Contract Provisions and Ratchets: Utility Security or Customer Equity?

Abstract

The contract provisions and ratchets contained in an electric utility's tariffs for commercial and industrial customers are often subjects of debate between the utility and its customers during regulatory proceedings. Although customers argue that these provisions are means for the utility to secure revenues from them for service not received, these provisions are necessary to properly recover the fixed demand cost of a customer to provide both intra-class and inter-class equity and to allow for a degree of revenue stability for the utility.