Midwest utility stabilizes multiyear cash flow concerns through rate updates

Client need

A Midwest municipal utility was looking to update its electric utility rates with a forecast of retail revenues over a five-year period. It faced concerns associated with volatile annual operating expenses affecting its net cash flow over that period as well as increased net metering activity in its service territory impacting its ability to recovered fixed costs.

Baker Tilly solution

Baker Tilly performed a comprehensive electric revenue requirement, cost of service and rate design study with a cash flow forecast for the utility’s operations for the five-year period. Baker Tilly also developed solar net metering tariff rates by determining the municipal utility’s avoided cost of energy, which also included the value of avoided transmission capacity, generation capacity and Midcontinent Independent System Operator (MISO) day-ahead market costs. Additionally, our energy and utilities specialists analyzed 8,760 hourly customer load profiles and hourly wholesale locational marginal prices (LMP) in the MISO market to determine appropriate on-peak and off-peak utility rates.

Results

Through the rate study, the municipal utility achieved its objective of stabilizing forecasted revenues to align with volatile operating costs. The utility also updated its solar net metering tariff rates to better reflect the true value of solar generation in accordance with the hourly solar production and its avoided cost of energy instead of previously a static retail rate.

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