Utility redesigns rates to mitigate volatile purchased power costs and increased solar distributed generation

Client need

Due to major shifts in purchased power costs and increased distributed generation (DG) in its service territory, a Southern utility needed to update its electric base rates to better reflect its current operating conditions. The utility also planned to adjust the base rates for its water, wastewater and gas utility functions.

Baker Tilly solution

The specialized energy and utilities team at Baker Tilly performed electric, water, wastewater and gas utility cost of service and rate design studies as well as future cash flow calculations for the utility. The electric rate study included an assessment of rate design options to mitigate the impact of increased DG. Baker Tilly also conducted a separate analysis of the utility’s purchase power agreement (PPA) as a potential capital lease accounting treatment under GASB 62, in lieu of recovering purchased power costs through a fuel adjustment.

Results

The utility demonstrated that through the proposed base rate changes its targeted revenue requirement could be met without significant customer rate changes. Baker Tilly’s recommendations were approved by the utility’s commissioners allowing the utility to weather increased purchased power costs and DG.

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