According to the Connecticut attorney general’s office, Connecticut Natural Gas customers will save approximately $7 to $8 per month due to this decision, while Southern Connecticut Gas customers will save about $3.50 to $4 per month. Stir that all together and you have a situation in which, when monopoly utilities ask for a rate increase, they usually receive it, or at the very least are not told by regulators that they actually need to do more with less in order to save ratepayers money. This results in consumers and other interest groups — such as, say, clean energy advocates or environmentalists — receiving far less representation on regulatory bodies than the utility industry itself. Utilities are also allowed to earn rates of return above their cost of capital, meaning they can return more to investors than they need to in order to attract that investment (i.e., investors would still invest at lower rates). As some of my colleagues wrote in a recent report, the formulas and incentives built into the process are a mess, encouraging utilities to overspend on wasteful stuff and then recoup those costs, plus a percentage, by charging ratepayers more. Those rates of return are determined by public bodies — generally known as public utilities commissions — that are either elected (11 states) or appointed by other elected officials (the other 39, plus D.C.).
But have you ever stopped to consider the impact of similar events on your electric utility bills? For example, a CNN business article dated March 13 discusses the impact of the conflict between Ukraine and Russia on American gasoline prices. The news has been full of storiesdetailing the impact of unforeseen events, such as worldwide pandemics, extreme weather events and international conflicts on particular industries. Local conditions and state decisions are driving the increase in average national electricity rates. When designed according to theory and implemented properly, performance-based regulation can benefit both utility customers and society.
The COSR "retrospective" analysis fails to consider long term benefits available to new technologies, Rabago emailed Utility Dive. The system cannot be optimized with an IRP analysis that disadvantages new DERs and other new technologies. Better analytics and modeling can include the benefits and costs of resources on the distribution system in the IRP analysis, Aggarwal said. The final revenue requirement includes a percentage of the utility's proposed capital expenditures as a rate of return for shareholders whose investments provide the utility with operating capital. The new approach begins by identifying what utility customers want and then uses a stakeholder-based regulatory forum to create opportunities for utilities to earn money by meeting those demands. The disadvantage is furthered if the new technologies are customer-owned, not offering return-on-investment opportunities for utilities.
North Carolina's Duke Energy Asks for Higher Rates—and Profits
The diagram below illustrates how electricity travels, including PJM’s operation of transmission lines subject to the jurisdiction of the Federal Energy Regulatory Commission. New Regulatory Finance is an invaluable text for economists, accountants, CFOs, attorneys, regulators, or anyone involved in capital-related decisions. Electricity affordability is increasingly becoming a key priority for governors as they balance keeping costs down for households while ensuring their state is investing for a future with significantly higher electricity demand. Motivated by these (and other) cost pressures, over a dozen governors have taken recent actions to improve electricity affordability while their states prepare for a future with increasing electricity demand. Since 2021, the variance in monthly natural gas prices is over two times larger than it was between 2008 and 2020.
Trend Sumo: FDD Beyond Energy Savings
- Costs from such proceedings are “highly unlikely to have any noticeable impact on customer bills,” Eversource argued.
- These spikes have put many people in the impossible situation of deciding whether to pay to keep their lights on or to pay for other essentials like food, medicine, and transportation.
- Bills include energy (kWh) or demand (kW) charges, as well as ancillary charges such as support for Energy Efficiency Programs and coverage of distribution losses.
- TEP’s “average monthly residential bill fell from about $146 in 2024 to $140 last year, a drop of about 4 percent,” company spokesperson Joseph Barrios said in an email.
- Combining this slow response to over-compensation with the declining cost of capital over most of the last four decades (at least until 2022 came along) would explain why the gap in equity returns has widened on average.
RMI Electricity Practice Principal Leia Guccione said power system stakeholders are now saying they want to move to a performance-based regulatory structure but they don't yet know how to do it. Bigger questions will have to be answered about "the utility of the future and what its core business is and how revenue and earnings can come from a different business model," Cross-Call said. The rate case is still the venue for the financial decisions and customer rate setting, but through the iterations of solicitations and deployments, that is likely to change. As new DER technologies allow customers to provide more services to the grid, the "underlying core business of the utility will need to be reconsidered," Cross-Call said. Initially, the solicitations will reveal the new capabilities and values of new technologies. "But putting it in rates creates needless complications and subsidies. That's just how the process works. Regulators approve the cost of those incentives in procedures outside of the ratemaking process."
Governor-led actions identified in our research include championing legislation, issuing executive orders/directives, releasing state energy plans, and more. We publish research like this to inform decision-makers and drive real-world impact. Overall the paper estimates excess costs to consumers could range from $2 billion to $20 billion per year, with the most likely number in the middle of that range.
Good regulators stand up to monopoly utilities.
The formula used to calculate the impacts of performance-based regulation involves mapping the influence of actual costs incurred by the utility, the share of cost savings retained by the utility, and the “benchmark”—or baseline—costs, onto the costs flowed through to customers. The concern is that present utilities have weak or even https://lievell.com/ericsson-partners-with-umniah-jordan-to-cut-network-energy-use-with-ai-ml-solutions.html?noamp=mobile perverse incentives to satisfy new goals and objectives. For example, it is conceivable to have “too much of a good thing.” This outcome can occur under performance-based regulation when it provides stronger incentives for utilities to perform better in some activities than others.
The PUC then holds regulatory proceedings that include elements such as expert testimony, evidence submission, and cross-examination—similar to a court case. (Several states, including Georgia and https://www.linkinsanity.com/benefits-of-getting-habitual-to-upi-stress-relieving-features.html Louisiana, held primary elections for open positions this month. Arizona will hold a primary for its two open commissioner seats in July.) Legislative bodies are involved in the appointments for a handful of other states, as well. So while public service commissions regulate what consumers pay, they’re also required to ensure safe and reliable service.
Arizona Regulators Considering Big Rate Hikes for Two Utilities
The compensation we receive from these companies may impact how and where products appear on this site. Our editorial team is committed to creating independent and objective content focused on helping our readers make informed decisions. It can’t override decisions made by the state PUC, but it can https://medhaavi.in/13-time-management-hacks-that-can-change-your-life/ implement things like stricter regulations for renewable energy goals on a more local level to help meet state goals.
These spikes have put many people in the impossible situation of deciding whether to pay to keep their lights on or to pay for other essentials like food, medicine, and transportation. The trick, Ackermann said, is to balance wide-ranging goals with the desire to capture the political outrage over high bills. The company, he said, has proposed ideas that would streamline the ratemaking process, such as multiyear cases that would make projections further into the future and reduce the number of proceedings. “It is disingenuous for outside groups and other stakeholders not to acknowledge that EEI and our member companies are prioritizing the interests of customers while leading the clean energy transition,” Riel said.
