WPUI: Cost Challenges for Today s Utility PSCW Perspective on Cost Allocation

Transcription

1 WPUI: Cost Challenges for Today s Utility PSCW Perspective on Cost Allocation Kate Christensen Sam Shannon Policy & Rate Analysts Division of Energy Regulation Public Service Commission of Wisconsin June 28, 2018

2 Cost of Service at the Commission PURPA (1978) created standard of COSS-based rates NARUC Cost Allocation Manual (1992) Docket 5-EI-137 (opened 2005; closed 2014 with no action) THE COMMISSION DOES NOT ENDORSE ANY PARTICULAR COSS MODEL In contested cases, Commission staff does not endorse any particular COSS model and the Commission itself has not differed from this recommendation Long-standing practice 3270-UR-12 (1984) 6680-UR-107 (1992) The Commission recognizes that the embedded cost-of-service studies are not precise reflections of cost causality and are dependent on the accuracy of the data used and the judgments of the study analysts. The Commission does not adopt any single set of assumptions for cost-of-service studies or a particular cost-of-service method. Because no one study is accurate enough to solely provide the precise cost of providing electric service to every class, the Commission deems it reasonable to consider the results of all the types of cost studies presented in this proceeding. The differing, valid points of view allow the Commission to consider a balanced range to establish class revenue responsibility.

3 Major Case COSS Process Moving toward standardization in filings Utility files multiple COSS models in consultation with Commission staff and regular interveners Electric utilities file 5-6 models Gas utilities file COSS A and COSS B models

4 Major Case COSS Process Major COSS Groups (Description) 3CP 12CP 12CP 10% Energy 12CP 40% Energy Locational Residential 18.5% 15.7% 14.1% 13.2% 6.5% General Service -7.1% -7.4% -8.6% -8.8% -7.6% Medium Commercial (Cg-2) -3.2% -4.5% -5.6% -5.4% 0.9% Large Industrial (Cp-1, Cp-2) -10.1% -7.0% -4.4% -3.5% 1.1% Lighting/Miscellaneous -8.5% 1.0% -0.4% 0.6% -8.3% Total 1.5% 1.5% 1.5% 1.5% 1.5% Stanley Rule all COSS models presented at Commission staff audit or settled revenue requirement

5 Municipal and Small IOU Case COSS Process Receive revenue requirement from Audit and Finance staff For municipals and small IOUs, Commission staff performs COSS Typically in muni cases COSS is uncontested In contested cases, prepare testimony outlining COSS and decisions made in allocating costs Supplemental information from application and annual reports Metering information Street lighting System Peak information Miles of distribution line Model is updated over time to reflect IOU cases Change the way we present information to reflect Commission decisions

6 Electric Customer Charges MGE, WPSC requested increases to customer charges in UR-121 (2015) Commission established concept of buckets Buckets reflect classification of customer-related costs in the NARUC Manual Reaffirmed in subsequent IOU and Municipal rate cases Minimum system studies Minimum size Zero-intercept 100% Demand (CUB) Gas customer charges have not seen the same level of scrutiny

7 Market-Based Rates in COSS Market-based electric rates are becoming more popular offerings Two types of market-based rates Incremental Load Programs (NLMP) Nominated Load Programs (RTMP, RTP, DAMP) Compliance with Wis. Stat Each type receives different COSS treatment Incremental Load Programs are summarily defined as marginal sales during contract term Nominated Load Programs are included in overall utility system * For more detail, see Memorandum in docket 6680-TE-102

8 Gas Special Contracts Wisconsin Stat provides that a natural gas utility may enter into an individual contract with a customer Long-run Incremental Cost Docket 5-GI-108 Final Decision Part I (1995) Includes capital and operating costs Contract rates involve cost-based review Embedded cost is the ceiling LRIC is the floor Marginal cost vs. embedded cost Sales and cost representation in COSS

9 Other Uses of COSS Income Tax Credits Docket 5-AF-101 SEA 2018 Embedded Cost Allowances Additional Meter Charges Community Solar Credits NSPW 9% 11% 9% 12% 11% 23% 25% WEPCO 8% 9% 6% 8% 11% 20% 38% Revenues - $698 million Generation Fuel/PP Transmission Distribution Cust A&G Taxes Net Income Revenues - $3.242 billion Generation Fuel/PP Transmission Distribution Cust A&G Taxes Net Income

10 Future COSS Considerations Rate Case Settlements Commission staff continues to monitor other jurisdictions for COSS developments DER growth implications on current assumptions NARUC DER Compensation Manual (2016)

11 Questions Contact Information: Kate Christensen Sam Shannon Division of Energy Regulation Public Service Commission of Wisconsin