Conducting a review of a transmission formula rate (Transmission Formula Rate Analysis)
“The improved cost recovery from the Attachment O Review is a windfall
for us … the return on investment was immediate and substantial.”—GM, municipal utility
Background
The general manager of a MISO transmission-owning municipal electric utility saw an MCR conference presentation and became interested in MCR’s Attachment O formula rate services. The general manager engaged MCR to make sure the utility was properly recording its costs and optimizing its transmission revenue in its existing transmission formula rate.
Solution
MCR conducted a review of the municipal’s Attachment O formula rate costs, associated work papers and its detailed general ledger accounts. MCR supplemented the review of costs with interviews of key operating and financial personnel to understand their day-to-day activities. These two steps ensured the client was recording its distribution and transmission assets and expenses consistent with the FERC Uniform System of Accounts and the MISO tariff. Along the way and also in a workshop setting, MCR provided education regarding the proper recording of costs and the optimization of allocators used in the Attachment O.
Results
The Attachment O Review resulted in improvements to how certain costs were recorded and led to modified timekeeping processes to ensure costs were recorded consistent with FERC accounting. The client achieved a substantial increase in annual transmission revenue by placing its existing transmission-related expenses in the proper categories and ensuring field personnel were charging the proper accounts, with a particular emphasis on the appropriate recording of transmission vs. distribution wages. The additional annual revenue eased budget concerns, helping the client to fund additional necessary capital projects. The Attachment O Review also resulted in a more educated and confident staff that now has an in-depth understanding of Attachment O related assets and expenses and how allocators impact revenue, providing staff with the ability to make more informed business decisions going forward.