Rates and Regulatory Issues

Determining the right price for utility service is an intricate process. Historically, the utilization of traditional rate making practices to design rates based on the cost of providing service to specific customers was an acceptable means of providing for the stable recovery of revenue requirements through the use of appropriate price signals. Today, recognizing the realities of competition in the provision of utility service, rate making demands the application of innovative approaches aimed not only at meeting overall revenue requirements, but those also targeted at customer retention and risk mitigation.

The deregulation of natural gas pipelines and wholesale electric power, the effects of ongoing RTO development on the use of the transmission grid, and the emergence of retail electric competition has resulted in increased concern over cost shifting between customer classes, cost-based pricing, market rate based pricing and their effects on captive ratepayers. The uncertainty associated with the future electric and gas marketplace from the evolving competitive environment in which utilities now find themselves has introduced many new complexities which cannot be adequately addressed by traditional rate making mechanisms.

ERG provides clients with the following rate and regulatory services:

• Fuel adjustment clause analysis and development
• Special contract development
• Development of "test year" revenue requirements
• Power purchase contract negotiations
• Rate of return and cost of capital analysis
• Large customer rate negotiations
• Economic/financial feasibility studies
• Inclusion of capital improvement costs in rate structure
• Load forecasting
• Cost-of-service study development including:
  • Functionalization of utility investment into major operating categories
  • Classification of functionalized costs
  • Allocation of costs to individual customer classes
  • Unbundling customer class cost components into functional service areas
  • Development of individual rates of return by customer class
  • Development of unbundled revenue requirements by customer class
  • Analysis of existing rate and fee structures
  • Design of residential, commercial, industrial, interruptible, time of use, and alternative rates

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