Cost Allocation and Rates
EES Consulting’s qualifications are very strong in the areas of developing retail and wholesale tariffs. This particular area of expertise is one of the areas of specialty around which EES Consulting was formed. Our approach to each project begins with the assumption that most utility problems are not simply an engineering problem or a financial/economic problem. Rather, they are complex problems, best solved by a team composed of experts in the fields of finance/rates, engineering, customer service, economics and planning. This technique of viewing a situation from several aspects has a great deal of merit. Each expert provides a unique viewpoint and perspective to the problem and the solution. Furthermore, individuals provide input from their areas of expertise and do not attempt to over-reach their professional bounds to provide solutions.
Rate design encompasses a multitude of considerations that often are somewhat removed from fundamental unit cost determinations. Issues such as appropriate price signals, potential impact of rate adjustments, ability to pay, intra-class subsidies etc., will ultimately influence the final approved rate structure. EES Consulting assists clients in the process of developing competitive rate designs in a restructured environment by considering fundamental economic and pricing theories. For example, economic theory dictates that, in a competitive market, the price of a commodity must roughly equal its cost, if equity among customers is to be maintained. This concept of price equals cost guides EES Consulting in establishing fair and equitable rates.
Alternative rate designs considered by EES Consulting include flat energy charges, incremental and decremental block energy charges, seasonal energy charges, time-of-use energy charges, customer charges (versus minimum charges) and demand charges for customer classes with new meters capable of providing hourly load data. Each of these rate design options are considered while examining the current rate design and the policy objectives of the utility. EES Consulting is also experienced in developing fair and equitable cost allocation methods for shared or overhead costs across business units.
