cost of service principles - overview · 10.08.2020 · principles-overview september • rate...
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COST OF SERVICE PRINCIPLES - OVERVIEWWORKSHOP DISCUSSION
AUGUST 10, 2020
WORKSHOP DISCUSSIONS BY MONTH
August
• Cost of Service Principles-Overview
September
• Rate Design Issues/Options
October
• Customer Incentives Through Rate Design
November
• Billing Issues/Options
January
• Preliminary List of PPS Rate Schedules
February
• Preliminary Revenues and Revenue Requirements
March
• Preliminary Cost Allocation and Rate Design
April
• Proposed Final Rate Design
COST OF SERVICE PRINCIPLES - OVERVIEW
A. Revenue Requirements• What level of rate revenues do we need?• Based on historical and projected
• Operating expenses, net of other revenues, plus• Debt service requirements, including reserves, plus• Capital expenditures
B. Allocation of Costs• Assign cost responsibility to rate classes• Based on use of capacity and energy
C. Rate Design = A ÷ B
REVENUE REQUIREMENTS
Projected “test year” costs to be recovered from rate revenues.
Classified Into:
▪ Energy-related
▪ Capacity-related
▪ Customer-related
Functionalized Into:
▪ Generation
▪ Transmission
▪ Distribution
▪ Customer
▪ Administrative & General
COST CLASSIFICATION AIDS RATE DESIGN
Energy Capacity Customer
Generation
Transmission
Distribution
Customer
Admin & Gen
ALLOCATION OF COST RESPONSIBILITY
Energy
Fuel Cost
Energy Purchases/(Sales)
Capacity
Generation Fixed Costs/Debt Service
Capacity Purchases/(Sales)
Transmission Costs
Distribution Capacity Costs
Customer
Customer Service
Revenue Cycle Costs
Customer Accounting
Distribution Services
Other
Direct Assignment
Revenue
ALLOCATION FACTORS
Energy
Energy Sales
Capacity
Coincident Peak Demand
Non-coincident
Peak Demand
Customer
Customers -Unweighted
Customers -Weighted
RATE DESIGN - BASICS
• Customer Charge• Energy Charge
Two-Part Rate
• Customer Charge• Energy Charge• Demand Charge
Three-Part Rate
WORKSHOP DISCUSSIONS BY MONTH
August
• Cost of Service Principles-Overview
September
• Rate Design Issues/Options
October
• Customer Incentives Through Rate Design
November
• Billing Issues/Options
January
• Preliminary List of PPS Rate Schedules
February
• Preliminary Revenues and Revenue Requirements
March
• Preliminary Cost Allocation and Rate Design
April
• Proposed Final Rate Design
DISCUSSIONCOST OF SERVICE PRINCIPLES