October 18, 2005

Model Revenue Stability Rate Rider -- Version 3

Version 3 of the Model Revenue Stability Rate Rider can be obtained here:
Download file

These are the significant changes in this version:

1. Customer Charge Adjustment Deleted

References to the "customer charge" adjustment factor have been deleted because no customer charge adjustment would ever be needed.

2. Introduction of a "K" Factor to Prevent Unintended Shortfalls & Windfalls

Discussions at the last MADRI meeting highlighted a potential problem with the original version of this proposed rate rider relating to differences between incremental customer usage and average customer usage. As was pointed out by EEI, in those cases where the incremental use of new customers tends to be significantly different than the embedded average usage of customers, implementation of the rate rider could cause unintended shortfalls or windfalls for the utility.

This problem was experienced in the case of Central Maine Power some years ago, resulting in an unacceptably sudden and large adjustment factor. In the CMP case, the impact of the adjustment was aggravated by the fact that the adjustment was done on an annual basis, rather than on an monthly basis. The model rate rider was already drafted to use a monthly adjustment, so this part of the problem was not present in the previous draft. However, the difference between average and incremental usage could potentially still cause this problem.

In the new draft, a "K" factor has been utilitized to mitigate unintended shortfalls or windfalls from the adjustment. There is a separate "K" factor for the kWh adjustment and the kW adjustment. The "K" factor is calculated by comparing the the average use per customer (i.e. Total Use divided by Total Customers) during the test year to the growth in usage associated with the change in the number of customers (i.e. Change In Use During the Test Year divided by Change in Number of Customers During the Test Year). The "K" factor is calculated by comparing the the average use per customer during the test year to the growth in usage associated with the change in the number of customers. The ratio of these two calculations yields the appropriate "K" factor which is then applied to the revenues intended to be collected by the Revenue Stability Adjustment Factor.

3. Document Updates

The draft model rate rider and the example "three month" filing cycle have been amended to reflect the changes in items one and two above.

Questions or comments about this draft version of the Model Revenue Stability Adjustment Factor Rate Rider can be posted on this weblog or made directly to Wayne Shirley utilizing the link below.

Posted by rapwayne at October 18, 2005 10:03 AM