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Electric Rate cases

This article explores the vital role of interveners in electric rate cases, highlighting their objectives and strategies to advocate for lower rates. Interveners, including consumer advocates, environmental groups, and large energy users, aim to influence the Public Utilities Commission to reduce revenue requirements and modify rate designs. By understanding the intricacies of rate allocation and associated charges, interveners can effectively represent their interests, ensuring fairer electricity costs for all customers. This resource is essential for anyone involved in or impacted by electric rate proceedings.

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Electric Rate cases

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  1. Electric Rate cases From an Intervener's Perspective by Matt White

  2. What is an Intervener? • An intervener is a non-utility that participates in a rate case to advocate its interest • Interveners can be • Consumer advocates: Government agency that protects residential customers’ interests • Large scale energy users • Environmental groups • Unregulated electric suppliers

  3. What Interest? • Environmental • Safety/Consumer Protection • Number one interest • Interveners want to pay less for electricity

  4. How Do Interveners Reduce Electric Rates? • Convince the Public Utilities Commission that rates should be lower • Three ways to reduce electric rates • Reduce the revenue requirement • Shift revenues to another customer class • Modify rate design within the class

  5. What is a Revenue Requirement? • Revenue Requirement is the amount of money utilities are allowed to collect from consumers through electric rates • Utilities are entitled to recover all of the costs they incur to serve customers (e.g. cost of fuel, labor) • Utilities are entitled to receive a rate of return on all of their assets they use to serve customers • Add the value of all a utility’s assets (e.g. power plants, electric lines) • Utilities receive a certain percentage of the value of all their assets annually

  6. How Do You Reduce Revenue Requirement? • Argue that a utility’s reported costs are too high • Argue that a utility values its assets too high • Argue that a utility’s rate of return should be lowered

  7. All Customers Win! • Reducing revenue requirements reduces rates for all customers

  8. Rate Design/Class Allocation • If revenue requirement is the size of the pie utilities receive from customers

  9. Dividing the Pie • Rate design and class allocation is the method of determining the piece of the pie each customer must pay

  10. Customer Classes • Each electric customer is assigned to a class • Similar customers are assigned to the same classes • Usually residential customers are in the same class, industrial customers are in the same class, and commercial customers are in the same class • Each class is assigned a certain percentage of the revenue requirement • Each class has a different electric rate design to recover those revenues • Rates are higher or lower depending on the class • Different charges depending on the class (e.g. fixed monthly charges, per kWh charges, per kW charges)

  11. Intervener’s Strategy • Argue that the other classes should pay more of the revenue requirement and argue that your class should pay less • This pits one intervener against the other

  12. Intra-class Allocation • The pie also must be divided up amongst each customer in the class. • Rate design determines how much of the revenue requirement each customer pays

  13. Customer Charges • Customer’s are allocated their piece of the revenue requirement through the charges they receive on their electric bill • There are generally three types of charges • Fixed monthly charge • Energy Charge (per kWh) • Demand Charge (per kW)

  14. Allocating Costs Through Charges • Each customer pays a different percent of the revenue requirement, depending on the type of charge • Example: If in the residential class there is a high fixed monthly charge, and a low energy charge who wins and who loses? • Customers with low electric usage lose because they must pay the high fixed monthly charge no matter what • Customers with high electric usage win because there is a low cost to excess consumption

  15. Strategy • Know your electric consumption pattern and argue for the charges that cost you the least

  16. You vs. Them • If you pay less because the rate design has been changed in your class, other customers in your class pay more

  17. Zero Sum Game • Generally rate cases are a zero sum game • If the utility gets less, customers get more and visa versa (revenue requirement) • If one customer class pays less revenues, another class pays more • If one customer in a class is charged less, another customer is charged more

  18. Who Loses the Game? • Those who do not show up to the table (i.e. intervene in a rate case) • The other players will take your chips!!!

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