Full Title: New Uses for an Old Tool: Using Cost of Service Studies to Design Rates in Today’s Electric Utility Service World.
Author(s): Pamela Morgan & Kelly Crandall
Publisher(s): EQ Research
Publication Date: April 1, 2017
Full Text: Download Resource
Description (excerpt):
In short, the regulatory arena is due for a conversation about how and why circumstances are changing, and what actions will create more desirable outcomes. Our suspicion is that the CCOSS as currently practiced will not enlighten that conversation. Rather, fueled by an abundance of data that is still not necessarily complete or useful, CCOSSs may be an electric industry version of the recently coined term “weapon of math destruction:” a tool that is opaque, scalable, and harmful.
But if the CCOSS is not the focus of discussion about rate design, and if it cannot serve as justification for decisions about which households and small businesses should pay what for electricity service, what should stakeholders do? To address this, we offer recommendations on how to think about rate structure and the role of CCOSSs in the future. Old questions are new again: Which rate structures are fair? Which services does and should a public utility provide? Which services should have a price and who should pay? If your only tool is a hammer, every problem looks like a nail. Not every question can be answered with a CCOSS, so regulators and stakeholders need more than just a hammer in their toolbox. With an understanding of the history of cost of service and its expression in a CCOSS, we outline ways that regulators can put the CCOSS tool to good use in order to reach better outcomes over time.