Midwest utility battles rising energy prices by adjusting rates

Organization challenge

With the energy prices in the market and to meet the environmental costs of operating coal powered generating facilities, a mid-size utility serving over 11,000 customers in the Midwest needed to adjust rates to maintain the cost to serve customers with reliable energy services. The utility requested the assistance of the Baker Tilly energy and utilities team to perform a detailed rate study in order to properly adjust energy rates to consumers in order to continue to provide the high level of service reliability.

Baker Tilly solution

The specialized team at Baker Tilly evaluated the changes in cost drivers for the increases in energy costs and evaluated the impact and financing of environmental compliance initiatives. .  The team prepared a forecasted revenue requirement and cost of services by retail and wholesale customer classes was developed. 

Results

Rates were designed to smooth and mitigate rate impacts on customer classes while meeting utility revenue requirement targets. .  Recommended adjustments were made to the utility’s energy adjustment clause mechanism to allow the utility to share the risk of the changing energy prices with its customers.  The utility is now able to continue providing a high level of reliable service to its customers while maintaining cash flows for infrastructure improvements and system growth.