Customer involvement in rate cases: encouraging utilities to manage power cost risk.(POWER OUTLOOK: ENERGY COSTS AND TRENDS)

Large commercial and industrial (C&I) energy consumers actively seek the lowest power costs by regularly comparing the rates offered by their utility and third-party suppliers. However, C&Is often do not participate in the process that determines utility rates. Participating in rate setting cases is a form of early intervention negotiation that can be a very effective means to keep a lid on volatile power prices.

Public utility commissions (PUC) regulate utility rates so that they reflect the utility's cost of service. This cost of service is determined in large part by the utility's wholesale cost of power, which is determined by the utility's portfolio of power supply and demand-side management (DSM) options available to meet customer load.

Utilities make their portfolio selection decisions through a very public process in which the utility proposes and then locks in its power supply and demand management plan. This plan, known as an integrated resource plan (IRP), must meet the power requirements of the utility's retail customers in a least-cost manner, consistent with reliability and social (i.e., environmental, safety, etc.) objectives.

C&I consumers should actively, aggressively, and consistently participate in the process of selecting the portfolio by commenting on the utility's proposed IRP. PUCs are always sensitive to input from C&Is. Often, PUCs require adjustments to the utility's IRP to reflect customer input.

Because planning decisions can have significant impacts on retail rates, many jurisdictions require utilities to file IRPs at regular intervals. For example, under the Energy Policy Act of 1992, the Western Area Power Administration's 678 wholesale customers, representing millions of end-use customers in 15 western states, are required to submit an IRP every five years. In Idaho and Oregon, utilities must submit an IRP every two years.

C&I consumers are well advised to monitor their utility's schedule for producing an IRP and to participate in the process. Participation can be an effective way to help the utility keep retail rates in check. Thomas Aubee, Pace Global's specialist in distributed generation and critical power systems, comments that "one of the best examples of cooperative resource planning is in the area of demand management, where many C&I customers obtain significant cost reductions year-round."

Managing Risk