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TVA Cost of Service

TVA Cost of Service. Joint Accounting Conference Huntsville, Alabama May 16, 2014. What is Cost of Service ?. What? Why? How? What: It’s a study. Nothing more, nothing less. Why: If you can’t measure it, you can’t control it!

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TVA Cost of Service

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  1. TVA Cost of Service Joint Accounting Conference Huntsville, Alabama May 16, 2014

  2. What is Cost of Service ? • What? Why? How? • What: It’s a study. Nothing more, nothing less. • Why: If you can’t measure it, you can’t control it! • How: No single costing methodology is superior to any other, and the choice of methodology will depend on the unique circumstances of each utility. TVA developed the RCA/200 methodology approximately ten years ago and began using it and comparing it to other cost allocators. “Equity is the mother of confusion.” —British economist W. Arthur Lewis on the unresolved conflicts about “fair” cost apportionment

  3. Revenue and Costs

  4. Cost of Service Process

  5. Functionalization, Classification, Allocation • Costs are FUNCTIONALIZEDas • generation, transmission, and other • Generation costs are CLASSIFIED as fixed and variable • Costs are ALLOCATED using RCA/200 methodology

  6. TVA General Ledger

  7. Costs and Allocation Methods

  8. Variable Cost Allocation Methodology • Resource Cost Allocation (RCA) Methodology assigns variable costs based on class / customer usage and TVA’s hourly power supply cost for each hour of the year

  9. Energy Cost Allocation Illustration

  10. Fixed Cost Allocation Methodology • Top 200 (200) Methodology assigns fixed costs based on class / customer load during TVA’s Top 200 peak hours of the year

  11. Top 200 Hours Fiscal Years 2001 - 2013

  12. Transmission Cost Allocation Methodology • Transmission and ancillary services Methodology allocates costs based on class / customer load share during each of TVA’s 12 monthly system transmission peaks (12CP) of the fiscal year

  13. Other Cost Allocation Methodology • Other fixed costs • Methodology allocates costs based on class / customer shareof variable, fixed, and transmission costs

  14. COS for Fiscal Year 2013 – by Customer

  15. COS for Fiscal Year 2013 – by Class

  16. Comparison of Alternate Allocators Fiscal Year 2013

  17. Alternate Allocators Considered

  18. TVA/TVPPA/TVIC Rate Design Guiding Principles • Rates must recover all costs. • Rates must track cost of service. • Rates must send efficient pricing signals. • Rates must balance precision with simplicity. • Rates must be stable. • Rates must be competitive.

  19. What does “RCA” in “RCA/200” stand for? Text a KEYWORD to 22333 or Submit responses at PollEv.com

  20. What does “200” in “RCA/200” represent? Text a KEYWORD to 22333 or Submit responses at PollEv.com

  21. Where is the monument with “The greatest thing” quotation? Text a KEYWORD to 22333 or Submit responses at PollEv.com

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