Insights into Electricity Distributor Rate Application Review

 
Intervenor Review of
Intervenor Review of
Electricity Distributor
Electricity Distributor
Rate Applications
Rate Applications
 
 
July 9, 2012
Jay Shepherd
for School Energy Coalition
 
School Energy Coalition
 
Who We Are
Coalition of seven school board/management
organizations
5000 schools with 2 million students
Spend $550 million per year on energy
Intervention Principles
Always look for the win-win solution
“Walk softly but carry a big stick”
Think long term
 
Role of Intervenors
 
Voice of the customers
Assist the Board
Attitude of the client
organizations
 
 
But Who Are They?
 
Organizations:
Five active ratepayer groups in LDC
applications
Other ratepayer, environmental and
industry groups in other matters
People:
Experienced consultants specializing
in energy
 
Steps in the Review
 
Revenue Requirement
OM&A issues (pattern, FTEs, affiliates)
Rate Base issues (opening, capex, dep’n)
Cost of Capital issues (debt rate, taxes)
Revenue Forecast 
(load, customers)
Deficiency/Sufficiency
Who Pays
Cost Allocation (RTC, anomalies)
Rate design (fixed charges)
 
Sources of Information
 
Financial Statements
Rating agency reports
Website, Newspaper stories, etc.
Yearbook data
Asset Condition Assessment and AMP
Strategic/Business Plan
Tax returns or tax calculations
Previous applications, results, rates
 
Comparative Data
 
Valuable diagnostic tools
Identify potential problem areas
Test against evidence for consistency
Comparative Rates the most important
Captures all aspects of costs, but rough
Rate Base and Capital Spending
PP&E per customer (level and trend)
Capex/depreciation ratio each year
Average depreciation rate
 
Comparative Data
 
OM&A Metrics
OM&A per customer
FTE per customer
Spending ratios (e.g. maint. vs. G&A)
Individual line item trends
Other Metrics
Components of revenue (e.g. by class)
Debt/equity ratio (leveraging)
Actual returns
 
Examples
 
(see handouts)
 
Interrogatories
 
What are we looking for?
Documents referred to (or omitted)
Explanations
Missing data, steps, or confusion
Comparative data
Clear answers simplify the TC (call)
Challenges facing this LDC
Show investigation and analysis
Thoughtful plan to deal with them
 
 
Technical Conference
 
Usually first contact with intervenors
Not cross-examination, but tougher
than IRs
Model TC is a dialogue
Point is to save the Board panel from
wasting their time
 
ADR –The Process
 
What is actually going on?
Negotiation between utility and ratepayers
Most COS applications can be settled
Opportunity vs. challenge
Steps
Exchange of information/dialogue
Intervenor caucus
Offers back and forth
Reaching agreement
Documenting the agreement
 
ADR – Negotiations
 
Offers
Issue by issue – revenue requirement usually first
Deficiency based packages (looking for savings)
Settlement of other issues
Cost allocation and rate design
Deferral and variance accounts
Severability
Intervenor point of view
Result by agreement vs. result by decision
ADR positions vs. Hearing/Argument positions
Comparative data increasingly influential
 
Oral Hearings
 
General comments
Short time frame
Board members busy but very experienced
Creates an impression but also a record
Cross-examination
Bias in favour of the cross-examiner
Utility counsel has limited freedom to protect you
Good questioners are well prepared
Don’t “play the game” - use your natural advantage
Credibility not easily lost, but also not easily regained
Pay close attention to questions from Board members
 
Intervenor Review of
Intervenor Review of
Electricity Distributor
Electricity Distributor
Rate Applications
Rate Applications
 
 
July 9, 2012
Jay Shepherd
for School Energy Coalition
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Delve into the aspects of intervenor review in electricity distributor rate applications, focusing on the role of School Energy Coalition as a voice for customers, and the steps involved in the review process such as revenue requirements, cost allocation, and rate design. Discover the sources of information utilized, the importance of comparative data analysis, and metrics like OM&A and debt/equity ratios that aid in decision-making.

  • Electricity
  • Distributor
  • Rate Application
  • Intervenor Review
  • School Energy Coalition

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  1. Intervenor Review of Electricity Distributor Rate Applications July 9, 2012 Jay Shepherd for School Energy Coalition

  2. School Energy Coalition Who We Are Coalition of seven school board/management organizations 5000 schools with 2 million students Spend $550 million per year on energy Intervention Principles Always look for the win-win solution Walk softly but carry a big stick Think long term

  3. Role of Intervenors Voice of the customers Assist the Board Attitude of the client organizations

  4. But Who Are They? Organizations: Five active ratepayer groups in LDC applications Other ratepayer, environmental and industry groups in other matters People: Experienced consultants specializing in energy

  5. Steps in the Review Revenue Requirement OM&A issues (pattern, FTEs, affiliates) Rate Base issues (opening, capex, dep n) Cost of Capital issues (debt rate, taxes) Revenue Forecast (load, customers) Deficiency/Sufficiency Who Pays Cost Allocation (RTC, anomalies) Rate design (fixed charges)

  6. Sources of Information Financial Statements Rating agency reports Website, Newspaper stories, etc. Yearbook data Asset Condition Assessment and AMP Strategic/Business Plan Tax returns or tax calculations Previous applications, results, rates

  7. Comparative Data Valuable diagnostic tools Identify potential problem areas Test against evidence for consistency Comparative Rates the most important Captures all aspects of costs, but rough Rate Base and Capital Spending PP&E per customer (level and trend) Capex/depreciation ratio each year Average depreciation rate

  8. Comparative Data OM&A Metrics OM&A per customer FTE per customer Spending ratios (e.g. maint. vs. G&A) Individual line item trends Other Metrics Components of revenue (e.g. by class) Debt/equity ratio (leveraging) Actual returns

  9. Examples (see handouts)

  10. Interrogatories What are we looking for? Documents referred to (or omitted) Explanations Missing data, steps, or confusion Comparative data Clear answers simplify the TC (call) Challenges facing this LDC Show investigation and analysis Thoughtful plan to deal with them

  11. Technical Conference Usually first contact with intervenors Not cross-examination, but tougher than IRs Model TC is a dialogue Point is to save the Board panel from wasting their time

  12. ADR The Process What is actually going on? Negotiation between utility and ratepayers Most COS applications can be settled Opportunity vs. challenge Steps Exchange of information/dialogue Intervenor caucus Offers back and forth Reaching agreement Documenting the agreement

  13. ADR Negotiations Offers Issue by issue revenue requirement usually first Deficiency based packages (looking for savings) Settlement of other issues Cost allocation and rate design Deferral and variance accounts Severability Intervenor point of view Result by agreement vs. result by decision ADR positions vs. Hearing/Argument positions Comparative data increasingly influential

  14. Oral Hearings General comments Short time frame Board members busy but very experienced Creates an impression but also a record Cross-examination Bias in favour of the cross-examiner Utility counsel has limited freedom to protect you Good questioners are well prepared Don t play the game - use your natural advantage Credibility not easily lost, but also not easily regained Pay close attention to questions from Board members

  15. Intervenor Review of Electricity Distributor Rate Applications July 9, 2012 Jay Shepherd for School Energy Coalition

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