Last year American consumers paid $12.7 billion more for gas and electrical utility service - an average of $380 for each household - than they paid in 1975, and three-fourths of the increase resulted from utilities' "automatically" passing through higher fuel costs, according to a congressional study.
Forty-five states allow utilities to pass through higher fuel costs using so-called "fuel adjustment clause increases" rather than taking part in formal rate-making proceedings and many of these states also allow utilities to pass along non-fuel costs without seeking a decision from state regulatory commissions.
"It thus appears that the fuel adjustment caluses are being used by utilities without commission sanction, to throw a blanket over more and more utility costs which should be openly reviewed and subject to challenge," the study said.
In 1975 utilities received $11.5 billion in added revenues through fuel adjustment clauses out of a total of $15.6 billion in rate increases.
During 1976 electrical utilities had the largest share - $6 billion - in rate boosts using the automatic fuel pass-through procedure while gas utilities added $3.6 billion in revenues outside of the regulatory mechanism.
Sen. Edmund S. Muskie (D-Maine) and Sen. Lee Metcalf (D-Mont.) of the Senate Governmental Affairs Committee charged in the study that "abuse of fuel adjustment clauses suggests that the public might be better served by their abolition and reliance on traditional rate-making procedures."
Since the 13 member Organization of Petroleum Exporting Countries quadrupled oil prices in 1973, the pieces utilities pay for oil, natural gas and coal have more than doubled. Utility industry officials claim that fuel adjustment causes, which automatically pass these surging fuel costs along to the consumer, are necessary for the companies to remain financially viable.
Last year state utility commissions granted the companies $3.1 billion in rate boosts as a result of formal rate proceedings, less than the $4.1 billion awarded in 1975.
In 1976, the companies polled in the 45-state study received an average of about one-half of the increases they petitioned for, compared with about two-thirds in previous years.
Labeling the increases from fuel adjustment clauses "astronomical," the Governmental Affairs Committee study said the trend is evidence that "state commission regulation of utility rates and services is preferable to federal regulation of those matters," since federal regulation might be used to override state agency denials of increases.
But the Muskie-Metcalf study also says that because of the large proportion of rate increases granted to electrical and gas utilities outside of the regulatory framework, "commissions which appear in formal cases to be standing up to utilities, only to grant them substantial discretion in automatic clauses, are hardly upholding their responsibilities."