Conducting a review of the transmission formula rate and developing a transmission revenue forecast (Strategic Economic Analysis)
“I assumed the person before me knew what they were doing, so I was hesitant to change the way they were doing things. MCR opened my mind and gave me the confidence to change the way things are done.”
—Manager of Accounting & Finance, municipal utility
Background
A transmission-owning municipal electric utility in MISO was significantly upgrading its existing transmission assets while moving from point-to-point service to network integrated transmission service (“NITS”). Because of this, the municipal wanted to ensure the upgraded assets obtained full revenue recovery in the MISO Attachment O formula rate to help offset their upcoming NITS costs.
Solution
MCR conducted a three-stage process to ensure the client reached full revenue recovery for its transmission-related assets and expenses. First, MCR conducted a review of the municipal’s Attachment O formula rate and work papers and its detailed general ledger accounts, supplemented with interviews of key client personnel. This step ensured the client was recording its costs consistent with the FERC Uniform System of Accounts and the MISO tariff. Second, MCR conducted a forecast of their annual transmission revenue requirement (“ATRR”) with and without the upgraded transmission assets to determine the ATRR impacts of recommended changes to the recording of costs. Third, MCR worked closely with the client to develop required documentation and “the story” to ensure the upgraded assets would qualify as networked assets under FERC’s 7-factor test. Along the way and also in a workshop setting, MCR provided education regarding the proper recording of costs and use of allocators related to the Attachment O.
Results
The Attachment O Review resulted in changes to various recording of costs and modified timekeeping processes to ensure costs were recorded consistent with FERC accounting. The client achieved a substantial increase in transmission revenue by placing its existing transmission-related costs in the proper categories and ensuring field personnel were charging the proper accounts. MCR’s forecasted ATRR with the upgraded assets provided an initial blueprint for a future formula rate submittal and was used by the client as an input to the municipal budget. After the client and MCR developed the required 7-factor test documentation, MISO performed a power flow study and accepted the upgraded assets as being networked assets eligible for full transmission revenue recovery in the Attachment O. The Attachment O Review resulted in a more educated and confident staff that now has a more 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.