Management Issues: Other Issues Raj Addepalli

1. Management Issues: Other Issues Raj Addepalli

2. Substantive Issues • Ratemaking • Service Quality • Integrated Resource Planning • Public Benefit Programs • Mergers/Acquisitions • Introduction of Competition • New Generation/Transmission Facility Approval • Sale of Assets • New Security Issuance

3. Substantive Issues Service Quality • Service Quality • Standards in place for reliability • SAIFI, CAIDI standards in place, measure system average frequency of interruptions and duration of interruptions • Utilities monitor 10 worst circuits and report to the Commission periodically • Staff continuously monitors utility performance in providing reliable service • Staff conducts special investigations re: utility restorations after storm related outages or other extended outages to see whether the utility acted prudently

4. Substantive Issues Service Quality • Other Service Standards measured • Internal • Billing Accuracy • Meter Reading on time • Appointments Kept • New Services provided on time • External • Customer Satisfaction • Customer Complaints to the Commission

5. Substantive Issues Service Quality • Staff monitors utility service quality • Incentive/Penalty mechanisms used to induce utilities to provide good service • Staff investigates major service quality problems: recent examples • utility’s massive billing errors • utility’s prolonged outages and how it communicated with public

6. Substantive Issues Service Quality • Metering • Requirements on new meters and meter devices that are installed for billing purpose • Commission approves the meters before utilities installs meters • Ongoing meter testing requirements on utilities to ensure continued accuracy of meters • Staff reviews utility reports and does periodic audits

7. Substantive Issues Service Quality • Metering (contd) • Master metering • Sub-metering • Automated Meter Reading (AMR) • Telephone (Inbound, Outbound) based meter readings • Radio frequency drive by • PLC

8. Substantive Issues Service Quality • Billing • Typically, bills are typically rendered on a monthly basis based on monthly meter readings • Some utilities do bimonthly meter reading, but monthly billing with estimated meter reads in between • Commission monitors accuracy of utility billing • Customers pay by mail, by phone, internet, walk-in utility office, at grocery stores etc. • Billing Policies (frequency, payment practices, interest on over collections, late payments etc) set by Commission

9. Substantive Issues Service Quality • Customer Service • Commission • monitors utility provided customer service • resolves customer complaints against utilities • sets customer service policies (penalties for poor service, slamming, cramming, utility collection practices, utility response to customers concerns)

10. Substantive Issues Service Quality Summary of Performance Incentive Plans

11. Substantive Issues Integrated Resource Planning • Evaluation of Supply and Demand Side Resources • Optimal Mix of each to meet the growing energy needs of customers • Utilities conduct studies and file plans with Commission • Public Input sought • Commission takes action on utility plans • A major issue is measuring costs and benefits of various options, particularly those benefits that are difficult to quantify • Utilities could be provided incentives to achieve public policy goals

12. Substantive Issues Public Benefit Programs • Research and Development • Independent research by utilities (reliability improvements, productivity improvements etc) • Funding contribution to other agencies for new technologies and common purpose research (EPRI, NYSERDA etc) • Commission staff reviews utility expenditures on R&D

13. Substantive Issues Public Benefit Programs • Low-Income programs • Elements: • Rate Discounts • Percentage of Income plans • Arrears Forgiveness • Energy Efficiency Measures • Budget Counseling • Consumer Education

14. Substantive Issues Public Benefit Programs • Low-Income programs (contd) • Budget • Some funding from Federal Government • Some funding from State Government • Some funding from other customers; very minimal • Commission monitors utility activities; encourages coordination among state agencies with responsibility for assisting low-income customers

15. Substantive Issues Public Benefit Programs • Demand Side Management Programs • programs that involve peak shaving, valley filling, load shifting from peak to off-peak, energy efficiency etc. • if “market place” cannot provide these services, perhaps some public funding is needed • who benefits from programs and who pays for them? • how do we do cost, benefit analysis of the programs? • who makes judgements on which programs should or should not be done?

16. Substantive Issues Public Benefit Programs • Cost effectiveness • costs relatively easy to compute • benefits, particularly non quantifiable and secondary benefits, difficult to compute • leads to controversy over public benefit programs • Rate Impact Measure Test, Total Resource Cost Test etc. measures for cost effectiveness

17. Substantive Issues Mergers and Acquisitions • Utilities file petitions for Commission approval • Evaluation by the Commission whether it is in the public interest? • Who bears the cost of M&A and who gets the benefit? Over what time period? • Impact on utility employees, customers, community evaluated

18. Substantive Issues Competition • Drivers: • Advances in power-generating technology • Lower cost and cleaner alternatives to utility capacity • Pressure from customers • Regional electricity price variations • In 1995, average sales revenue to all consumers ranged from 4.0 cents/kWh in western states to 11.9 cents/kWH in the Northeast • Industrial customers had significant influence with legislators and regulators • Trend to competitive markets in other industries

19. Substantive Issues Competition • Based on three primary assumptions: • Efficiency through competitive markets will reduce prices and improve the quality of service • Inability of regulation to match the performance of markets where competition is viable • Competition will spur innovation (e.g. communications) • Recognition that regulation still superior to imperfect competition for many utility functions: • transmission and distribution rates and service • load pocket problems

20. Substantive Issues Competition • Continued reliability of service • Address concerns about market power in competitive services • Provide level-playing field for competitors • Continue regulation of monopoly services (e.g. transmission & distribution) • Continue environmental and public policy programs • Continue customer protections and the obligation to serve

21. Substantive Issues Competition • Wholesale Markets: • Regional entities to manage and operate transmission grids • will provide non-discriminatory access to transmission • Properly designed ISOs can improve grid operations through uniform market rules and pricing approaches • Reliability and security remain highest priority • The new trend is to forming Regional Transmission Organizations (RTOs)

23. Substantive Issues Competition • Fundamental challenges remain the same. How to deal with: • Excessive market power • Attainment of public policy objectives • Promotion of operational efficiencies to correct market failures • Instant deregulation is not the answer • Implementing competitive markets, while continuing to regulate those that are not competitive, requires significant Commission effort and resources

24. Substantive Issues Competition • Retail Competition • Customers have a choice of purchasing commodity and other services from competitors (Energy Service Companies - ESCOs) • Utility role ultimately limited to wires and pipes is the vision of some • Developing the infrastructure and markets an ongoing exercise