Electric Rate cases

1. Electric Rate cases From an Intervener's Perspective by Matt White

2. What is an Intervener? • 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

3. What Interest? • Environmental • Safety/Consumer Protection • Number one interest • Interveners want to pay less for electricity

4. How Do Interveners Reduce Electric Rates? • 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

5. What is a Revenue Requirement? • 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

6. How Do You Reduce Revenue Requirement? • 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

7. All Customers Win! • Reducing revenue requirements reduces rates for all customers

8. Rate Design/Class Allocation • If revenue requirement is the size of the pie utilities receive from customers

9. Dividing the Pie • Rate design and class allocation is the method of determining the piece of the pie each customer must pay

10. Customer Classes • 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)

11. Intervener’s Strategy • 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

12. Intra-class Allocation • 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

13. Customer Charges • 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)

14. Allocating Costs Through Charges • 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

15. Strategy • Know your electric consumption pattern and argue for the charges that cost you the least

16. You vs. Them • If you pay less because the rate design has been changed in your class, other customers in your class pay more

17. Zero Sum Game • 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

18. Who Loses the Game? • Those who do not show up to the table (i.e. intervene in a rate case) • The other players will take your chips!!!