Regulatory and Industry Practices to Reduce Line Losses

1. Regulatory and Industry Practices to Reduce Line Losses Energy Regulatory Partnership Program Abuja, Nigeria July 14-18, 2008 Ikechukwu N. Nwabueze, Ph.D. Director, Regulated Energy Division Michigan Public Service Commission

2. Losses Defined • Losses – A term used to define the difference between the electrical energy delivered to a customer (or a given point on the electrical distribution system) and the amount of electrical energy that must be generated at the power plant to serve that customer. • In other words, losses refer to the amount of power lost in transferring power from the power plant to the point of delivery (often referred to as line loss). • Line losses will vary by rate class based upon the voltage level at which each class is served.

3. Line Loss • Losses occur at every step in the electric system providing power to customers.

7. Losses in Allocations and Power Supply Cost Recovery • Allocation factors include appropriate losses for each customer class (or rate schedule) in determining properly designed allocation factors • In addition to cost of service in rate proceedings, the MPSC uses loss multiplication factors applied to power supply costs in order to recover losses in the Power Supply Cost Recovery Mechanism under PA 304 • These multiplers allow recovery of the extra generation needed to provide enough energy at the customers service drop to overcome all system losses

8. Regulatory & Industry Practices to Reduce Losses • Regulatory practices to reduce losses include: • Mandate reporting on customer interruptions. • Respond to Customer inquiries regarding service interruption. • Mandate service standards and penalties. • Industry methods to reduce line losses include: • Vegetation management • Maintenance of lines and transformers • Installing electric protection systems such as reclosers and lightening arrestors. • Installation of larger transformers • Equipment upgrades

9. Questions?