Conducting a review of a transmission formula rate (Transmission Formula Rate Analysis)

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“Engaging MCR is one of the true investments a utility can make that will really pay off… I’ll tell you there’s a lot more utilities that could use this kind of help. The upfront cost is certainly worth the reward.”

—GM, municipal utility

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Background

A municipal electric utility, which is an existing transmission-owning utility in MISO, wanted to ensure that its transmission-related costs were being properly recorded in the MISO Attachment O cost template and that they were optimizing their annual transmission revenue requirement (“ATRR”), consistent with the tariff.

Solution

MCR conducted a review of the municipal’s Attachment O formula rate, workpapers, and their detailed general ledger accounts, and conducted interviews with key management and staff. MCR worked with the client to modify and sharpen the set of internal accounts that are now mapped to the FERC Uniform System of Accounts and consistent with the RTO tariff. The revised account structure resulted in a clearer and more defendable separation of generation, transmission and distribution assets and expenses, and identified recoverable costs that were being “left on the table.” MCR also worked to integrate improved timekeeping processes consistent with the new account structure.

Results

The results for this municipal client fall into three areas: 1) cleaner numbers for all functional departments, leading to more effective budgeting with transparent actual spending and more targeted priorities in capital planning, 2) a substantial increase in the recovered transmission ATRR, easing pressures on the municipal’s budget, and 3) a more educated staff that now has an in-depth understanding of Attachment O related assets, expenses, and how allocators impact transmission revenue. More effective budgeting and a more educated staff lead to more informed business decisions going forward.