Municipal utility initiates rate study to manage volatile wholesale and fuel costs

Client need

A Midwest municipal utility needed to update its electric utility rates. The utility faced concerns associated with significant rate changes and bill impacts to its customers as well as volatile costs for purchasing power from the wholesale market along with fuel costs.

Baker Tilly solution

Baker Tilly’s specialized energy and utilities team performed a comprehensive electric revenue requirement, cost of service and rate design study with a cash flow forecast for the utility’s operations covering a two-year period. We also examined the hourly wholesale prices in the Midcontinent Independent System Operator (MISO) market to determine the appropriateness of on-peak and off-peak rates and developed an power cost adjustment clause (PCAC) to stabilize customer base rates with respect to fluctuating purchased power and fuel costs.

Results

Baker Tilly’s rate study included a proposed two-step rate increase, enabling the utility’s revenue requirement to meet its operating costs but also mitigating any significant changes to customer rates. The utility’s board approved our recommendations.

For more information on this topic, or to learn how Baker Tilly energy and utility specialists can help, contact our team.