Arkansas Code
Subchapter 12 - Formula Rate Review Act
§ 23-4-1207. Formula — Adjustment of customer rates

(a) Customer rates shall be adjusted in a formula rate review mechanism based on a comparison of the earned return rate to the target return rate.
(b) Adjustments of customer rates shall be calculated using the following formula:
(1) If the earned return rate is less than the target return rate minus five-tenths percent (0.5%), the formula rate review mechanism revenue level for the formula rate review test period shall be increased by an amount necessary to increase the earned return rate to the target return rate;
(2) If the earned return rate is greater than the target return rate plus five-tenths percent (0.5%), the formula rate review mechanism revenue level for the formula rate review test period shall be decreased by an amount necessary to decrease the earned return rate to the target return rate; or
(3) If the earned return rate is less than or equal to the target return rate plus five-tenths percent (0.5%) and greater than or equal to the target return rate minus five-tenths percent (0.5%), the formula rate review mechanism revenue level for the formula rate review test period shall not change or be adjusted.

(c) If a formula rate review test period utilizes projected data under § 23-4-406 or a projected year, rates shall be adjusted by the netting of historical year differences under § 23-4-1206.
(d)
(1) The total change in the formula rate review mechanism revenue level shall be allocated to each applicable rate schedule based on an equal percentage of the base rate revenue used in the development of rates in the Arkansas Public Service Commission's order addressing the public utility's last application for a general change in rates and charges.
(2) The total amount of a revenue increase or decrease for each rate class shall not exceed four percent (4%) of each rate class's revenue for the twelve (12) calendar months preceding the formula rate review test period.

(e) Only one (1) rate review adjustment shall occur during any period of three hundred sixty-five (365) days.

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