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Simple English definitions for legal terms
automatic-adjustment clause
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A quick definition of automatic-adjustment clause:
An automatic-adjustment clause is a rule that lets a company that provides a service, like electricity or gas, raise its prices without having to ask permission from the government, if certain costs go up. For example, if the cost of fuel goes up, the company can raise its prices without having to go through a long process of asking for permission. This rule is meant to help companies keep up with their expenses and make sure they can still provide the service they offer.
A more thorough explanation:
An automatic-adjustment clause is a provision in a utility-rate schedule that allows a public utility to increase its rates without a public hearing or state review, if certain operating costs, such as the price of fuel, increase.
For example, let's say a utility company has an automatic-adjustment clause in their rate schedule. If the price of fuel increases, the company can automatically increase their rates without having to go through a public hearing or state review process. This allows the company to adjust their rates quickly and efficiently to cover their increased costs.
Another example could be a water utility company that has an automatic-adjustment clause in their rate schedule. If the cost of chemicals used to treat the water increases, the company can automatically increase their rates to cover the additional expense.
Overall, an automatic-adjustment clause allows utility companies to adjust their rates in response to changing operating costs, without having to go through a lengthy and potentially costly review process.