Distribution System Training

The purpose of this module is to present and discuss the principal factors which must be taken into consideration when setting rate schedules for different classes of customer.

After completion of this module, the participant should be able to understand the following concepts, and apply them in day-to-day activities.

• Rate setting based on cost of service regulation
• The objectives of the rate setting process
• The calculation of revenue requirement
• The need for ROI (Return on Investment)
• Components of the rate base
• Allowable components of operating cost
• The load forecast, short term and long term
• Planning new plant installation and its associated capital investment requirements
• The balance between customer and shareholder interests
• Objectives of the cost of service study (cost allocation study)
• Functionalization and classification of costs
• Allocation of demand costs, energy costs and customer service costs between different classes of customer
• Embedded costs (average accounting cost) versus marginal costs
• The use of marginal costs to provide price signals to customers reflected in time of day rates
• The determination of rate schedules to recover revenue requirements
• The characteristics of commonly used rate schedules, including flat rate, flat rate plus fixed charge, declining block rates, inverted block rates, two part tariff with demand charge, seasonal and time of day rates
• Characteristics of interruptible rates