Client Solutions
Featured projects where we delivered solutions to common and complex client challenges
New rates for emerging trends
Electric Utility Moves Towards Cost of Service Rates for Each Customer Class
Electric cost of service studies allocate the costs of electric service to each customer class. But, the actual rates charged to each customer class may over or under collect their cost of service. Why is that?
- The cost of service is the science, and the rate design is the art. The electric rate structure of any utility has decades of embedded history and political decisions.
- The approach now is more towards basing rates on the cost of service. There are still inter-class subsidies in rate design, but more focus has been on closing those gaps.
- The utility had not increased rates in 5 years and wanted to take the opportunity to move customer rates towards their cost of service and to incorporate distributed energy resources (DER) and electric vehicle charging into their rate structure.
- We worked with the utility to design rates to reflect the costs to serve each customer class. We assisted the utility in developing rate structures to provide incentives for customers, including a residential time-of-use opt OUT rate and a DER rate with a system connection charge.
- We also designed an electric vehicle off-peak charging rate and a subscription charging rate (i.e., the EV customer can charge all they need for one monthly rate).
- Giving customers choices incentivizes them to monitor their power usage and shift how they use electricity to lower their power bills. The percentage of customers that take an interest in doing so is not high. Still, with opt-out rates carrying a 5% premium, the utility is pretty certain that the lower rate structure of the time-of-use rate will spur more customers to stay in the rate vs. opting out.
An independent expert can be the edge you need
Expert witness testimony to support rate and accounting positions
There are times you will need an independent analysis and voice for electric rate or other approvals before your Board or other regulatory bodies. We provide expert witness testimony before regulatory bodies in support of your rate case or on a variety of accounting matters.
- Joint owners of a power plant disputed the allocation of administrative and general expenses by the power plant operator
- Wholesale power customers questioned the impact impairment accounting for retired units had on their rates
- A utility sought recovery of the construction costs of an abandoned power plant project in its ratebase
- All of these situation were projects where we assisted our clients with expert witness testimony - an independent voice
- We have testified before FERC, state commissions, and in arbitration proceedings in these areas:
- Electric cost-of-service studies and rate design studies
- Power plant impairment accounting treatment
- Rate of return calculations
- Accounting for production and sale of by-products from electricity generation, including FGD gypsum
- Ratebase calculation and recovery in rates of completed and abandoned projects
- FERC transmission rates
- Allocation of administrative and general costs for joint power plant ownership
- Determination of plant in service recovery - used and useful definitions
- Testimony before these regulatory bodies requires confidence coming from a deep level of experience in the power and utilities industry, coupled with insights into industry finance and operations, precedence rulings, and new industry trends that impact contracts and recording of transactions.
Better construction processes equals better ratemaking
Electric Utility Redesigns its Construction Accounting
Don’t underestimate the value of sound fixed asset systems in power and utilities organizations. Fixed asset depreciation is a component of customer rates and the return on rate base, which can make up to 10% of a customer’s rate. Fixed assets that were accurate can become inaccurate and a problem area due to a lack of attention to changing business processes, workforce training and succession, and lagging technology.
- A large electric and water utility found that its continuing property records (fixed asset records) did not accurately reflect the actual value of the utility plant in service that served its customers.
- The impact of this was to make customer rates higher than they should be due to higher depreciation expenses and return on rate base included in customer rates.
- We worked with the client to review all business processes involved with the work order system in operations, engineering, and accounting. We flowcharted each major process, identified bottlenecks, and designed a solution to make the process more efficient.
- The utility selected ERP software, and we helped them implement the new business processes into the flow of information in the ERP system. Our project scope included follow-up analysis and testing of the efficiency of the new processes after a 6-month implementation period. We made recommendations for some business process changes and led training classes for the utility’s personnel on the modified process.
- We also assisted the utility with oversight of a complete fixed asset system inventory and modifications to its financial records to reflect the revised plant in service amounts.
- Management points to the disappearance of side systems and side records and more reliance on the new software platform’s data and reporting tools as signs of a successful project. They also point to the increased accuracy in project inputs and outputs and better confidence in the balance of plant in service used in cost of service studies.
Use a chart of accounts made for your business
Electric Utility Implements the FERC Uniform System of Accounts
Locked into a Municipal Chart of Accounts, an Electric Utility Was Not Able to Properly Assess Its Financial Situation and Rates
- A municipal electric utility struggled to properly measure its financial results and set customer rates as it was using a city-wide general fund chart of accounts
- The utility chose to implement the FERC Uniform Chart of Accounts to meet best-practices in the business
- Implementation was difficult, as the utility still needed to use the city’s software platform
- The utility was able to reserve 3-digits of a 24-digit string for the FERC chart of accounts
- We assisted the utility with custom software modifications that reported on the FERC chart of accounts
- We also performed training for utility team members on using the FERC chart of accounts and developed process changes for a smooth transition to the new formats
- The next step will be a cost of service study to establish a baseline for equitable customer rates
