Is It Time for State Utility Commissions to Embrace Multiyear and Formula Rate Plans?
Ross C. Hemphill, President of RCHemphill Solutions LLC
Mark Newton Lowry, President of Pacific Economics Group Research LLC
Kate O’Connell, Manager, Energy Regulation and Planning, Minnesota Department of Commerce
Moderator: Ken Costello, Principal Researcher – Energy & Environment, NRRI
Traditional rate-of-return ratemaking has undergone critical review at least since the early 1960s. Various stakeholders and economists have offered proposals to improve, replace, or supplement it with mechanisms that attempt to redress the supposed deficiencies underlying traditional ratemaking. The primary question for utility regulators is whether these mechanisms are compatible with the objective of setting just and reasonable rates.
The focus of this webinar is on two such mechanisms, multiyear rate plans (MRPs) and formula rate plans (FRPs). State commissions in recent years have expressed more interest in both of these mechanisms. Still, the vast majority of U.S. utilities operate under traditional retail ratemaking.
This webinar will discuss the major issues surrounding MRPs and FRPs. Under what conditions they are in the public interest is the ultimate question for regulators to answer.
This webinar will address several questions on MRPS and FRPs, including the following:
- How do MRPs and FRPs differ?
- What empirical evidence is available showing the effects of MRPs and FRPs on both customers and utilities?
- Why haven’t MRPs and FRPs become more widespread in the U.S.?
- What features of MRPs and FRPs are most essential to make them work on behalf of customers?
- What economic and policy conditions are most supportive of MRPs and FRPs?
- Should utilities be accountable for achieving performance in different areas as part of a MRP or FRP?
- How can regulators determine whether a MRP or FRP has performed well on behalf of customers?
- What are the biggest challenges for regulators in deciding whether MRPs and FRPs are in the public interest?
- In Minnesota, what were the major issues identified during the investigation of MRPs and in rate cases where utilities have proposed MRPs?