Download presentation
Presentation is loading. Please wait.
Published byCaroline Green Modified over 9 years ago
1
CFC: Created and Owned by America’s Electric Cooperative Network Electric Rate Concepts In an Era of Change Oregon Statewide Directors Workshop Rod Crile Regional Vice President, Member Services, CFC
2
2 Created and Owned by America’s Electric Cooperative Network Three Step Process to Rate Making Revenue requirements Cost of service Rate Design The first two are straight forward exercises but require assumptions to be made The last requires a lot of thought –Many outside influences
3
3 Created and Owned by America’s Electric Cooperative Network Caveat Oregon is not, but If your cooperative is in a state that is rate regulated, that regulator may have specific rules and/or preferences about the rate making process.
4
4 Created and Owned by America’s Electric Cooperative Network Why Is Everyone Talking About Rate Design Yesterdays rates don’t work as well when: –Sells of Kwh are flat or decreasing –Sending proper message to distributed generators –Helping explain how we incur cost on their behalf Why hasn't everyone changed –Keep it simple –Member exceptence –Regulator –Decisions based on old rate design
5
5 Created and Owned by America’s Electric Cooperative Network What Members Need To Pay For Some costs are fixed. Some are variable*. *Variable cost are only incurred when a kWh is produced
6
6 Created and Owned by America’s Electric Cooperative Network Mitigating Risk Weather – volatility in kWh usage Up front investment Falling kWh usage Members won’t understand rate Covering fixed cost Generating necessary margin Sending the right message Not charging the right people Not rewarding the right people Matching power supplier rate Setting a new peak Unnecessary generation expansion / spot purchases
7
7 Created and Owned by America’s Electric Cooperative Network Traditional Residential Rate Design Three part cost –Consumer –Energy –Demand/capacity Generation Distribution –Margin Cost of Service –$36.00- Fixed –.02600-Variable –$10.00- Fixed 6.00 4.00 –$5.00- Fixed
8
8 Created and Owned by America’s Electric Cooperative Network Traditional Residential Rate Design Two part rate design –Consumer* charge $22.00 –Energy cost.12560 –Had to make an assumption of how many kWh the cooperative will sell –Consumer charge $22.00 –Block 1 – First 850 kwh.1400 –All above 850 kwh.1000 –May not send a very clear message *Facilities, service, availability, fixed, distribution, etc.
9
9 Created and Owned by America’s Electric Cooperative Network Moving Away from Yesterday’s Two Part Rate Keep raising the “customer charge” up to match cost of service –Which number? Just customer? $36.00 Customer and margin?$41.00 Customer, margin, demand? (assume 4 kw)$81.00 Are they all customer related? –All at once? –Couple dollars a year? –Can have huge impact on low users – decrease for high users
10
10 Created and Owned by America’s Electric Cooperative Network Moving Away from Yesterday’s Two Part Rate Three part rate (bill demand separately) ― Is your coop ready for this? ― Are your members ready for this? –Very few doing it today –The industry is watching Those that are already doing it What utilities are thinking about –More/better communications on how cost are incurred –Print the demand usage on the bill with no associated charge –Starting to bill demand, but at a low rate $.50 per KW
11
11 Created and Owned by America’s Electric Cooperative Network Moving Away from Yesterday’s Two Part Rate Interim steps – to get where you want to be –Communications –Break out charges differently on the bill Customer charge$22.00 Distribution cost per kwh$.0256 Generation per kwh$.040 Energy per kwh$.060 Total$.1256
12
12 Created and Owned by America’s Electric Cooperative Network Interim steps – to get where you want to be –Margin stabilization – formulary rate Equity TIER Annual adjustments Does not help rate design issues Moving Away from Yesterday’s Two Part Rate
13
13 Created and Owned by America’s Electric Cooperative Network Summary Communications is critical –Inside and outside the cooperative Technology –Properly bill the rate –Properly support the rate –Give the member the information they need Review rates annually are they: –Generating the required margin? –Getting the desired member response? –Matching the power supplier’s rate structure?
14
14 Created and Owned by America’s Electric Cooperative Network Summary Caution –No one rate design concept is necessarily the correct one for your cooperative to adopt. Each system is unique and may be facing different circumstances Sources of additional information –2013 – Electric Rate Concepts In an Era of Slow Growth –2010 - Rate Strategies for 21st Century Challenges: A Guide to Rate Innovation for Cooperatives
15
CFC: Created and Owned by America’s Electric Cooperative Network
Similar presentations
© 2024 SlidePlayer.com Inc.
All rights reserved.