Electric Rate cases
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Transcript Electric Rate cases
From an Intervener's Perspective
by
Matt White
An intervener is a non-utility that participates
in a rate case to advocate its interest
Interveners can be
Consumer advocates: Government agency that
protects residential customers’ interests
Large scale energy users
Environmental groups
Unregulated electric suppliers
Environmental
Safety/Consumer Protection
Number one interest
Interveners want to pay less for electricity
Convince the Public Utilities Commission that
rates should be lower
Three ways to reduce electric rates
Reduce the revenue requirement
Shift revenues to another customer class
Modify rate design within the class
Revenue Requirement is the amount of money
utilities are allowed to collect from consumers
through electric rates
Utilities are entitled to recover all of the costs they
incur to serve customers (e.g. cost of fuel, labor)
Utilities are entitled to receive a rate of return on
all of their assets they use to serve customers
Add the value of all a utility’s assets (e.g. power plants,
electric lines)
Utilities receive a certain percentage of the value of all
their assets annually
Argue that a utility’s reported costs are too
high
Argue that a utility values its assets too high
Argue that a utility’s rate of return should be
lowered
Reducing revenue requirements reduces rates
for all customers
If revenue requirement is the size of the pie
utilities receive from customers
Rate design and class allocation is the method
of determining the piece of the pie each
customer must pay
Each electric customer is assigned to a class
Similar customers are assigned to the same classes
Usually residential customers are in the same class,
industrial customers are in the same class, and
commercial customers are in the same class
Each class is assigned a certain percentage of the
revenue requirement
Each class has a different electric rate design to
recover those revenues
Rates are higher or lower depending on the class
Different charges depending on the class (e.g. fixed
monthly charges, per kWh charges, per kW charges)
Argue that the other classes should pay more
of the revenue requirement and argue that
your class should pay less
This pits one intervener against the other
The pie also must be divided up amongst each
customer in the class.
Rate design determines how much of the
revenue requirement each customer pays
Customer’s are allocated their piece of the
revenue requirement through the charges they
receive on their electric bill
There are generally three types of charges
Fixed monthly charge
Energy Charge (per kWh)
Demand Charge (per kW)
Each customer pays a different percent of the
revenue requirement, depending on the type of
charge
Example: If in the residential class there is a
high fixed monthly charge, and a low energy
charge who wins and who loses?
Customers with low electric usage lose because they
must pay the high fixed monthly charge no matter
what
Customers with high electric usage win because
there is a low cost to excess consumption
Know your electric consumption pattern and
argue for the charges that cost you the least
If you pay less because the rate design has been
changed in your class, other customers in your
class pay more
Generally rate cases are a zero sum game
If the utility gets less, customers get more and
visa versa (revenue requirement)
If one customer class pays less revenues,
another class pays more
If one customer in a class is charged less,
another customer is charged more
Those who do not show up to the table (i.e.
intervene in a rate case)
The other players will take your chips!!!