Rate Design Issues Forum

Spend your evenings on the Universities famous Terrace

Rate Design Workshop

October 13-15, 2014

Agenda

2014 Presentations

Pyle Center

Eligible for 2 CEUS–Ask about CLEs

For information about attendance and fees, please contact:  samb@wpui.org

To register for the event please click here

Registration fee:  $650

This is a unique opportunity to take part in discussions about rate issues–the first day and a half will be devoted largely to making sure we are all using the same set of ideas and vocabulary.  The last full day will be devoted entirely to roundtable discussion with experts and the participants.

Rate design is undergoing a sea of changes in policy objectives, metrics, customer expectations, and technology changes.  A day to discuss these kinds of options should be not only a good change of pace for rate design professional, whether in the industry or from organizations such as commissions and public/business interest groups, but it could hopefully stimulate some new ways to think about pricing in the future.

 

Training facility is a half block down the street.

Monday October 13

 

8:30 – 9:30          The Principles—everyone using the same vocabulary

The Principles—everyone using the same vocabulary

Trainers:  Bruce Chapman, Steve Braithwait CA Energy Consulting

 The energy industry has moved from bundled to unbundled energy costs posing new problems and creating new opportunities for rate design.  This first section will look at efficient rate design.  We will present the economic principles for designing retail electricity rate structures that provide appropriate incentives for energy efficiency and variable rate design and discuss the resulting trade-offs.  

  • What should rates achieve?
  • Examples of tradeoffs – e.g. revenue recovery vs. efficient pricing
  • The role of price signals—to what prices do customers respond?
  • Static (e.g. TOU) and dynamic (e.g. CPP, RTP) rate designs
  • Customer, utility, stakeholder and commission risk

 

9:30 – 9:45          Break

 

9:45 – 12:30        Cost Recovery Challenge

Discussion leaders:  Robert Camfield and Dan Hansen

  • Institutional and statutory basis for determining utility prices.
    • Notion of a public utility – “for the convenience and necessity of the public”
    • Just and reasonable rates
    • Fair rate of return criteria
  • Metrics for determining average cost-based prices
    • Revenue requirements
      • Fixed operating expenses and fuel charges
      • Rate base and return on capital
      • Rate of return, and operating income
    • Capital measurement
      • Original and current cost basis of resource value
    • Cost of capital
      • Capital structure
        • Debt, equity, and zero cost components
          • Debt securitization
        • Regulatory capital structure: departures from the books
          • Double leverage: is it appropriate to apply?
      • Return on equity
        • Metrics and market models including DCF, Risk Premia, and CAPM
  • Regulatory governance
    • Revenue sufficiency in the context of declining sales and rising costs
      • Cost trackers
      • Incentive properties
    • Performance-based regulation, and incentives to minimize costs
    • Principles for affiliate transactions
    • Managing the problem of competitive entry

 

12:30 – 1:30        Lunch

 1:30 – 2:15    Recovery of Fixed Cost Options

Discussion Leader:  Dan Hansen

 2:30 – 4:30          Who causes a cost, and who should pay?  Iit is not as easy as one might hope (Engineering and Economic principles of embedded cost of service). 

Discussion Leader:  Lawrence J. (Larry) Vogt is the Manager of Rates for Mississippi Power Company, noted author of Electricity Pricing –Engineering Principles and Methodologies (published 2014)

In this section we will review how costs are classified between demand-related and customer-related cost components.  MDS is key to determining the monthly fixed costs of providing basic electric service.  It provides a cost justification basis for the Customer Charge portion of the rate structure. 

 

  • Transformers
  • Meters
  • Sub-stations
  • Whose fault is this cost (understanding customer and line faults)

 

4:30       Propose Questions for Wednesday

 

Tuesday October 14

 

8:30       Pricing of Renewable Products—Discussion Leader, Bruce Chapman

  • Pricing Renewables
  • Securing supply:  Feed-in tariffs and renewable portfolio standards—principles, intended and unintended outcomes
  • Auction-type renewable energy purchases—e.g. LIPA/Austin Energy
  • Securing supply from customers: net metering issues
  • Selling to customers: green pricing and cost recovery
  • Training Coordinator:  Bruce Chapman, CA Energy Consulting and other speakers as appropriate

 

9:45       Wholesale Costing and Pricing of Electricity with Respect to Marginal cost rate making and revenue allocation—includes breaks and lunch

Discussion Leader:  Laurence Kirsch and Robert Camfield

We will cover topics such as:

  • Carrying Charges on capacity:  financial basis of charges
  • Marginal Generation Costs
  • Marginal generation capacity and reserve costs
  • Marginal generation energy costs
  • Marginal Transmission Capacity Costs
  • Marginal Distribution Costs
  • Marginal distribution customer-related costs
  • Marginal distribution capacity-(demand)-related costs
  • Determine appropriate costing periods
  • Attributing costs to costing periods
  • Adjustment of marginal costs for losses
  • Reconciling marginal cost-based rates with revenue
  • Requirements

3:45       Understanding the Wholesale grid and Transmission Connection

Discussant:  Chris DeMarco, UW Madison

 Case Discussion:  The Physics of Electricity (Grid and Distribution)—Loading and unloading the grid and local distribution systems.  In this section we will gain an understanding of what is needed to keep a grid running efficiently and reliably.

  • Understanding LMPs:  Price of electric power varies rapidly with time, updated every five minutes, and has the POSSIBILITY to vary radically by geographic location (where geography is associated with transmission grid connection points).
  • How does the system deal with substantial variations in load due to renewable energy resource additions to the grid?

 

Wednesday:  Discussion Seminar8:30  – 12:30  

We will address three to five issues of concern that are nominated by the attendees.  Experts that can be available are:

  1. Larry Vogt—Mississippi Power  (Utility rate designer—engineering/economic  perspective)
  2. Chris DeMarco  UW Madison (Transmission and distribution—physics and economics)
  3. Dan Hansen CA Energy Consulting (CAEC)  Rate Design
  4. Robert Camfield—CAEC  (capital valuation, regulatory economics, wholesale electricity markets)
  5. Steve Braithwait—CAEC (Expert on load management issues and outcomes, forecasting, pricing and customer response)

 

Accommodations: On Lake Mendota, The Pyle Center

 Following is the URL for you to provide to your conference participants which will permit them to make on-line  reservations at the Lowell Center.  Please provide this information to your participants for their use:

 Please use this URL for booking online (case sensitive): http://bit.ly/wpui19aug

 When calling to make reservations, your guests should refer to group code: WPUI

 Please note your room block will be released four weeks prior to the arrival date.  The room to the left is a Lakeview Room, $105/night (no taxes)

Forum Fees: 

Fees:  $650


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