Quantifying economic benefits of joining an RTO as a transmission owner for a municipal utility (Strategic Economic Analysis)
“MCR has an expertise that was otherwise very difficult or even impossible to find. MCR’s expertise has allowed us to move forward with our strategic plan on transmission. … MCR has become more than just a consultant; they’ve become a partner in our operation.”
—General Manager
Background
A municipal utility client was contemplating membership as a transmission owner in a Regional Transmission Organization (RTO) and asked MCR to provide an independent cost-benefit analysis of becoming a transmission owner. But first, the General Manager and Director of Finance wanted to make sure that the municipal was properly recording their costs in conformance with FERC accounting and would comply with the RTO’s new formula transmission rate protocols.
Solution
MCR worked with the client’s transmission and financial personnel to conduct a cost integrity review of the client’s assets and costs with a particular focus on data comprising the formula rate revenue requirement. MCR reviewed the recording of costs, made recommendations in cost reporting to optimize transmission revenue and conducted a client workshop. The workshop discussed the components of the formula rate template and allocators impacting revenues, highlighted the results of the cost integrity review and educated client staff on the requirements of the formula rate protocols.
Results
The results of the formula rate review fed into the cost-benefit analysis of whether to join the RTO as a transmission owner. MCR also worked with the client to define the key analytical assumptions. The analysis results were presented to the board of directors and helped our client define a long-term transmission strategy, which included joining the RTO as a transmission owner.