- Electric Cost-of-Service & Rate Design Study - Moreno Valley
To evaluate the adequacy of revenue requirements and to develop a financial plan to address a number of issues, namely rapidly increasing system load, the City of Moreno Valley asked us to conduct an electric cost-of-service and rate design study on behalf of Moreno Valley Utility (MVU), the municipal-owned electric utility. The study consisted of a revenue requirements analysis, a cost-of-service analysis and a rate design analysis.
First, the revenue requirements analysis was completed to determine whether sufficient revenue would be available to cover projected operating and capital expenditures, or if revenue adjustments would be required. Based on the analysis completed and specific discussion regarding rates, we recommended MVU take no action to raise additional revenue over and above monies generated by current rates.
The cost-of-service analysis included the functionalization, classification and allocation of the various costs of the test year revenue requirement. Functional costs included energy and transmission power supply, primary and secondary distribution delivery, customer services, and Public Purpose Program expenses. The costs were classified to the functional cost categories and allocated to each of MVU’s rate classifications. The resulting allocated cost-of-service for each rate classification was then compared to test year revenues for each class to assess the projected cost recovery provided by the existing retail rates.
The results of the cost-of-service analysis provided the basis for potential revisions to electric service rates. However, MVU’s main classifications and rates parallel certain rate structures offered by Southern California Edison (SCE), an investor-owned electric utility serving central and southern California. The Moreno Valley City Council established this policy to ensure MVU’s rates remain in parity with SCE to avoid discord from two separate rate offerings within city limits. Our team recommended no policy change. Therefore, rate design was primarily focused on the Economic Development Rate (EDR) program. Current policy includes EDRs to attract new businesses or support expansion of existing businesses by offering discounts for extended periods of time. We proposed modifications to the program that included new EDR program periods with new cost-based discounts, and additional qualifying criteria. The new EDRs continue to incentivize investment while avoiding lost revenue due to discounts exceeding the cost of power.
- Financial model development
- Financial planning
- Cost-of-service analysis
- Retail electric rate design
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