Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
Benchmarking Your Rate Case
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is a sub-optimal number. Utilities should aspire to raise their load factors because that will lower their average costs and relieve the upward pressure on rates.
1. The weak economic recovery is one of five factors slowing down sales growth with demand-side management, codes and standards, distributed generation and fuel switching toward gas being the other four. See Ahmad Faruqui and Eric Shultz, “ Demand Growth and the New Normal ,” Public Utilities Fortnightly , December 2012. Ironically, the slowdown in sales growth is prompting utilities to raise rates, in order to recover their fixed costs which, ipso facto, don’t move proportionately with sales. For example, Xcel Energy in Minnesota is requesting a rate increase partly to recover fixed costs that run the risk of being stranded as sales growth slows down due to an expansion in its Demand-Side Management programs. Especially relevant to this paper are Faruqui’s rebuttal and direct testimonies which can be found here and here.