Rate increase further blunted by SNF settlement proceeds

Update courtesy of Utility Regulatory News #4057: In authorizing a combined electric and natural gas utility to increase its rates by less than half of what had been requested, the Wisconsin Public Service Commission has ruled that in light of the state’s ongoing economic woes, it would be inappropriate to require the utility’s ratepayers to pay up front for environmental compliance costs that will not actually be incurred until sometime in the future, if ever. The utility, Northern States Power-Wisconsin (NSPW), had sought more than $29 million in electric rate relief and $8 million in natural gas rate relief, the basis for which was attributed in part to a need to prefund two projects, one for improving certain facilities to assure compliance with the new Cross-State Air Pollution Rule (CSAPR) and the other for cleaning up a former manufactured gas plant site. Noting that the CSAPR is under appeal and that questions remained about insurance indemnification as to the gas plant site remediation work, the commission found that it would be better to adhere to its long-standing policy of deferring environmental costs as they are incurred, for future amortization. The commission explained that such an approach has worked well for almost 20 years, has allowed for closer tracking of costs, and has provided for proper ratepayer/shareholder cost allocations. In approving additional gas revenues of $2.9 million and electric revenues of $12 million, the commission observed that NSPW will soon be receiving its share of an award stemming from a breach-of-contract suit brought against the U.S. Department of Energy (DOE), in which DOE was faulted for failing to receive and store spent nuclear fuel (SNF). According to the commission, the Wisconsin portion of the SNF litigation proceeds will total almost $13 million, thus muting the overall effect of the rate increases granted NSPW. For the full story, subscribe to URN.

Posted: February 13th, 2012 under Nuclear Spent Fuel, ratemaking, regulation.
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Nixes proposal to lower demand charges for solar customers

Update courtesy of Utility Regulatory News #4057: In the course of reviewing rate design options for an electric utility, the California Public Utilities Commission has rejected a recommendation from a solar advocacy group that fundamental changes be made to the schedules applicable to those customers participating in a pilot solar project. The group had urged the commission to raise from 20 megawatts (MW) to 50 MW the maximum solar capacity eligible for participation in the pilot, and to concomitantly reduce associated demand charges and increase volumetric charges. The commission, however, determined that such changes could lead to an even greater revenue deficit than the utility, Pacific Gas & Electric Co. (PG&E), was already experiencing. The commission said that given that the current solar pilot has played a key role in the utility’s existing revenue shortfall, a decrease in the demand charge would only exacerbate the situation. Further, the commission posited that reductions in the demand charge would run counter to the commission’s cost-based rate-making policies and were likely to cause a shift in cost responsibility among PG&E’s various customer classes. In the commission’s view, lower demand charges for solar customers would translate into other customers subsidizing solar facilities, a result that would be patently unfair. The commission concluded that net-metered solar customers are already properly compensated for the power they export to the grid and that relief from demand charges was not necessary to spur continued interest in solar generation installations on customer premises. For the full story, subscribe to URN.

Posted: February 13th, 2012 under ratemaking, renewables.
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Invokes use of a wind proxy

Update courtesy of Utility Regulatory News #4054: Reviewing the methodology used by Rocky Mountain Power for its purchases of energy and capacity from wind-based qualifying small power production facilities (QFs), the Wyoming Public Service Commission has adopted a permanent avoided-cost pricing method for the utility. Referring to it as a “partial displacement differential revenue requirement” approach, the commission said that the new method involves two primary changes from previous avoided-cost rate formulas. First, capacity deferrals for all wind QFs will be premised on a wind proxy and will no longer be limited to 50 megawatts per year. Second, the timing and amount of such deferrals will depend on the need for and the costs of a wind unit or a combined-cycle combustion turbine, as reflected in the utility’s most recent integrated resource plan. In rejecting a counter-proposal for “front-loaded” capacity payments to wind QFs, the commission said that such treatment would be tantamount to rate basing of the facilities, a measure that is reserved solely for utility-owned generating resources and thus would be inapt for wind QFs. According to the commission, use of a wind proxy should produce QF rates sufficient to promote growth in the wind power industry in the state. For the full story, subscribe to URN.

Posted: January 27th, 2012 under ratemaking, renewables, wind power.
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Finds it would amount to an improper rebundling of electric rates

Update courtesy of Utility Regulatory News #4034: In disapproving a request by Public Service Co. of New Hampshire (PSNH) for authority to institute a special generation-related surcharge mechanism applicable to all customers, the New Hampshire Public Utilities Commission has determined that not only would the proffered charge have a repressive effect on customer choice programs, but that it also would be tantamount to repackaged generation and distribution service rates, in contravention of the state’s industry restructuring law which requires that rates for electric generation and distribution services be unbundled.

The utility had asked that it be allowed to recover from all customers a portion of the fixed costs of maintaining its generation assets. According to PSNH, the surcharge should be equally applicable to those customers who now purchase their electric supply from competitive providers, in that there is a possibility that they could return to utility-provided generation at some point. The utility asserted that recouping all its generation costs from other non-shopping customers had produced default energy service rates that were as much as 8 percent higher than they need be. The commission, however, found that the concept of a non-bypassable generation surcharge would violate state law that mandates that generation costs be unbundled from distribution service costs. While nixing the proposed non-bypassable surcharge proffered by PSNH, the commission nevertheless agreed that the utility should be able to impose a fee on customers who migrate elsewhere for supply service and then later return to utility-provided supply. It therefore authorized the utility to submit an associated tariff proposal for just such situations. For the full story, subscribe to URN.

Posted: September 13th, 2011 under generation, ratemaking, retail competition.
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Changes at PSC prompt partial reversal of December NWE order

Update courtesy of Utility Regulatory News #4028: The Montana Public Service Commission (PSC), with new members and leadership, has amended certain aspects of a December decision that had authorized NorthWestern Energy (NWE) to implement a revenue decoupling mechanism and an inclining block rate structure in conjunction with an increase in electric rates.

The rate order had been issued only a few weeks before two new members of the PSC were due to be sworn in. Both of the new commissioners had publicly disagreed with the decoupling and tiered rate portions of the order, and upon taking office, they initiated a fresh review of the NWE decision. Pursuant to that review, the commission deemed appropriate the electric and natural gas revenue requirements established pursuant to an underlying settlement, which provided the utility with $7.66 million in electric rate relief but called for a decrease in natural gas rates of a little less than $1 million. The commission also upheld the stipulation’s rate of return on equity (ROE) of 10.25% for both electric and gas operations. However, in that the December decision had reduced NWE’s electric ROE to 10% to account for the company’s lower risk profile because of the decoupling mechanism, the reconstituted commission found that the full 10.25% ROE should be restored for electric services.

The commission explained that because revenue decoupling and inclining block rates were no longer being authorized, there was no reason to disturb the settlement’s original ROE provisions. For the full story, subscribe to URN.

Posted: August 25th, 2011 under decoupling, ratemaking, regulation.
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