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A multi-year tariff framework is intended to

  • A.remove the regulator from the process entirely
  • B.guarantee the utility its actual costs each year
  • C.fix the tariff permanently at its present level
  • D.give the utility an incentive to reduce costs

Answer: D

Setting a trajectory for several years lets the utility keep part of any saving it makes below the approved path, which annual cost-plus regulation does not. Uncontrollable items such as fuel are passed through separately.

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