52.241-7
Change in Rates or Terms and Conditions of Service for Regulated Services
For regulated services, contractors must promptly disclose rate and service changes, honor the lowest comparable customer rates, and ensure approved changes are incorporated into the contract through proper modification.
Overview
- FAR 52.241-7 governs how regulated utility or similar service contracts handle changes in rates, tariffs, and service terms when those services are subject to oversight by a regulatory body.
- Its purpose is to ensure the Government receives timely notice of proposed and approved changes, pays only effective regulated rates, and formally incorporates those changes into the contract.
Key Rules
- Notice of proposed and pending changes
- The contractor must provide written notice when it files an application to change rates or service terms and must also disclose any changes already pending before the regulator at contract award. The notice must fully describe the proposed change.
- Approved changes and timing
- If the regulatory body approves a change, the contractor must send the Contracting Officer a copy within 15 days after the effective date. The contractor must continue service under the amended tariff, and the Government pays the higher or lower rate effective on the regulator’s effective date.
- Lowest available rate protection
- Throughout contract performance, the contractor’s published and unpublished rate schedules may not exceed the lowest rates available to other customers of the same class under similar conditions of use and service.
- Non-rate regulatory changes and contract modification
- The contractor must immediately provide regulations affecting the contract that concern matters other than rates. Changes to rates or service terms must be incorporated by contract modification unless the contract states otherwise.
Responsibilities
- Contracting Officers: review notices, evaluate regulatory changes for consistency with Federal law, and issue contract modifications to incorporate approved changes.
- Contractors: notify the Government of filings, pending matters, approved changes, and other relevant regulations; continue service under amended tariffs; and ensure rates do not exceed the lowest comparable customer rates.
- Agencies: pay adjusted regulated rates when effective and reject regulatory changes that conflict with Federal laws or regulations.
Practical Implications
- This clause exists to align regulated-service contracts with external utility regulation while preserving Federal contracting controls.
- It affects day-to-day administration by requiring prompt notice, tariff tracking, and timely contract modifications.
- Common pitfalls include late notice, failure to disclose pending rate cases, and charging rates above the lowest comparable schedule.