IS CHANGE COMING? TRANSMISSION RATE FILINGS AT THE PUC CODY FAULK, Lloyd Gosselink Rochelle & Townsend, P.C. GRANT RABON , NewGen Strategies & Solutions Texas Public Power Association 2018 Annual Meeting
CODY FAULK � Energy – Utility Associate at Lloyd Gosselink Rochelle and Townsend P.C. in Austin, Texas. � Represent municipally owned utilities (MOUs), cities, and investor owned water utilities in proceedings at the Public Utility Commission. � Rulemakings � Service Area disputes � Integration into ERCOT � Transmission Line Routing � Fun Fact: Has only ever been a TPPA Member City customer. TPPA 2018 ANNUAL MEETING
GRANT RABON � Has provided management and financial consulting services to public utilities since 2005, including: � Financial risk assessments and feasibility � Valuations/appraisals � Litigation support � Cost of service and rate design � B.S. in Chemical Engineering and MBA. � Has testified at the Public Utility Commission of Texas. � One of less than 20 individuals in the nation with an Accredited Senior Appraiser (ASA) designation in Public Utilities from the American Society of Appraisers. TPPA 2018 ANNUAL MEETING
TRANSMISSION COST OF SERVICE RULES 16 TAC § 25.192 – Transmission Service Rates � A TSP's transmission rate shall be calculated as its commission-approved transmission cost � of service divided by the average of ERCOT coincident peak demand for the months of June, July, August and September (4CP), excluding the portion of coincident peak demand attributable to wholesale storage load. A TSP's transmission rate shall remain in effect until the commission approves a new rate. The TSP's annual rate shall be converted to a monthly rate. The monthly transmission service charge to be paid by each DSP is the product of each TSP's monthly rate as specified in its tariff and the DSP's previous year's average of the 4CP demand that is coincident with the ERCOT 4CP. The transmission cost of service for each TSP shall be based on the expenses in Federal � Energy Regulatory Commission (FERC) expense accounts 560-573 (or accounts with similar contents or amounts functionalized to the transmission function) plus the depreciation, federal income tax, and other associated taxes, and the commission-allowed rate of return based on FERC plant accounts 350-359 (or accounts with similar contents or amounts functionalized to the transmission function), less accumulated depreciation and accumulated deferred federal income taxes, as applicable. Each TSP in the ERCOT region shall periodically revise its transmission service rates � to reflect changes in the cost of providing such services. The commission may prescribe a schedule for providers of transmission services to � file proceedings to revise the rates for such services. TPPA 2018 ANNUAL MEETING
TRANSMISSION COST OF SERVICE RULES � 16 TAC § 25.192 – Return Determination for MOUs � For municipally owned utilities, river authorities, and electric cooperatives, the commission may permit the use of the cash flow method or other reasonable alternative methods of determining the annual transmission revenue requirement, including the return element of the revenue requirement, consistent with the rate actions of the rate-setting authority for a municipally owned utility. � For municipally owned utilities, river authorities, and electric cooperatives, the return may be determined based on the TSP's actual debt service and a reasonable coverage ratio. In determining a reasonable coverage ratio, the commission will consider the coverage ratios required in the TSP's bond indentures or ordinances and the most recent rate action of the rate- setting authority for the TSP. TPPA 2018 ANNUAL MEETING
TRANSMISSION COST OF SERVICE RULES � 16 TAC § 25.192 – Interim TCOS Filings � Each TSP in the ERCOT region may apply to update its transmission rates on an interim basis not more than once per calendar year to reflect changes in its invested capital. � An interim update of transmission rates action shall be subject to reconciliation at the next complete review of the TSP's transmission cost of service, at which time the commission shall review the costs of the interim transmission plant additions to determine if they were reasonable and necessary. � Any amounts resulting from an update that are found to have been unreasonable or unnecessary, plus the corresponding return and taxes, shall be refunded with carrying costs. TPPA 2018 ANNUAL MEETING
ORIGINALLY PROPOSED RULEMAKINGS REGARDING TCOS ISSUES � PUC Project No. 46393 - RULEMAKING PROCEEDING TO REPEAL AND REPLACE 16 TEXAS ADMINISTRATIVE CODE § 25.192, RELATING TO TRANSMISSION SERVICE RATES � PUC Project No. 47545 - RULEMAKING PROCEEDING TO ESTABLISH FILING SCHEDULES FOR INVESTOR-OWNED ELECTRIC UTILITIES OPERATING SOLELY INSIDE ERCOT AND NON-INVESTOR-OWNED TRANSMISSION SERVICE PROVIDERS OPERATING WITHIN ERCOT TPPA 2018 ANNUAL MEETING
PUC PROJECT NO. 46393 � Proposed rules would include the following provisions for non-IOUs: � Eliminate the cash flow method for revenue requirement determination. � Transmission rate of return may not exceed the overall rate of return for all the entity’s services. � Not certain how this would be applied to municipal utilities (e.g., just the electric utility functions only or might it also reference other city utilities or services?). � Requirement for ’baseline values’ to be established in any future full TCOS filing, including those approved by stipulation or litigation. � Interim filings limited to only one per year. � No interim rate increase if utility is over-earning according to its most recent Earnings Monitoring Report (with adjustment for weather-normalized data). TPPA 2018 ANNUAL MEETING
PUC PROJECT NO. 46393 (continued) � Adjust the cost of debt for an interim filing to reflect what was reported in the most recent EMR. � No increases in joint or common costs associated with substations that serve load at distribution voltage, including costs associated with land or equipment, in an interim filing. � Any utility that has not had an approved case within the last 36 months of the effective date of the rule changes must submit a TCOS filing based on the following schedule: � If no rate approved in a full case since before December 31, 2009, must file a full or interim case within one year of the effective date of the rule changes. � If have had a rate approved in a full case since December 31, 2009, must file a full or interim case within two years of the effective date of the rule changes. TPPA 2018 ANNUAL MEETING
LEGISLATIVE CHANGE � During the pendency of Project 46393 the Legislature enacted Senate Bill 735. � The Legislature provided the following as basis for the enactment: � As part of the 2016 annual Earnings Monitoring Report (EMR), PUC staff noted that within a certain class of utilities, a large percentage had not been subject to a comprehensive or even cursory review by PUC for many years. � Specifically, of the 38 utilities considered in this class, 19 had not had a comprehensive rate proceeding in over 10 years, and of these, eight had not been reviewed in over two decades. In this report, PUC also identified some structural deficiencies with the current cost recovery system. � The Legislation was intended to address the PUC's recommendations by establishing a requirement for PUC to periodically and efficiently review all electric utility rates, including a periodic adjustment of transmission rates to reduce rates as certain costs go down. � The bill allows the current periodic rate adjustment for distribution costs to become a permanent expedited recovery mechanism to reduce regulatory lag in the build out of infrastructure. TPPA 2018 ANNUAL MEETING
PROJECT 47545 � Proposed new rule 25.247 will establish a schedule requiring periodic filings for rate proceedings by investor-owned electric utilities operating solely inside ERCOT, as required by Senate Bill 735 (SB 735). � Staff’s initial proposed rule would require each non-investor-owned transmission service provider to submit a complete application for an interim update under §25.192 (relating to Transmission Service Rates) within 48 months of its most recently approved change in network transmission-service rates under §25.192. TPPA 2018 ANNUAL MEETING
COMMENTS FILED IN PROJECT 47545 � Multiple stakeholders participated, including: � TPPA � LCRA � Floresville Electric Light & Power � City of San Marcos � Texas Electric Cooperatives, Inc. � Texas Industrial Electric Customers (TIEC) TPPA 2018 ANNUAL MEETING
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