Alternative energy economics
The client asked us to review a supply contract for wind generation. We analyzed the contract and explained to the client that the contract lacked some important price and supply protections and did not take into account potential changes that could reduce the value of the offer.
A small water company was an asset in a bankruptcy case. The court needed a valuation to determine if a fair price was being offered to buy it. A major issue was a substantial amount of excess capacity. We provided a valuation, supported by two approaches, which the court accepted.
We often review the bills of clients in regulatory proceedings or contract disputes to determine the dollar impact of any proposals or claims. Also, if you have a problem with a malfunctioning meter, an audit of prior months’ bills is needed to determine the proper adjustment.
Auditing utility bills for errors is rarely useful, unless you have a special rate and very complicated bill.
Contract analysis, interpretation and negotiation
Our client had a contract to supply cogenerated power to the local utility. One year, the utility requested a refund, claiming that the generator had not met the reliability standard in the contract. Our analysis showed that it had met the reliability criterion according to the terms of the contract, although the contract itself used a non-standard definition of reliability. Further, we showed that the utility’s meters were not sufficiently precise to support its claim.
Cost allocation (class cost of service studies)
We have prepared and analyzed hundreds of cost of service studies, for electric, natural gas, oil and gas pipeline, water and wastewater utilities.
Demand response programs and interruptible rates
Interruptibility may mean different things–and have different values–in traditional, integrated electric markets and in deregulated markets. We have advised clients on how to define and value interruptibility in both types of markets.
DSM is an important resource, but should be subject to cost-effectiveness tests. Sometimes, education is the most cost-effective approach. In one case we showed that large subsidies were offered for DSM measures that had a payback of less than one year without any incentive.
Distributed energy and self-generation
Evaluating self-generation includes determining the appropriate cost for backup and maintenance service from the utility. In one case, we showed that the utility’s proposed rate for backup service would cost a self-generating customer more than if the customer continued to take full service from the utility.
Electric and gas distribution rates
Rate design involves trade-offs among simplicity, accuracy and continuity. We have dealt with this in many venues.
Financial and economic modeling
Whenever possible, we prefer to create a spreadsheet model to demonstrate the effects of a proposal, including the effects of different assumptions. Regulators have told us more than once that they find these useful.
Natural gas and liquids pipelines and issues
We have dealt with issues of pipeline competition, rolled-in versus incremental pricing, apportionment, excess capacity and liquids extraction.
Performance-based rates (incentive regulation)
A client group asked us to develop the parameters for negotiating an incentive contract with a pipeline. Our analysis explained the different types of incentive arrangements and provided a basis for them to negotiate a deal successfully.
We have also advised clients where we thought that an arrangement of the “CPI-X” form would be disadvantageous to them.
Clients have retained us to prepare forecasts of electricity and natural gas prices. We believe that the forecast prices are less important than understanding the main factors that drive the forecast and the sensitivity of the forecast to different assumptions.
Purchased power contracts
A municipality asked us to evaluate competing proposals for the supply of electricity to its utility. Our analysis covered the difference in cost as proposed, potential differences under different market conditions and other variables that could affect the final cost of power.
Rate design issues include: the level of demand versus energy rates; the split of electric transmission costs between generators and loads; stand-by rates; demand ratchets; peak load pricing; real time pricing; interruptible rates (or credits); distance-based versus postage stamp pipeline rates; customer charges versus usage charges; and unbundling, to name a few. We have, at one time or another, dealt with all these issues on behalf of various clients.
Regulatory principles and procedures
On behalf of a regulatory agency, we did an evaluation of its procedures in order to see how the process could be improved and speeded up. On behalf of a municipal utility regulated by city council, we have developed the principles and criteria to use in order that both sides understand better their roles and obligations.
A client group had us evaluate and present evidence on the appropriate generation reserve margin for integrated utilities. Reliability is not a question of “how much do you want?”, but of “how much do you want to pay for?” The reliability of the system can always be increased at a price, so the question is at what point the cost outweighs the benefits.
We have submitted issues on all aspects of revenue requirements–rate base valuation, operating expenses, depreciation expense, taxes and cost of capital.
Water and wastewater rates
Water and wastewater services are becoming more expensive. Costing and rate design will become more important. For one wastewater client, we totally revamped its cost-of-service study, including addition of methods for determining overstrength costs and charges.