Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
Rate Case Analytics
Hard numbers support operating- and capital-cost claims for gen plants.
capacity have skyrocketed; and ensuring that everything is being done to extract productivity from existing assets before requesting money for new build.
For example, in the case of Kansas City Power & Light, predictive analytics was referenced directly by F. Dana Crawford in his January 2007 testimony. The testimony involves a line of questioning related to “supply plan maintenance expense normalization.” To address the question, “What is KCPL doing to address performance improvements needed to maintain high levels of output from its existing generating assets?” Mr. Crawford responded, in part:
“For a number of years, KCP&L has utilized dedicated predictive maintenance teams at each plant site to gather data (vibration, oil sampling, thermography, sonic testing, etc.) to proactively look for early ‘warning’ signs of possible equipment failures. These efforts have been successful and are a key component of the PRO [plant reliability optimization] process.”
Crawford also said the company uses real-time predictive analytics and data-historian technology to support maintenance and troubleshooting activities.
Several other utilities are including, have included, or plan to include PM&D software in their rate-case strategies. However, rate cases are sensitive exchanges of information and, for various competitive and other reasons, utilities understandably aren’t always willing to disclose their evidence to a wider audience. Nevertheless, at a recent predictive analytics user group meeting, one utility executive observed, “One of the values we’re seeing in our analytics is we’re able to take it in front of our regulator. We’re proposing significant rates increases over the next couple of years to deal with our capital program, and by sharing this tool with the regulator we’re able to say this is what we’re doing to minimize those capital increases and really stretch the life of the assets that we’re operating.”
In a later session at the same meeting, the utility representative continued, “One of the tasks we face is being transparent in how we make our investment decisions and having to justify those in front of our regulator. [Predictive analytics] can be a valuable tool for us to do that because it allows us to start to show trends in the equipment and very easily come up with that information when we’re asked.”
A representative of a large investor owned utility added that they’ve “already presented [predictive analytics] to the regulators as being proactive, preventing cost and rate increases, and [got] a very favorable reception from the public service commissions.” At this utility, PM&D technology is a key component of centralized performance monitoring and diagnostics at afacility serving multiple sites.
In April of this year, Mark C. Birk, vice president of power operations at AmerenUE, testified on heat rate and efficiency testing to the Missouri Public Service Commission. “By monitoring heat rates, the company can track the efficiency of its units and address observed reductions in a unit’s efficiency appropriately,” he said. “This in turn allows the company to make efficient use of the fuel it buys by getting as much electric generation as it reasonably can from each unit of fuel burned. Performance monitoring systems allow AmerenUE to continuously track