Electric Cost-of-Service - Essential Concepts for a Changing Industry
July 22-23, 2024 | Denver, CO and Online
Click Here to register $1495
If you are unable to attend at the scheduled date and time, we make recordings available to all registrants for seven days after the event
“It was a very engaging and insightful class. Scott and David were also very knowledgeable with tons of experience to draw upon.” Utility Accountant, LADWP
“Excellent overview of the entire cost of service process for people new to topic or needing a refresher done by two excellent speakers.” Budget & Rates Analyst, Great River Energy
“Thanks for covering so much and allowing me to apply newly learned concepts into exercises that were extremely practical.” Budget Administrator, Anaheim Public Utilities
This two-day course will lead participants through the cost-of-service process from start to finish in detail. Our experienced team of instructors will guide attendees through:
- Discussion and comparison of investor-owned utilities, municipal utilities, and electric cooperatives in cost-of-service principles and techniques
- Traditional cost-of-service analytical techniques
- Unbundled cost-of-service analytical techniques
Each participant will complete a sample cost-of-service analysis during the course and training materials will be provided.
Learning Outcomes
- Discuss FERC Uniform System of Accounts
- Identify revenue requirements
- Examine utility case studies
- Discover energy allocation factors
- Define the steps in the ratemaking process
- List cost classifications
Recommended Background And Requirements
No prior cost-of-service experience is required, although knowledge of utility system infrastructure, business environment, and operations will be helpful. To participate in model development, a laptop computer with Microsoft Excel 2003 or later is required.
Agenda
MONDAY, JULY 22, 2024
8:30 a.m. – 4:00 p.m. : MOUNTAIN TIME
Short breaks will be taken throughout the course (30 minutes total)
Course Overview and Introduction
- Course objectives
- Course overview
- Steps in ratemaking process
- Steps in cost-of-service process
- Developing cost-of-service analysis – different perspectives
- Interpreting cost-of-service results
Overview of Cost-of-Service Process
- Process overview
- Introduction
- State regulatory process
- Local regulatory process
- Federal mandates
- The cost-of-service team
- Stakeholders
Study Preparation
- Introduction
- Four important considerations
- Common supporting analyses to ensure success
- Financial planning
- Study period selection
- Load research study
- System loss study
- Resource planning studies
- Minimum system studies
- Accounting for direct assignment
- Lighting study
- Load forecasting
Morning Break
Policies, Objectives, and Strategies
- Introduction
- Policies
- Objectives
- Strategies
- Marginal vs. embedded costs
- Cost unbundling
- Competitive pricing
- Time-of-use pricing support
- Real-time pricing support
- Varying return on investment
- Cost recovery through rules and regulations
- Other strategies
Lunch Break
Revenue Requirement
- Introduction
- Steps in rate design process
- Definition
- What is included in revenue requirements
- Test year concept
- Known and measurable adjustments
- Used and useful adjustments
- Components
- Utility approach (IOU)
- FERC Uniform System of Accounts
- Rate base
- Components
- Definitions
- Return on rate base
- Weighted average cost of capital (WACC)
- Cost of debt
- Cost of equity
- Utility Case Studies
- Utility approach (regulated cooperative)
- Cash approach (municipal)
- Debt service coverage ratio
- Comparison
- Adjustments to base rates
- Introduction to cost-of-service model
- ATTACHMENTS: revenue requirements examples 5-1 through 5-4
Afternoon Break
Revenue Requirement (continued)
- Classroom exercise No. 1: revenue requirement test year adjustment – adding a new load
- Classroom exercise No. 2: revenue requirement test year adjustment – adding a new resource
Cost Allocation Methodologies
- Introduction
- Steps in ratemaking process
- Sample cost allocation methods
- Common approaches to cost allocation
- Embedded
- Marginal
- Common approaches to cost allocation
- Bundled
- Unbundled
TUESDAY, JULY 23, 2024
8:30 a.m. – 4:00 p.m. : MOUNTAIN TIME
Short breaks will be taken throughout the course (30 minutes total)
Review of Day 1
Functionalization of Costs
- Introduction
- Steps in ratemaking process
- Bundled approach
- Unbundled approach
- Business unit concept
- Products and services
- Allocations
- Direct
- Derived
- Classroom exercise No. 3: functionally unbundling costs
Morning Break
Classification of Costs
- Introduction
- Steps in ratemaking process
- Basic cost categories
- Fixed and variable costs
- Cost classifications
- Demand-related
- Energy-related
- Customer-related
- Revenue-related
- Direct assignments
- Classification of functions
- Special studies
- Minimum systems
- Zero intercept
- Classroom exercise No. 4: classification of distribution plant
Rate Class Determination
- Overview of issues
- Rate classes
- Number of classes
- Type of classes
- Classes within classes
- Rate class trends: community solar
- Cost-of-service support
Lunch Break
Development of Allocation Factors
- Introduction
- Steps in ratemaking process
- Demand allocation factors
- Coincident peak
- Non-coincident peak
- Sum of max demands
- Average and excess
- Other
- Utility Case Studies
- Energy allocation factors
- Customer allocation factors
- Revenue allocation factors
- Direct assignment
- Classroom exercise No. 5: development of demand allocation factors
Allocation of Costs
- Classroom exercise No. 6: allocated cost-of-service
Afternoon Break
Interpreting Cost-of-Service Results
- Introduction
- Subsidization
- Inter-class subsidization
- Intra-class subsidization
Course Wrap-Up