An Evaluation of the Federal Power Commission's Rulemaking on Utilities' Construction Work in Progress

EMD-77-7: Published: Dec 2, 1976. Publicly Released: Dec 2, 1976.

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GAO was asked to review a proposed Federal Power Commission rule to allow natural gas and electric utility companies to include construction work in progress in their bases for computing rates.

The rulemaking order does not appear to serve adequately the purposes the Commission originally envisioned. The immediate financial impact appears to be minimal, and little change will result in the utilities' allowances for funds used during construction accounts. More importantly, the rulemaking sets a precedent for the Commission to depart from its historic "used and useful" policy and provides an opening for utilities to submit future rate increase filings with cost of construction work in progress in the rate base. The greatest impact of the rulemaking will probably be to increase the administrative workload of the FPC staff, thus intensifying the regulatory lag problem.

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