ABSTRACT
TVA’s fundamental philosophy is that rates should reflect the cost of providing electric services to each consumer. Basically, it is TVA’s policy that only when consumers pay the cost they impose on the system are rates equitable. In reality, however, the task of developing equitable rates requires the consideration of many and oftentimes conflicting issues requiring tradeoffs between the issues of equity and strictly defined cost-based rates. For example, the avoidance of large, abrupt changes in a consumer’s electric bill has traditionally been a concern in electric utility ratemaking. If for some reason rates and costs have become misaligned for a particular group of consumers, equity consideration may require that changes to correct the problem be phased in gradually over an acceptable period of time.
