Utilities and regulators are stuck in a rut, treating rate-base assets in a traditional way and depreciating their value according to a straight-line calculation. But alternative accounting...
Rate Case Analytics
Hard numbers support operating- and capital-cost claims for gen plants.
It’s been a long time since many electric utilities have had to ask their rate commissions for the amounts of money they’re asking for today. States with deregulation programs either have frozen rates or reduced them over the last decade, in the hopes that competition would naturally lower prices to consumers. Now those programs are ending and their success is questionable. Utilities in more regulated states haven’t faced since the 1970s new build programs like the ones currently contemplated. And, everyone is paying far more for fuel today than they expected to only a few years ago, so fuel adjustment clauses or pass-through are also on the docket.
As a result, utilities are preparing new rate-case strategies, i.e., plans for how to communicate with the regulator and the public about why higher rates are necessary. One question often asked by regulators is “what are you doing to get the most out of the assets you have?” Testimony from recent hearings reveals the application of real-time performance monitoring and diagnostic (PM&D) technologies can bolster the case.
These new PM&D technologies provide plant operators and engineers one of the following: early detection and warning of impending problems to prevent unexpected component failures; continuous tracking and comparing of critical performance parameters, such as heat rate, so that operators can make adjustments to controllable process variables; collection and archiving of on-line data for tracking of long-term trends in component and system health; and validation of sensors and process measurements. These technologies transform reams of plant data into actionable information, so staff can focus on solving problems, not just looking for them.
A number of companies provide PM&D software products, which fall into several categories. The first type of software is the data historian. A data historian is a time-series database that interfaces with a plant’s distributed control system. The historian stores the time history of a plant’s instrumentation, and typically also provides a common infrastructure to access and view plant data across a plant or corporation. The second type of software analyzes thermal performance. This software analyzes the factors that affect the heat-rate performance of a plant against design conditions, helping to indentify areas of thermal loss. The third type of software is predictive-analytic software, which compares the current performance of a piece of equipment to its past performance and is used to detect the early signs of problems, so maintenance can be more proactive instead of reactive.
Several U.S. and Canadian electric utilities have included their use of PM&D software in their rate-case hearings and commission testimony. Reasons for including these software technologies in testimony are diverse, but mostly stem from today’s challenges such as recruiting and training a new generation of workers to deal with a loss of expertise as experienced workers retire; supporting rate increases at a time when capital costs for new