Utility Regulation

Synapse supports our clients’ participation in electric utility rate cases, certificate of public convenience and necessity (CPCN) cases, integrated resource planning dockets, and other proceedings that review and assess the costs, practices, and decision-making of regulated utilities. This work includes investigating revenue requirement and rate allocation issues, alternative ratemaking mechanisms and policies, whether regulated utility investments are “used and useful” and prudently incurred, and the operation and design of retail electricity markets. We provide support regarding these matters in both litigation and rulemakings. Synapse also examines issues related to gas utility cost allocation and rate design.

Rate Cases

Synapse supports clients’ participation in general or “base rate” cases by analyzing the proposed revenues to be recovered from customers in utility tariffs, evaluating allocation of costs among groups of customers, and assessing design of the rates themselves. Synapse frequently provides analysis and testimony regarding:

  • Whether costs associated with power resources are used and useful in providing service to customers, and whether they were prudently incurred
  • Cost-of-service studies, including allocations of costs to customer classes and allocation of costs to rates for unbundled services
  • Revenue requirement issues
  • Rate design issues, including design of real time pricing rates
  • Rate adjustments, typically done through a “rider” or “fuel clause” added to base rates

Alternative Ratemaking

Synapse assesses alternative ratemaking mechanisms to ensure that they encourage utilities to seek operational efficiencies and meet public policy goals without inappropriately shifting risk to consumers. We provide policy guidance regarding alternative ratemaking mechanisms such as Performance-Based Ratemaking (PBR) and decoupling, and assist in the development of appropriate utility performance incentives. Our work in this area includes:

  • Evaluating alternative ratemaking mechanisms in ratemaking proceedings and assessing whether they are, or are not, appropriate
  • Ensuring that regulated utilities are provided with meaningful financial incentives to reduce costs and increase efficiency
  • Assessing and designing performance metrics and incentives to encourage utilities to provide safe and reliable delivery of service, maintain (or improve) responsive customer service, address the needs of low-income customers, and adequately support innovative resources such as energy efficiency and distributed generation
  • Providing technical and policy support regarding revenue decoupling mechanisms to ensure that they sufficiently remove the financial disincentives that utilities face regarding demand-side resources, while protecting consumers

Assessment of Existing and Proposed Resources

Synapse frequently investigates the appropriateness of proposed resource acquisitions in prior approval settings, such as certificate of public convenience and necessity (CPCN) cases, in rate cases where new resources are being considered for inclusion in rates, and in resource planning contexts. For assessments in rate cases, Synapse examines whether regulated utility costs are “prudent” and “used and useful,” consistent with traditional ratemaking principles. In preapproval and planning contexts, Synapse examines projections of long-range costs and benefits and risks of proposed resources, emphasizing consideration of a full range of alternatives. Our work in this area evaluates:

  • Decisions concerning the need for new generating facilities and whether to undertake major equipment upgrades or repairs at operating power plants
  • Power plant operations and outages and resultant replacement power costs
  • Utility energy contracts and purchases
  • Transmission system maintenance and investments
  • Power plant acquisitions
  • Utility decisions whether to seek damages from vendors for equipment and component failures
  • Whether proposed power plants or utility acquisitions would be used and useful
  • Proposals to transfer power plants or gas production assets from unregulated to regulated affiliates or vice versa
  • Fuel supply contracts
  • Decisions regarding capacity mix, including relative quantities of firm transportation service, storage, and seasonal capacity

Retail Markets

Synapse evaluates the operation and design of proposed and existing retail electricity markets, arrangements under which retail customers are allowed to purchase competitive generation service from the provider of their choice, and procedures for incumbent utilities to provide regulated distribution service as well as standard offer or default service. Our work in this area includes:

  • Examining the treatment of stranded costs
  • Assessing the design of unbundled services for supply (particularly standard offer or default supply service), distribution, metering and billing, and the establishment of rates for each of those unbundled services
  • Evaluating the methods by which supply is procured for standard offer or default service

Learn more about how Synapse supports clients on power sector transformation and distribution systems planning topics.