the amount collected might fall short or exceed the actual cost of a utility's fu
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