Alice Miller Energy Consultant September 28, 2011

Transcription

1 Rate Design and Billing Systems Alice Miller Energy Consultant September 28, 2011

2 What is Rate Design? Principal goals of rate design Meet revenue requirement Equity among service classes Customer impacts Customer acceptance Rate stability Revenue stability Feasibility of administration Understandability Price signals (e.g., set delivery rates using marginal costs as a guide) Social concerns (e.g., low income rates) 2

3 Rate Design in New York kstate NYS utilities rates use the Cost of Service approach Rates are based upon the actual costs incurred by the utilities to provide service to each specific customer class The assets (wires, poles, meters, generators, substations, etc.) are valued for ratemaking at their original construction cost and are not indexed for inflation or increases in reproduction cost The assets are expected to last an estimated period ofyears andthe original cost is charged to ratepayers over that period of time as Depreciation Expense How does it fit in the ratemaking process? Rate cases Tariff filings Generic proceedings 3

4 Major Components of NY Electric Tariffs Firm Service Classifications Residential Commercial Industrial Delivery Charge, T&D (set by the Commission) Reflects the costs of moving electricity from the generator to the customer s s meter Electric Supply Charge Reflects the costs of electricity produced or purchased from the market (commodity and capacity) Utilities use hedging instruments to moderate price volatility 4

5 Other Variations of NY Electric Tariffs Other rate types Real Time (Hourly) Pricing Customer notified of hourly energy cost variation in advance Time of Use (TOU) Voluntary/Mandatory Defined periods Flex Rates Demand Response (similar to Interruptible for gas customers) Seasonal Standby Supplemental, back up Delivery Buyback Economic Development Zone Rates Area Development rates Business Incentive rates 5

6 Major Components of NY Natural Gas Tariffs Delivery Charge (set by the Commission) Reflects the cost of moving the gas from the citygate (interconnection with interstate pipeline company) to customer s meter Gas Supply Charge Adjusted monthly and reconciled annually Reflects the costs of gas supplies purchased from producers in State or out of State (commodity and capacity) Commodity price is set by the marketplace; utilities use hedging instruments to moderate price volatility Pipeline capacity price is set by FERC 6

7 Other Components of NY Natural Gas Tariffs Other rate components Weather Normalization Clause Lowers bills during colder than normal weather periods and raises bills during warmer than normal weather Tends to smooth customer bills and revenue to the local distribution company Storage Service Allows for gas injections during the summer when prices are presumably low, and withdrawals in winter during peak demand and high prices Standby Service Back up commodity supply service provided to transportation customers as needed dd 7

8 Why is a Cost of Service Study Needed? To assign utility costs to customer classes of service To determine how to recover costs from customers in a class Example: time of use versus flat rate residential customers Differentiate costs caused among different voltage levels in a large general service class To determine the number and types of service classifications To establish system, class and subclass rates of return (ROR) Significant classror deviations fromsystem average ROR suggests over or under contributions (inequity among classes) To form the basis for rates or contract prices for special services Delivery or standby Interruptible or curtailable NOTE: Contract prices and rates such as standby or interruptible are not based on embedded cost of service by may be based on marginal cost of service 8

9 Various Types of Cost Studies Embedded Cost of Service Study (ECOS) Historic: focused on how existing costs were incurred, use of historic test year data ProForma: estimates forward looking costs (projections) from recent historic test period costs Allows for known and anticipated changes from historic base Significant capital expenditures, major changes in workforce, etc. Marginal Cost of Service Study (MCOS) Measure the change in cost levels in response to a change in customer usage or demand ShortRunversus LongRun Short run based on small per unit changes (usually variable cost sensitive) Long run considers broader time spectrum, such as 3 5 or 10 year planning horizons and capital expenditures 9

10 Embedded Cost Study Fundamentals Functionalize costs into Production Transmission Distribution Customer Service and Facilities Administrative and General Classify costs as being related to Customer, demand, or energy Allocate Final step in cost of service study classified costs are assigned to customer classes and sub classes Uses Load Research to form the basis using statistically significant and current load samples for each anticipated service class 10

11 Rt Rate Structure t Features Unit Charges Flat versus Blocked Declining versus Inverted Demand versus Energy Customer, Service and Minimum Charges Hour s Use 11

12 Customer Billing Typical information on a residential electric customer s bill Total amount of the bill is the Delivery charge plus the Supply charge Total Electric Delivery Charge includes Basic Service Charge Delivery Charge Temporary State Assessment Surcharge Revenue Decoupling Adjustment System Benefit Charge Renewable Portfolio Charge Taxes (delivery) Total Electric Supply Charge includes Electric Supply Merchant Function Charge Taxes (commodity) 12

13 RateDesign Initiatives that Support the Promotion of Energy Efficiency, and Demand Response Mandatory Hourly Pricing The NYSPSC has required New York State s largest industrial and commercial users to have interval meters, encouraging control of daily load and to discourage usage in expensive high demand hours Goal of implementing hourly pricing is to realize the benefits of reducing the electric system s peak period demand and shifting load to off peak, lessexpensivetime expensive periods (thereby reducingpeakperiodprices) period prices) Enhanced peak period reliability, and wholesale market power mitigation The NYSPSC has also found that hourly pricing provides more accurate price signals and more equitable customer bills by properly assigning the cost of electricity to each hour instead of averaging the cost over many hours Currently, more than 4,000 customers and more than 20% of load are subject to mandatory hourly pricing ii 13

14 Rate Design Initiatives that Support the Promotion of Energy Efficiency, and Demand Response Net Metering for Customers Pursuant to Public Service Law (PSL) 66 j and 66 l, New York s six major electric utilities net meter customers generating electricity from eligible solar, farm waste, micro combined heat and power and fuel cell (together, micro gen), and wind generating equipment For demand net metered customers, the excess generation, in kwh, accumulated ltdduring a billing period dis multiplied li by the applicable tariffed kwh rates and that credit is subtracted from the current bill If the amount of the credit exceeds the amount of the bill, the excess amount is converted, at tariffed kwhrates rates, backto a kwh figure, which is subtracted from usage during the next billing period before the next credit, if any, is calculated. The statutory rate for calculating the credit applicable to these forms of generation is set at the same rate per kilowatt hour applicable to service provided to other customers in the same service class 14

15 RateDesign Initiatives that Support the Promotion of Energy Efficiency, and Demand Response Net Metering for Customers continued As provided for in PSL 66 j, residential solar, farm waste, residential wind, and farm service wind customers are reimbursed at the utility s avoided cost for any excess in generation production over usage remaining at the end of an annual period Non residential solar and wind customers, and micro gen customers, are not entitled to annual cash outs 15