Prepared for the Oregon Public Utility Commission (OPUC), “Multi-Year Rate Plans: Purpose and Design Considerations” provides a thoughtful, practical framework to inform the design and implementation of multi-year rate plans (MRPs) in Oregon. Unlike traditional cost of service regulation, where utility revenue requirements and rates are set in a general rate case and remain fixed until the subsequent filing, MRPs refer to a revenue requirement set for more than one year (commonly three to five years), during which adjustments to utility base rates are permitted based on variables such as an inflation index or anticipated cost increases. When well-designed, MRPs offer a multitude of benefits, including a regulatory structure that creates cost-containment incentives for utility investment and operational efficiency, reduced rates or bill savings as a portion of utility cost savings are passed on to consumers, opportunities for increased margins for utilities, reduced capital expenditure bias towards solutions that reduce total costs below allowed revenue amounts, utility innovation, and reduced administration burden through fewer rate cases.
MRPs come in many forms, and their construction is an exercise in selecting from a menu of options and strategically building a framework to achieve a set of identified objectives. Drawing on relevant examples from peer jurisdictions, the report presents a comprehensive taxonomy of MRP types, features, and design elements to consider, in addition to performance-based regulation (PBR) components, for regulated electric and gas utilities. Additionally, the report identifies key characteristics of successful MRPs, establishes minimum design standards to support constructive outcomes and mitigate common challenges, and highlights best practices that serve as foundational elements of a balanced, integrated regulatory framework.
The application of MRPs in Oregon will depend on further exploration by the OPUC in Proceeding AR 676.
Authors:
Dan Cross-Call, Jocelyn Durkay, Matthew McDonnell, Christina Thayer
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