Nuclear power's effects on electric rate making

Government and the electric utility industry are re-evaluating nuclear power's contribution to the total U.S. energy supplies. This article addresses how the recently increased nuclear plant construction and operation costs are translated into the prices that consumers pay for electricity. The electric rates that consumers pay must reflect the costs of producing electricity, as well as the costs of transmission, distribution, metering, and billing. The use of nuclear power for electric production is anticipated to grow rapidly so as to meet a larger portion of our country's electricity needs through the end of the century; so nuclear power costs are expected to be an even larger portion of the total electricity price. There are certain rate-making issues that are actively being discussed in public forums and before state and Federal regulatory bodies. These issues are not unique to nuclear power, but take on added significance when nuclear power is used by utilities to produce electricity because of the technology required and because of the type, timing, and magnitude of the costs involved. These are: (1) inclusion of construction work in progress in the rate base; (2) fuel adjustment clauses and treatment of nuclear fuel cycle costs; (3) treatment of certain taxes under the rate-making method called normalization or deferral accounting (sometimes referred to as ''phantom taxes''); and (4) rate treatment for particular nuclear expense items reflecting costs of delays, plant cancellations, and operational slowdowns