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Rate & Regulatory Analysis Projects
Following are descriptions of a selection of projects that demonstrate our capabilities in the area of Rates and Regulatory Analysis.
Click on a Project below:
Competitive Market-Based
Rates, Market Power Analysis, and Tariffs for an Independent
Storage Project
Totem Gas Storage Company, LLC retained McFadden Consulting
to assist it in obtaining a certificate of public convenience
and necessity authorizing it to develop, construct, operate,
and maintain underground natural gas storage facilities
using the Totem Field located in Adams County, Colorado.
McFadden Consulting developed a unique, market-based rate
structure, which was approved by the Commission. The
market-based rates were the first competitive rates approved
by the Public Utilities Commission of Colorado for a natural
gas company in the state. Mr. McFadden developed Totem’s
tariff that contained the company’s rates, terms and conditions
for service and was instrumental in facilitating a settlement
agreement with the only party opposing the CPCN. As
part of this engagement, McFadden Consulting conducted a
Market Power Analysis that assessed the potential market
power of the gas storage project. Mr. McFadden testified
at a hearing on these matters before the Commission.
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Public
Service Company of New Hampshire Performance Review, Rate
Case Analysis and Restructuring Proposal
McFadden Consulting, as part of a team led by The Liberty
Consulting Group, conducted a financial and management audit
of Public Service Company of New Hampshire on behalf of
the Public Utilities Commission of New Hampshire.
A significant portion of this project focused on PSNH’s
rate case. The rate case was the first filed by PSNH
since emerging from bankruptcy seven years earlier.
In addition, the rate case was the precursor to the unbundling
of rates that was expected to occur resulting from the New
Hampshire Legislatures passage of RSA 674-F which requires
each electric utility to file a restructuring plan.
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Retail
Pricing for Russian Electric Power Sector
Acted as the project manager for the retail pricing portion
of the privatization project for the electric power sector
in Russia. The objective of this assignment, which was conducted
on behalf of U.S. AID in concert with Ministry of Fuels
and Energy of the Russian Government, and RAO ESS Rossii,
the Russian privatized electric power
sector joint-stock company, was to develop the framework
for retail electric pricing which considers the county's
social, political and economic needs and realities. This
project was part of the overall privatization of the electric
power sector of Russia, which is restructuring the entire
industry to increase its economic efficiency by injecting
elements of competition and diversity.
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Review
of Questar Gas Company’s Cost of Service and Rate Design
McFadden Consulting was retained by the Utah Committee of
Consumer Services to review Questar Gas Company cost of
service and rate design issues in connection with its request
for a revenue increase of $22.2 million. A significant
issues was the recovery of $7.0 million revenue requirements
associated with the company’s construction of a CO 2
extraction facility that the Commission had previously ruled
should be considered in a general rate case filing.
Mr. McFadden testified at hearings on this matter.
The Commission approved a settlement agreement, which permitted
recovery of a portion of the costs associated with the plant.
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Review
of Cost Allocation Rules between Regulated and Unregulated
Services
The Colorado Business Alliance retained McFadden Consulting
to review rules proposed by the Public Utilities Commission
of Colorado relating to cost allocation between regulated
and unregulated services. The rules prescribed cost
allocation methodologies for the segregation of investments,
revenues, and expenses for electric and gas utilities that
engage in both regulated and unregulated services to ensure
that the unregulated operations are not subsidized by regulated
ones. Mr. McFadden testified at a hearing before the
Colorado Commission on these matters.
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Review
of Transmission Tariff, Cost of Service, and Rate Design
for Restructured California Power Markets
McFadden Consulting, in conjunction with MarketPower,
Inc., was retained by Southern California Gas Company to
review the transmission cost of service and rate design
proposals of Southern California Edison Company, Pacific
Gas and Electric Company, and San Diego Gas and Electric
Company. The proposals, filed with the Federal Energy
Regulatory Commission and collectively known as the WEPEX
filings, are part of the comprehensive restructuring of
the electric utility industry in California. The major
issue is the proposal to charge one transmission access
fee to all end-use customers for both regional and local
transmission service. The alternative promulgated
by SoCalGas is to require generators to pay for utilization
of the regional transmission system designed to import power
into the state.
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Consideration
of Various Gas Price Hedging Proposals
As part of an integrated resource planning proceeding, McFadden
Consulting assisted the Utah Committee of Consumer Services
in considering various natural gas price-hedging alternatives
designed to stabilize gas prices to consumers. In
response to the volatile natural gas prices experienced
in 2000 and 2001, the company considered various alternatives
for stabilizing prices, including financial instruments
and longer-term pricing provision in gas supply contracts.
A significant factor in Questar’s pricing decisions
is that more than 50% of Questar gas supplies are obtained
from company-owned production, which is priced on a cost
of service basis. A settlement agreement was reached
that would permit recovery of various price stabilization
mechanisms through gas cost re covery
mechanisms.
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Review
of Competing Pipeline Alternatives
McFadden Consulting was retained by the Colorado Office
of Consumer Counsel to review a proposed expansion of transmission
facilities by a local distribution company. A significant
issue in the expansion was a competing pipeline proposed
by an interstate pipeline company. McFadden Consulting
identified a concern related to potential bypass that might
adversely affect the LDC and its customers. The LDC
expansion was approved with several contingencies and the
facilities have been constructed.
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Analysis
of Interstate Gas Pipeline Rate Case Filing
Citizens Utilities Company retained Mr. McFadden to review
and anal yze
Colorado Interstate Gas Company’s rate case filing in Docket
No. RP96-190. CIG’s proposed an increase of approxi mately
$30 million or 19.5 percent. In addition, it proposed
restructuring several of its various transportation, storage,
and no-notice services. These changes raised the increase
to Citizens significantly higher than 19.5 percent.
The analysis focused on cost allocation and rate design
issues. Mr. McFadden recommended a sculpted MDQ to
mitigate the increase on Citizens. CIG agreed to the
sculpted MDQ in a settlement agreement that was approved
by the FERC.
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Hedging
Alternatives and Natural Gas Price Stabilization Mechanisms
The Colorado Office of Consumer Counsel retained McFadden
Consulting to assist it in a proceeding established by the
Public Utilities Commission of Colorado to determine whether
price stability is an appropriate goal for local distribution
companies in their gas procurement practices and to examine
options for achieving more stable gas prices. Mr.
McFadden prepared a paper on various hedging alternatives
and price stabilization mechanisms and assisted in the preparing
the OCC’s comments in response to the Commission order.
Comments of other parties have been reviewed and various
options for stabilizing prices have been discussed with
other parties to the proceeding. The Commission held
a roundtable discussion on this matter at which Mr. McFadden
testified on behalf of the OCC.
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Implementation of Gas
Distribution Restructuring in Georgia
The Georgia Public Service Commission retained McFadden
Consulting in connection with Atlanta Gas Light Company’s
filing under the Natural Gas Competition and Deregulation
Act passed by the Georgia legislature. The act provided
for deregulation of components of the gas distribution business
in Georgia. Mr. McFadden provided testimony before
the Commission addressing several issues related to the
impact of the Company’s filing on rates and adjustment clauses.
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Electric Revenue Requirements,
Cost of Service and Rate Design
McFadden Consulting prepared a revenue requirements, cost
of service, and rate design analysis for the City of Fort
Morgan, Colorado electric department. A key issue was the
impact restructuring of the electric utility industry will
have on the electric department’s operations, costs, and
rates. The analysis considered the possibility of wholesale
and retail wheeling being implemented in the foreseeable
future, and incorporated flexible rate designs intended
to allow the City to react quickly to possible changes in
the electric utility industry.
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Market-Based Pricing
Guidebook
McFadden Consulting, in conjunction with MarketPower, Inc.,
is currently preparing a pricing guidebook to assist utility
managers in pricing products and services in a competitive
marketplace. The Market-Based Pricing Guidebook is being
developed for more than 3,000 electric utilities across
the United States for the National Rural Electric Cooperative
Association. It will provide practical approaches and methods
as well as the decision analysis process for U.S. utilities
to design and implement open market pricing.
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Review of Price Volatility
and Gas Cost Adjustment Mechanisms
The Colorado Office of Consumer Counsel retained McFadden
Consulting to assist it in a proceeding established by the
Public Utilities Commission of Colorado to determine whether
price stability is an appropriate goal for local distribution
companies in their gas procurement practices and to examine
options for achieving more stable gas prices. Mr.
McFadden prepared a paper on various hedging alternatives
and price stabilization mechanisms and assisted in the preparing
the OCC’s comments in response to the Commission order.
Comments of other parties have been reviewed and various
options for stabilizing prices have been discussed with
other parties to the proceeding. The Commission held
a roundtable discussion on this matter at which Mr. McFadden
testified on behalf of the OCC.
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Dispute Regarding Physical Bypass
McFadden Consulting assisted the City of Fort Morgan, Colorado
in a dispute regarding the construction of a gas pipeline
to the City’s two largest gas transportation customers.
In response to an increase in gas transportation rates,
Excel Corporation and Leprino Foods Corporation entered
into an agreement with KN Wattenburg Transmission Limited
Liability Company (KNW), a subsidiary of Kinder Morgan,
Inc., formerly known as KN Energy, Inc., in which KNW agreed
to construct a line from Colorado Interstate Gas Company’s
transmission facilities to Excel and Leprino plants located
in Fort Morgan. KNW originally applied for authorization
to construct the facilities with the Federal Energy Regulatory
Commission (FERC). The City opposed KNW in their application
to the FERC. The FERC initially approved the application,
and KNW constructed the facilities and is currently providing
service to Excel and Leprino. The City appealed the
FERC’s decision to the U. S. Court of Appeals for the 10th
Circuit, which remanded it back to the FERC after agreeing
with the City’s argument that the facilities were not subject
to FERC jurisdiction because qualified as “Hinshaw” exempt
facilities under the Natural Gas Act. The FERC on
remand ordered that KNW’s facilities qualified under the
“Hinshaw” exemption and therefore were not subject to its
jurisdiction. KNW then filed an application with the
Public Utilities Commission of Colorado seeking a certificate
to construct the facilities, which the City has opposed.
A hearing was held in this matter in June 2001, at which
Mr. McFadden testified on the City’s behalf.
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Review of Questar Gas
Company Response to Declining BTU Content of Gas Supplies
McFadden Consulting was retained by the Utah Committee
of Consumer Services to review Questar Gas Company’s response
to the declining BTU content of gas supplies in its service
territory. As part of its response to the problem,
Questar constructed a CO 2 extraction plant costing
approximately $20 million, with a revenue requirement impact
of approximately $7.5 million and requested that the costs
be included in their gas cost recovery mechanism.
The coal seam gas processed by the plant was not purchased
by Questar, but rather was contractually transported by
Questar Pipeline to markets outside of Utah. Mr. McFadden
testified on behalf of the Committee at a hearing held in
June 1999. The Commission decided the costs associated
with the CO 2 plant should not be recovered through
the Company’s gas cost adjustment, but that they could be
considered in a general rate case filing.
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Transmission Wheeling
Rate and Tariffs Pursuant to FERC Order 888
Mr. McFadden provided strategic oversight and technical
assistance for the development of a wheeling rate and the
preparation of a transmission wheeling tariff filed with
the Federal Energy Regulatory Commission on behalf of Intermountain
Rural Electric Association, in conjunction with Applied
Energy Concepts. A cost of service model based upon
the methodology for point-to-point transmission service
as well as network transmission service was developed to
analyze various scenarios. In addition, terms and
conditions for the two types of transmission service were
also reviewed. Rates were developed based upon Order
888 and cost of service calculations for the system.
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Acquisition of Gathering
and Transmission Facilities and Development of Gathering
and Transmission Rates
Mr. McFadden was retained by UMC Petroleum Corporation,
now known as Ocean Energy to provide rate and regulatory
assistance in its acquisition of certain gathering and transmission
facilities located in Montana from Northern Natural Gas
Company. The facilities were purchased by Havre Pipeline
Company, LLC, which is a joint venture with UMC and other
producers in the Bearpaw area. Historically, the facilities
were included in Northern’s integrated pipeline system and,
therefore, subject to the jurisdiction of the Federal Energy
Regulatory Commission. The main scope of the project
was to develop rates for both the gathering system and the
transmission system that would be appropriate under either
FERC or Montana Public Service Commission regulations.
The rates developed by Mr. McFadden were ultimately filed
with and accepted by the Montana Commission. Assistance
was also provided in structuring the acquisition to insure
the most favorable regulatory treatment for ratemaking purposes.
Mr. McFadden also assisted Havre in preparing their annual
report to the Montana Commission for 1996, 1997, and 1998.
Most recently, he provided assistance in developing new
rates that were filed in with the Montana Commission in
the fall of 1998. Mr. McFadden filed direct testimony
in support of the company’s filing. A hearing was
scheduled for mid-June 1999. However, the Company
decided to withdraw its application.
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Analysis of Cost of Service
and Rate Design
McFadden Consulting assisted a group of transportation intervenors
in a natural gas distribution company’s rate case. The cost
of service and rate design filing was the first rate design
filing proceeding for the company since the Federal Energy
Regulatory Commission completed implementation of its Order
636. Thus, the case had far-reaching cost of service and
rate design implications. The areas reviewed include cost
allocation methodologies, unbundling, balancing services,
allocation of storage costs, combining transmission and
distribution systems, combining rate areas, treatment of
gathering services, and interdepartmental transportation
rates.
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Review Financial Performance
and Determine Appropriate Rate Levels
We conducted a revenue requirements, cost of service, and
rate design analysis for the City of Fort Morgan, Colorado’s
gas department. New rates designed to improve the gas department’s
financial results were implemented. A more accurate gas
cost tracking mechanism was also implemented. In addition,
the gas department’s extension policy was reviewed and a
construction allowance based on its gross imbedded plant
was developed.
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636 South Monroe Way, Suite 101
Denver, Colorado 80209-3521
Phone: 303-733-0999
Fax: 303-733-0909
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