The Process And How You Can Participate
A Publication of the Arkansas Public Service Commission

Introduction

Today, utility rate setting is getting increased attention and interest from the public. When a utility company files a request for a rate increase, the attention of those affected by the increase turns toward the Public Service Commission (PSC). The PSC is the rate setting agency that must decide whether or not a rate increase request from a regulated utility is just and reasonable.

Although there is great interest in the activities of the PSC, many consumers are unfamiliar with the procedures of a rate case. The PSC has an important and difficult job. This brochure on “Rate Cases” seeks to make that process more understandable and accessible. We hope the information we have provided will answer your questions and give you a practical understanding of how the process works.

What Does the Law Require?

Arkansas law requires that the rates of regulated utility companies be reasonable; that the service they provide be safe and adequate; and that those utilities be allowed the opportunity to generate revenues which will keep them in good financial health.

Although these may seem to be contradictory goals, they are not. A utility cannot survive without customers who can afford its services, and consumers would be severely hurt if economic hardships were to force their utility to reduce or cease to provide utility service.

This government intervention, which attempts to balance the needs of consumers with the needs of the utility that serves the consumers, is called regulation. The PSC is the agency responsible for regulating utilities in Arkansas. This authority is given to the PSC by laws enacted by the Arkansas State Legislature, and is carried out through rules written and adopted by the agency.

How Will I Know When A Utility Asks For A Rate Increase?

Before the PSC considers a rate case, the utility must publish notice of the change requested. This notice must appear once a week for two consecutive weeks in newspapers having substantial circulation in the utility’s service area. Publishing the notice gives persons who will be affected by the proposed increase information and the opportunity to actively participate. The notice must include a general description of the application and tell customers how to contact the PSC for more information.

How Long Does A Rate Case Take?

Once an application for a rate increase is filed, the PSC must issue a final decision within 10 months. In a major rate case, thousands of man-hours are spent in examining the evidence to ensure that it is accurate and truly demonstrates the need for additional revenue.

What Happens When A Company Asks For An Increase?

Notice of Intent. Arkansas law requires that the utility notify the PSC 60 to 90 days prior to filing a rate case. This notice allows the PSC to form a team of experts to review a utility’s evidence and audit its books.

Application. The case begins when a utility submits a written application for a change in rates. The application must include documents supporting the request and information on current and projected expenses.

Rate Suspension and Hearing Date. If the PSC does not act within 30 days after a case is filed, the proposed increase goes into effect automatically. The PSC has the authority to “suspend” the increase for up to 9 months. This allows the PSC sufficient time to investigate all aspects of rate request and to hold public hearings.

Staff Investigation. The General Staff of the PSC operates independently of the Commission in rate cases. Upon the filing a rate application, the General Staff rate case team begins a very comprehensive review.

Each rate case is thoroughly and carefully investigated. During the investigation, the rate case team prepares its recommendation for presentation to the Commission. Those recommendations are in the form of testimony and exhibits which are filed and then presented during public hearings.

The Hearing. Rate hearings provide the Commission with the evidence and testimony it needs to make an informed decision. During the hearing, evidence and testimony are presented by the utility, the PSC General Staff, and any intervenors through established procedures.

A hearing is very much like a civil trial. Hearings follow certain rules which allow all parties to present and build a case.

At the beginning of each hearing, members of the public are also given an opportunity to express their views. A record of the hearing is made by a Court Reporter and provided to the Commission in the form of a transcript.

The Decision. After all the facts have been gathered, the Commissioners must study the entire record which may consist of thousands of pages. Once the review is complete, a decision is issued in the form of and “Order” which is binding on all parties. The Order contains a summary of the issues and evidence presented in the case, and explains the reason for the PSC’s decision. At this point, the rate case is complete unless appealed.

What Major Issues Are Considered and Decided?

Many technical aspects are considered. In the rate decision, the Commission must determine the revenue requirement, the amount of money that the utility is allowed to collect from its customers to cover its expenses and earn a fair return on its investment, and rate design, which specifies how the revenue will be collected from the various classes of residential, commercial and industrial ratepayers.

The Commission bases its rate design decision on the principle of cost-of-service–the charges levied against a customer should be proportional to the expense of serving that customer.

It should be noted that the Commission does not guarantee that a utility will actually earn the return granted in the rate order. The burden of proof is always on the utility to show that every part of its request is justified.

How Can I Get Involved?

There are several ways an individual or group can voice support or opposition to a rate request the Commission is considering:

Write a letter stating your position. Your letter should be addressed to the Secretary of the Commission and will be filed in the case file and reviewed by the Commissioners and General Staff.

Circulate a petition among those in your community who share your views. The completed petition should be forwarded to the Secretary of the Commission and will be made available for review by the Commissioners and the General Staff.

You may want to speak at the hearing. The Commission encourages individuals who will be affected by the outcome of the case to present their views. Your statement will become part of the record of the hearing. The Commissioners may also ask you questions.

You may want to become an Intervenor. An intervenor is any individual or group that is not otherwise represented and has made a timely written request for and been granted intervenor status. Instructions for becoming an intervenor are contained in our Rules of Practice and Procedure and are available from the Secretary of the Commission.

Is Participation Worth It?

Only you can decide if participation is worth it. We can only say that the Commission listens. That does not mean we will always agree with your viewpoint, but you can be assured that your viewpoint will be considered. There is a value in your participation. Even a single letter, when added to others expressing the same view, can make a significant difference.

In Closing

If you have questions about a regulated utility or a problem you are unable to resolve, contact our Consumer Services Office. You can come to see us in person, write to us, or call us on our local or toll-free numbers.

Phone Numbers:  501-682-1718     1-800-482-1164

Mailing Address: P.O. Box 400

Little Rock, AR 72203-0400

Street Address: 1000 Center Street

Little Rock, Arkansas  72201