Transcript Formula Rate

CLECO TRANSMISSION RATE
CASE
AGENDA
• Welcome and Introduction
• Purpose of Meeting
• Transmission System Update
• Formula Rate Overview
• Formula Rate Protocols
• Transmission Losses
WELCOME
• Meeting Logistics
• Standards of Conduct Reminder
• Presenter Introductions
BACKGROUND
• Current transmission rates
• ESIA Rates based on 1990 costs
• OATT Rates based on 1996 compliance filing
• Transmission rates recover operating costs of the transmission
system and return on transmission investments
• Since 1989, transmission improvements have been made to
maintain adequate and reliable service
• By managing costs and matching new investment to load growth
Cleco has avoided requesting a change in transmission rates
TODAY’S OBJECTIVES
• Purpose of the Meeting
• Cleco will be requesting a change in wholesale transmission and
distribution rates
• Want to engage and involve transmission customers and other
stakeholders in the process
• Timeline
• By March 30, 2012 – transmission rate filing with FERC
• June 1, 2012 – proposed effective date of new rates using formula
OBJECTIVES
• Cleco will change from a Stated Rate to a Formula Rate for
impacted customers.
• Cleco has and continues to have major investment s in the transmission
system. The cost should be shared between retail and wholesale
customers.
• Order 1000 may require Cleco to invest in upgrades on its system to support
regional reliability, Cleco will need a method to share costs between
wholesale and retail customers.
• Major changes to current methodology
• Cleco will start to invoice all customers using billing demand at coincident
peak, unless there is a stated contract demand.
• All customers will be reflected at Points of Receipt. All rates are developed
using the Points of Receipt.
• Network Service will no longer be billed on LRS, it will be a fixed rate for
load at coincident peak.
• Distribution rate has changed. All “ratchet” demands will be replaced with
Coincident peak billing.
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TRANSMISSION SYSTEM
UPDATE
TRANSMISSION SYSTEM
• How we plan the transmission system
• Where we spend money on transmission
• Significant transmission projects
HOW WE PLAN THE TRANSMISSION
SYSTEM
• Annually, perform an assessment and plan looking
out ten years, with emphasis on first three to five
years
• Plan the system to meet NERC Reliability Standards
as well as to meet Cleco planning guidelines
• Perform assessments and studies with other
neighboring utilities.
ACADIANA LOAD POCKET UPDATE
WHERE WE SPEND MONEY ON
TRANSMISSION
• Capacity-load growth driven
• Reliability and system integrity
• Upgrades of equipment to deal with performance issues,
aging infrastructure, end of life issues
• Transmission service requests
• Meeting pending NERC reliability standards
ACADIANA LOAD POCKET (ALP)
PROJECT
To address Reliability and Economics
Cleco Portion:
• $125 million
• 87% complete as of December 31, 2011
• Anticipate 100% Complete by December 31, 2012
FORMULA RATE
OVERVIEW
CHANGE IN COSTS
• Proposed revenue requirement based on
2010 costs = $33.1 million
• Primary driver of increase is higher
investment in transmission plant: net plant
grew from $152.4 million to $276.9 million
• Transmission plant increased approximately
182% over the last 21 years
• Transmission average peak demand has
grown from 1,446 MW (1989) to 2,652 MW
(2010)
STATED RATE VS FORMULA RATE
• A standard rate is a fixed charge set in a regulatory
process through a rate case
– The fixed rates do not change unless another rate case is
filed
• A formula rate is a fixed method for calculating a
rate based upon set inputs
– The formula is the filed rate – not the results in any one year
– The charges to customers update annually
– Data input comes from public sources (Form 1) and
company data
– Recalculation of the charges is done pursuant to a set of
protocols
– Forecast elements are subject to true-up
DETERMINATION OF REVENUE
REQUIREMENTS
• Basic calculation is return on rate base + operating
expenses
• Rate base components:
– Transmission plant balance less accumulated depreciation
• Excludes generator step-up transformers
– Allocated general and intangible plant less accumulated
depreciation
– Accumulated deferred income taxes associated with items
included in revenue requirements
– Working capital
– Other rate base adjustments necessary to reflect funds
supplied by investors
DETERMINATION OF REVENUE
REQUIREMENTS (CONTINUED)
• Return is determined by applying weighted
average cost of capital percent to rate base
– Cost of capital rate incorporates cost of debt and cost of
equity (i.e., ROE) weighted in proportion to capital structure
• Operating expenses:
– Depreciation expense for transmission plant and allocated
general/intangible plant
– O&M expense, including transmission O&M and allocated
A&G expense
– Allocated general tax expense:
• Property tax, payroll tax, other non-income taxes
– Income taxes
DETERMINATION OF REVENUE
REQUIREMENTS (CONTINUED)
• Revenue credits:
• Revenues received that offset costs included in revenue
requirements, primarily non-firm and short-term firm
revenues for transmission service, and lease payments
associated with transmission facilities
• The load divisor used to develop the unit charges
is stated at Points of Receipt (or system input), so
all billing determinants will be the customers
demands at the Points of Receipt. This does not
change the Contract Demands or Reserved
Capacity that may be stated at the Points of
Delivery.
FORMULA RATE
• Determination of revenue requirements is stated as a
formula that uses cost inputs from FERC Form 1 and
company records
– The Form No. 1 (FN1), a detailed and audited publicly
available source of data.
– Workpapers provide additional detail or data required by
the utility, FERC or intervenors
– Detailed cost support attachment to allow more detailed
functionalizations and allocations to better sync with
ratemaking.
• The resulting revenue requirement is recomputed annually.
• The annual revenue requirement is divided by calendar
year average transmission system peak demand for longterm firm service to determine the rate per MW.
• Revenue requirements and rates are billed initially using
estimated annual revenue requirements and trued-up to
actual revenue requirements when known.
FORMULA RATE
• Revenue requirement used for billing is for a
projected test year
• A “true-up” calculation is done each year to
compare the actual revenue requirement to the
projected
• Any difference is an adjustment to the revenue
requirement for the next projected period
ADVANTAGES OF FORMULA RATE
• Annual rate adjustment to reflect new investment, load
growth, and usage credits
• Right to have data requests answered during the annual
review period
• Review input
• Point out input errors
• Procedures to handle disputes are predetermined
through the protocols
• Improve transparency by providing data, changes in
accounting practices, and customer meetings
• Set forth annual update procedures, dates, timing, etc.
• How to handle data input or accounting errors
• Allow for customers to budget for upcoming rate
changes
WHOLESALE DISTRIBUTION RATES
• Cleco will be submitting revised Wholesale
Distribution Rates.
• The revenue requirement is calculated based on
cost of non-secondary poles, towers, conductors
and substation investments multiplied by the fixed
charge rate.
• The rate is derived by dividing the revenue
requirement by the 12 CP load on the distribution
system.
FORMULA RATE
PROTOCOLS
FORMULA RATE PROTOCOLS &
TIMELINE ILLUSTRATION
•Cleco will implement a formula methodology to
calculate its transmission service rates for Network
Integration Transmission Service, Point-to-Point
Transmission Service, and ESIA service
•The revenue requirements and rates will be
recalculated annually using the approved formula and
in accordance with the established formula protocols.
The protocols are separated into the following
categories:
– Annual update process
– Annual review procedures
– Resolution of challenges
ANNUAL UPDATE PROCESS
• Each year the ATRR and the PTP transmission rates
will be projected based on prior calendar year
data. This represents the annual update for the
upcoming rate year
– The annual update will be posted to the OASIS website
– An informational filing will be made with FERC
– The date on which these events occur is the publication
date
• The annual update will also include the true-up for
the prior year ATRR
– True-up amount (including interest) increases or
decreases ATRR for upcoming billing period
PROPOSED ANNUAL REVIEW
PROCEDURES
• Each annual update shall be subject to the annual
review procedures
• Interested parties will have up to 105 days after the
publication date to serve information requests to Cleco
(i.e., Discovery Period)
• Cleco will respond to requests within 10 business days in
most circumstances
• Any interested party will have up to 135 days after the
publication date to review calculations and notify Cleco
of any specific challenges
• Preliminary challenges will be posted to the OASIS
website
RESOLUTION OF CHALLENGES
• For any preliminary challenges to the Annual
Update not resolved, the interested party may
make a formal challenge with FERC
TRANSMISSION LOSSES
SUMMARY OF LOSS FACTORS
Cleco evaluates system losses every two years based on the system
configuration and loads in the odd years. The most recent completed study
was for the year 2009. These loss factors were taken or developed from that
study and used in the transmission rates to be filed.
Energy Losses
Voltage
Level
Loss
Factor
Expansion
Factor
(≥ 69kV)
0.0168
1.0171
(34.5 kV to < 69 kV)
0.0290
1.0299
(13.8 kV to < 34.5 kV)
0.0388
1.0403
Transmission
Subtrans.
Primary
Demand Losses (Average 12 Coincident Peaks)
Voltage
Level
Loss
Factor
Expansion
Factor
(≥ 69kV)
0.0170
1.0173
(34.5 kV to < 69 kV)
0.0324
1.0335
(13.8 kV to < 34.5 kV)
0.0443
1.0463
Transmission
Subtrans.
Primary
Losses = Receipt x Loss Factor
Receipt = Delivery x Expansion Factor
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Questions and Discussion