Burns & McDonnell - Watch our T&D How videos
FRI Public Utility Symposium Sept. 25, 2019

Rate Cases

FERC v. Ohio

Ohio ratepayers could prosper if natural gas prices rise in the next few years, boosting revenues when the utilities resell into PJM markets.
Image: 
"Ohio ratepayers could prosper if natural gas prices rise in the next few years, boosting revenues when the utilities resell into PJM markets." – Bruce Radford
Author Bio: 

Bruce Radford is executive editor of Public Utilities Fortnightly. Contact him at radford@fortnightly.com.

Will the Feds weigh in on the great Buckeye brawl?

Benchmarking Your Rate Case

With regulators reluctant to OK rate hikes, utilities can better justify an increase – if it compares well with the utility’s peer group.

Image: 
Figure 1 - SP&L’s Rate-Case Benchmarks
Figure 2 - Average Retail Rates of Benchmark Utilities
Figure 3 - Distribution of Retail Rates
Figure 4 - Retail Price Trend
Figure 5 - Load Growth Forecast
Figure 6 - Changing Load Factors
Figure 7 - Renewable Portfolio Standards
Figure 8 - Projected Reduction in Sales Attributable to DSM
Figure 9 - First Year of Need for New Capacity
Figure 10 - Annual Capacity Additions
Figure 11 - 2010 T&D Costs
Figure 12 - Projected Price Changes
Figure 13 - Cost Drivers in Rate Increases
Figure 14 - Historical and Projected Average Retail Rates
Author Bio: 

Ahmad Faruqui is a principal and Ryan Hledik is a senior associate at The Brattle Group. This article reflects the authors’ views and not necessarily those of The Brattle Group.

Show the PUC how your filing stacks up against the others.

Solution in Search of a Problem

Utilities seeking financing for environmental upgrades should look to the markets for debt and equity, rather than trying to securitize those costs.

Image: 
Figure 1 - Securitization by Purpose (% of Total)
Figure 2 - Risk Compression Caused By Securitization
Category: 
Transactions Business & Money
Author Bio: 

Thomas Feldman is a principal at Concentric Energy Advisors.

Securitization fails the test for financing environmental capex.

The Old Drawing Board

PUCs are concerned that a rapid shutdown of coal-fired plants will start a full-tilt dash to gas—similar to the one that caused bankruptcies among independent power producers in the late 1990s and early 2000s. But this time around, ratepayers and not IPP investors will be stuck with the risk, if utilities rush to add all that new gas-fired capacity to rate base.

Category: 
Frontlines
Author Bio: 

Michael T. Burr is Fortnightly’s editor-in-chief. Email him at burr@pur.com

Portfolio planning in the age of gas.

Gas Without Regrets

Gas-fired generators and suppliers alike can each share risk and reward from historic low prices with contracts that blend market and fixed prices

Image: 
Figure 1 - Coal and Natural Gas Generation (January 2005 through October 2013)
Figures 2 - 4 - Fixed, Collared, and Hybrid Agreements
Figure 5 - Maximum Regrets for Electricity Generators and Gas Suppliers
Figure 6 - Potential for Locking-In Affordable Gas-Fired Power
Category: 
Energy Risk & Markets
Sidebar: 
Sidebar Title: 
Presuming Prudence
Sidebar Body: 

In 2010, Colorado Gov. Bill Ritter signed the Clean Air-Clean Jobs Act, which, among other things, explicitly encouraged long-term gas supply contracts. The law specified procedures for commission approval and discouraged subsequent look-back by future commissions.

In April 2012, the Oklahoma Corporation Commission approved a competitive procurement rule that created new opportunities to enter long-term contracts for natural gas and other fuels. The rule created “an open, transparent, fair, and nondiscriminatory competitive bidding process” that would enable Oklahoma utilities to obtain a presumption of prudency for approved agreements.3

A report recently released by the National Regulatory Research Institute noted the proactive measures taken by Colorado, Oklahoma, and Oregon to promote long-term natural gas contracts, while the majority of state commissions provide little guidance.4 – GS and PB

Author Bio: 

Gregory C. Staple (gstaple@cleanskies.org) is the CEO and Patrick Bean (pbean@cleanskies.org) is an energy policy advisor at the American Clean Skies Foundation.

How suppliers and generators can each gain from today’s historic low prices.

A Virtuous Cycle

Data and experience show that serving customers well translates into better rate case outcomes. Conversely, poor performance starts a downward slide. J.D. Power and Associates research shows the correlation between customer service and financial returns.

Image: 
Figure 1 - Approved ROE And Customer Satisfaction
Figure 2 - Customer Expenses And Satisfaction
Figure 3 - Profitability and Customer Satisfaction
Figure 4 - Virtuous Cycle of Customer Satisfaction
Figure 5 - Rate Case Gap And Customer Satisfaction
Author Bio: 

Andrew Heath, Senior Director, Energy Practice, J.D. Power and Associates

How customer satisfaction drives returns on equity for regulated electric utilities.

Hedging or Betting?

Many utilities engage in hedging to protect customers from price spikes. But unless regulators are involved in crafting and monitoring these programs, they can turn into speculative ventures that put ratepayers at risk — for the benefit of shareholders.
Category: 
Business & Money
Author Bio: 

John A. Neri is a principal with energy consulting firm Benjamin Schlesinger and Associates, and is a lecturer in economics at the University of Maryland.

Lacking regulatory oversight, financial hedges turn into risky speculation.

Rate Design by Objective

Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to cross-subsidies, inequitable outcomes, and perverse incentives. An objective-based approach can better communicate costs to customers in a way that better serves operations and policy goals.

Image: 
Author Bio: 

Philip Q Hanser is a principal with The Brattle Group. He acknowledges the contributions of Brattle colleagues Ryan Hledik and Ahmad Faruqui, as well as Ken Costello of the National Regulatory Research Institute. He also acknowledges editorial assistance from Heidi Bishop and Shannon Wentworth at Brattle. The opinions expressed in this article are Hanser’s and don’t represent those of The Brattle Group or its clients.

A purposeful approach to setting energy prices.

Pre-Funding to Mitigate Rate Shock

As the industry resumes major capital-spending programs, utilities and their stakeholders are rightly concerned about the effects on prices. Traditional regulatory approaches expose utilities to risks and costs, and can bring rate shock when capital spending finally makes its way into customers’ bills. Pre-funding investments can provide a smoother on-ramp to bearing the costs of a 21st-Century utility system — but it also raises questions for utilities to address.

Image: 
Author Bio: 

Sherman Elliott is an independent consultant and formerly was a commissioner on the Illinois Commerce Commission. Ralph Zarumba is a director in Navigant’s energy practice.

Re-starting the Big Build calls for revisiting cost-recovery mechanisms.