- Electric Cost-of-Service & Rate Design Study - Lakeland
We prepared comprehensive cost-of-service and rate design studies for Lakeland Electric in 2008, 2011 and 2014. In the 2014 effort, Lakeland Electric required a study that would address financial issues. The major objectives of the study included a base cost analysis, cost allocation and cost-of-service analysis, recommendations of utility rates that are fair and practical based on the cost-of-service analysis, and rate recommendations including time of use pricing and power factor incentive pricing.
The study consisted of several phases. The annual revenue requirement used in the subsequent phases of the study was developed based on a five-year financial forecast of Lakeland Electric’s revenues and expenses. This financial forecast included projections of known changes in annual costs of large dollar items, such as power cost projections, based on information provided by Lakeland Electric. Other categories of expenses were forecasted using historical trends or assumed annual rates of inflation. The forecast results were used as the annual revenue requirement basis for the test year.
The cost-of-service analysis included the assignment, or unbundling, of the various costs included in the annual revenue requirement to Lakeland Electric’s functional services (i.e. power supply, transmission, distribution, customer service, etc.). These unbundled cost components of the adjusted annual revenue requirement were then allocated to the various electric rate classes. The resulting allocated cost of service for each rate classification was compared to the annual revenues for each class to assess the projected cost recovery provided by the existing retail rates.
The results of the financial forecast and cost-of-service analysis provided a basis for potential revisions to electric service rates for consideration by Lakeland Electric. Proposed rates were developed to recover the required levels of revenues to meet revenue requirements. Particular emphasis was placed on time of use pricing and power factor incentive pricing. The study report presented a discussion on the implications of the financial forecast and cost-of-service results on Lakeland Electric’s current electric rates and described the proposed modifications to those retail rates. Comparisons of sample monthly bills based on the current and proposed rates for each customer classification were also presented.
- Financial model development
- Financial planning
- Cost-of-service analysis
- Retail electric rate design
- City council presentation