Conducting a review of the transmission formula rate of a nearby incumbent IOU (Transmission Formula Rate Analysis)

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“MCR are in-depth experts on the Attachment O… I was flabbergasted MCR was able to gather so much information. They had all the appropriate questions for the IOU.”

—Director of Finance, municipal utility

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Background

A municipal utility was faced with rapidly rising transmission rates from the neighboring incumbent IOU transmission owner. It had been many years since the municipal conducted an in-depth review of the IOU’s transmission costs. The municipal engaged MCR to review the IOU’s transmission formula rate template to ensure the costs were accurate.

Solution

MCR conducted an in-depth review of the neighboring IOU’s formula rate and work papers. MCR worked with the client to question the IOU about areas requiring further explanation or areas of concern and assisted the client in understanding some of the more nuanced aspects of the formula rate.

Results

MCR produced a detailed analysis for the client focused on the causes of the transmission revenue increases for both the true-up and the changes in the upcoming year compared to the prior year. MCR also provided a look to the next year’s reporting period, including the potential impact of an ROE reduction and the impact of a change in the IOU’s income tax rate. The client was pleased that it could report to its Board that an in-depth review of the IOU’s costs was conducted, the IOU’s revenue requirement was being accurately calculated and that the municipal did not have to proceed with any formal challenge process or filings with FERC.