Avoided Costs of Electricity Services

March 19, 2024 | Online :: Central Time

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“This course was relevant and thought provoking. Time very well spent!” Manager, Rates and Finance – BC Hydro

“EUCI training is a great place to bring your Managers, Auditors, Business Process Approvers and even Board Members so they have a basic knowledge to be able to make an educated decision or approval on their employees’ daily operations objectives.” – Energy Market Analyst, City Utilities of Springfield

Utilities use estimates and measurements of avoided costs for a variety of objectives, including system planning and rate design. In the past, marginal generation capacity costs have been set according to the least-cost means by which capacity can be provided. Recent developments challenge this well-anchored approach. Emerging storage technology can supplement, if not supplant, the standard benchmark. The rise of distributed energy resource customers adds another consideration to the estimation and practical use of avoided costs. This course will explore the methods for determining avoided costs and how this information can be used to inform rate design considering these recent developments.

This course will provide conceptual and institutional background, review technical underpinnings and formulae, and discuss how marginal cost is used to inform the design of rates.

Learning Outcomes

• Distinguish between financial and accounting costs, and economic costs
• Examine short- and long-run marginal costs, internal marginal costs, and opportunity costs
• Analyze capacity as a means of satisfying energy and reserve requirements in electricity generation
• Identify the critical role of transmission services in ensuring the efficient and reliable flow of electricity within a network
• Evaluate the significance of distribution services in delivering electricity to end-users
• Examine Customer Demand Management (CDM) as a strategy for optimizing electricity consumption
• Apply specific timeframe and service-based estimation techniques, utilizing historical cost data and forward simulations accounting for uncertainty and cost risks
• Gain proficiency in evaluating technology choices, including both traditional and modern options, renewables, and storage
• Assess Locational Marginal Prices and distinguish short-run marginal costs encompassing energy costs and line losses
• Compare the technical methodology involving load flow studies, congestion costs due to line constraints, and reliability costs based on system operator criteria
• Analyze marginal costs differentiated by service type and area, encompassing load- and customer-related incremental costs, short-run marginal costs involving load-related costs such as line losses and reliability

Tuesday, March 19, 2024 : Central Time

9:00 – 9:45 a.m. :: Cost Concepts and Definitions

• Financial and accounting costs, and economic costs
• Average and marginal costs
  • Incremental costs
  • Avoided costs
• Short- and long-run marginal costs
• Internal marginal costs, and opportunity costs
• Costs differentiated by time and location (LMP)

9:45 – 10:45 a.m. :: Electricity Services, Output and Cost Metrics

• Generation services
• Energy supply
• Operating reserves o capacity—means of satisfying energy and reserve requirements
  • Transmission services
• Transport and interconnection services
  • Distribution services
• Delivery services, including transport and connection services
  • Customer services
• Specialized and tailored services including CDM and site services such as enhanced power quality and water heating

10:45 – 11:00 a.m. :: Morning Break

11:00 a.m. – 12:00 p.m. :: Estimation Methods

• Specific to timeframe and service
• Historically observed costs, changes in costs/changes in services provided
• Forward simulation of demand and supply
  • Accounting for uncertainty and cost risks
  • Dimensions of uncertainty are many
• Contemporary estimation issues:
  • Incorporation of renewables and storage in supply portfolio
  • Electric vehicle market penetration, and evolved load profiles by time and location

12:00 – 1:00 p.m. :: Generation Services

• Technology choices
  • Old-world choice set
  • Modern technologies and choices
• Renewables, storage
  • Energy services
  • Environmental costs including CO2 and other emissions
  • Short-run marginal costs
  • Energy costs
  • Internal production costs; market-based opportunity costs
  • Reliability costs as scarcity rent proxies
• Operating reserve demand curves
  • Opportunity costs
• Example optimization of energy and reserve costs, determined simultaneously through auction processes
  • Start-up and no-load costs
• Commitment problem under conditions of uncertainty
  • Reserves, reliability, and scarcity rents
• Long-run marginal costs
  • Energy costs as forward-looking estimates of energy costs/prices
  • Capacity costs and the relationship to reliability and customer outage costs
  • Capacity costs as long-run cost proxies
• Distinction of capacity costs from capital costs for fuel cost savings
  • Capacity auction markets
  • Bid-based auction markets; example procedures
  • Capital divisibility; attenuation of long-run capacity cost; 15-proxies based on reliability cost metrics (LOLP, LOLH, EUE)

1:00 – 2:00 p.m. :: Lunch Break

2:00 – 3:00 p.m. :: Transmission Services

• Marginal costs differentiated by location (Locational Marginal Prices)
  • Short-run marginal costs
  • Energy costs in the form of line losses
• Technical methodology including load flow studies
  • Congestion costs resulting from line constraints, obtaining locational marginal prices
  • Reliability costs; criteria-driven decisions of system operators
• Long-run marginal costs

• Capacity costs; equivalence to the cost savings associated with lower line losses
  • Problem of capital indivisibility

3:00 – 3:15 p.m. :: Afternoon Break       

3:15 – 4:15 p.m. :: Distribution Services

• Marginal costs differentiated by type of service and area
  • Load- and customer-related incremental costs
  • Short-run marginal costs
• Load-related costs in the form of line losses and reliability
• Long-run marginal costs
  • Load-related capacity costs; equivalence to the cost savings associated with reduced power outages
  • Customer-related delivery costs; connection services

4:15 – 5:00 p.m. :: Customer Services

• Incremental costs of providing services, by service type

Nick Crowley, Senior Economist, Christensen Associates

Nicholas A. Crowley is a Senior Economist with Christensen Associates Energy Consulting. Mr. Crowley has testified performance-based regulation issues on behalf of EPCOR Utilities in Alberta, as well as National Grid (gas) and Eversource (electric) in Massachusetts. Mr. Crowley also recently co-authored (with Dr. Meitzen) an analysis of the impact of performance-based regulation on Canadian utilities in Utilities Policy. He has calculated total factor productivity measures for the electricity and gas sectors and developed indexes for use in performance-based ratemaking.

Mr. Crowley has participated in the development of cost benchmarks for power systems and marginal cost estimation, and the development of avoided cost models. He assists electric utilities in measuring cost of capital and preparing COS studies for rate cases. He has also measured price responses by customers participating in leading demand response programs. Prior to joining CA Energy Consulting, Mr. Crowley served as an economist at the Federal Energy Regulatory Commission, where he assisted with energy industry benchmarking, the incentive regulation of oil pipelines using the Kahn methodology, and the review and evaluation of natural gas pipeline rate cases.

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Michael Clark, VP, Christensen Associates

Mike Clark specializes in antitrust, energy, applied econometrics, data analysis, and microeconomic theory. His antitrust experience includes class action lawsuits regarding price fixing and price discrimination matters; covering industries such as animation, electrical components, wholesale & retail gasoline, and airlines. His energy experience encompasses the measurement and evaluation of residential, commercial, and industrial energy programs; including demand response programs (e.g., critical peak pricing), time-of-use rates, net energy metering, and electric vehicle rates. He has also evaluated multiple utility pilot programs that use residential smart thermostats to facilitate energy conservation and demand response. His expertise incorporates demand modeling, estimating average treatment effects, forecasting, machine learning, and managing large datasets. His research has been published in the Journal of Private Enterprise.

In his free time, Mike enjoys outdoor activities such as rock-climbing, hiking, and camping.

We will be using Microsoft Teams to facilitate your participation in the upcoming event. You do not need to have an existing Teams account in order to participate in the broadcast – the course will play in your browser and you will have the option of using a microphone to speak with the room and ask questions, or type any questions in via the chat window and our on-site representative will relay your question to the instructor.

• Microsoft recommends downloading and installing the Teams app if possible. You may also use the Edge browser or Chrome.
• You will receive a separate email with a unique link to a personalized landing page which will include links to join all sessions of this event.
• If you are using a microphone, please ensure that it is muted until such time as you need to ask a question.
• The remote meeting connection will be open approximately 30 minutes before the start of the course. We encourage you to connect as early as possible in case you experience any unforeseen problems.

Please Note: This event is being conducted entirely online. All attendees will connect and attend from their computer, one connection per purchase. For details please see our FAQ

If you are unable to attend at the scheduled date and time, we make recordings available to all attendees for 7 days after the event

REGISTER NOW FOR THIS EVENT:

Avoided Costs of Electricity Services

March 19, 2024 | Online

Your registration may be transferred to a member of your organization up to 24 hours in advance of the event. Cancellations must be received on or before February 16, 2024 in order to be refunded and will be subject to a US $195.00 processing fee per registrant. No refunds will be made after this date. Cancellations received after this date will create a credit of the tuition (less processing fee) good toward any other EUCI event. This credit will be good for six months from the cancellation date. In the event of non-attendance, all registration fees will be forfeited. In case of conference cancellation, EUCIs liability is limited to refund of the event registration fee only. For more information regarding administrative policies, such as complaints and refunds, please contact our offices at 303-770-8800

Credits

EUCI is accredited by the International Accreditors for Continuing Education and Training (IACET) and offers IACET CEUs for its learning events that comply with the ANSI/IACET Continuing Education and Training Standard. IACET is recognized internationally as a standard development organization and accrediting body that promotes quality of continuing education and training.

EUCI is authorized by IACET to offer 0.7 CEUs for this event

Requirements For Successful Completion Of Program

Participants must sign in/out each day and be in attendance for the entirety of the conference to be eligible for continuing education credit.

Instructional Methods

PowerPoint presentations and case studies will be used in program.

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Upon successful completion of this event, program participants interested in receiving CPE credits will receive a certificate of completion.

Course CPE Credits: 7.5
There is no prerequisite for this Course.
Program field of study: Specialized Knowledge
Program Level: Basic
Delivery Methood: Group-Live
Advanced Preperation: None

EUCI is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its web site: www.nasbaregistry.org

 

Who Should Attend

• Distributed level renewable energy project developers
• Grid level renewable energy project developers
• Utility management
• Rate design and pricing staff
• Technical staff
• Regulators
• RTOs/ISOs
• Consultants
• Equipment manufacturers
• Renewables systems
• Solicitation / Procurement staff
• Resource Planning staff
• Legal Counsel