For many years public utilities and regulatory commissions have been greatly concerned over the time and expense involved in proceedings relative to utility rates. Few types of legal proceedings are more complex, intricate and expensive than the full-blown utility rate case, with its myriad problems in valuation, economics, accounting, law and engineering. Particularly during inflationary periods, such as the present, mounting expenses of operation confront utilities and commissions with the dismal prospect of repeated applications for rate adjustment and formal hearings thereon. It is not surprising that techniques have been sought to simplify the rate making process, consistent with the duty of regulatory commissions to maintain supervision of utility rates in the public interest. One such technique is a provision which, without formal proceedings, increases or decreases utility rates in proportion to increases or decreases in an operating expense.
Joe H. Foy,
Cost Adjustment in Utility Rate Schedules,
13 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vlr/vol13/iss3/4