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Energy Distribution

Valuation and Ratemaking

There are a variety of frameworks for assessing different ratemaking approaches for the electricity sector, including capital investments in generation, transmission, and distribution assets, compensating the deployment of distributed technologies, and leveraging opportunities for demand-side management. Investment decisions and implementation options are often reviewed and interpreted by multiple stakeholders, who have different motivations, interests, and obligations. NARUC has supported several initiatives aimed at both maintaining existing strategies and plotting new courses for consistently and transparently examining and determining different resource investment options, in coordination with the NARUC Staff Subcommittee on Rate Design. NARUC supports these efforts through a series activities, webinars, and other resources, including the Regulator's Financial Toolbox series that examines regulatory issues where technology meets bookkeeping. In this 90-minute webinar, speakers will address technology, economic, accounting, and customer considerations related to a variety of valuation and ratemaking topics. For those interested in performance-based regulation (PBR), please visit the PBR State Working Group site.

Quick Links

NARUC-NASEO Distributed Energy Resource Integration and Compensation Initiative

Peer-Sharing Webinars for Public Utility Commissions on Integrated Distribution System Planning, February 27 – June 12, 2023

Demand Flexibility within a Performance-Based Regulatory Framework, February 2023

Considering Interoperability for Electric Vehicle Charging: A Commission Case Study, December 2022

Smart Grid Interoperability Learning Modules

Resources

 

  • DOE: Pumped Storage Hydropower (PSH) Valuation Guidebook – A Cost-Benefit and Decision Analysis Valuation Framework, March 2021
    The objective of this project, funded by the U.S. Department of Energy’s (DOE’s) Water Power Technologies Office (WPTO), was to advance the state of the art in assessing the value of PSH plants and their contributions to the power system. The specific objective was to develop detailed step-by-step valuation guidance that PSH developers, plant owners or operators, and other stakeholders can use to assess the value of existing or potential new PSH plants and their services. This project built from A Valuation Framework for Informing Grid Modernization Decisions (2019).

    PSH Valuation Guidebook
    Valuation Approach
    Intended Audience
    Case Studies
    Project Team
    Report

  • The Value of Resilience for Distributed Energy Resources: An Overview of Current Analytical Practices, April 2019
    Planning for long-duration power interruptions caused by high-impact, low-probability events requires new approaches to power system resilience above and beyond previous hardening efforts. This report examines both regulatory decision-making and non-regulatory cost-benefit analyses to determine if, and how, a value of energy resilience was calculated and applied to proposed investments. Four criteria were used to evaluate the methodologies, including the method’s ease of use, scope of outputs, geographic scalability, and power interruption duration analysis capability. Some of the valuation methodologies examined in the report may be useful in regulatory decision-making; however, none of the methods reviewed met all four criteria for regulator usefulness and usability, and no single method is capable of capturing all regulatory concerns regarding the resilience value of DERs.

    Report

  • The Interface between Utility Regulation and Financial Markets, November 2018
    The purpose of this paper is to review the interfaces between regulators and capital markets to explain the significance of financial market knowledge in public utility regulation. This topic is critical because IOUs finance their investments in utility infrastructure through debt and equity capital obtained from capital/financial markets. This report reviews the significance of financial markets to regulation, describes how key variables (such as cost of capital) are calculated, and describes opportunities for regulators to become educated about relevant financial market activity.

    Report

  • NARUC Distributed Energy Resources Rate Design and Compensation Manual, November 2016
    This Manual is organized to provide regulators with a comprehensive understanding of the question of how does DER affect regulation. It lays out a background on the principles of rate design and compensation, the availability and use of new technologies, an explanation of what is DER, and describes a set of certain types of DER. This is to provide a regulator ample background of not only how DER impacts existing regulatory and utility models, but also provides a foundation for considering how to evolve along with this transition. The Manual then describes a variety of rate design and compensation options that a jurisdiction may consider—the options described herein are not the only ones available to a jurisdiction, but are the most prevalent under discussion today. The Manual goes through them laying out the pros and cons of the option, and providing regulators with information to assist them in their consideration. Lastly, the Manual outlines a few practical ways for it to be used, including examples of determining costs and benefits of DER, questions for a regulator to support an investigation into appropriate rate design and compensation for DER, and how to use some of the details in this Manual to support a decision-making process.

    Report

Activities

  • Webinar: Regulators’ Financial Toolbox: Considerations in Evaluating ADMS/DERMS Investments October 12, 2022
    NARUC presented a Regulators’ Financial Toolbox Webinar on ADMS/DERMS. This 1.5-hour webinar explored the types of financial tools utility regulators can use to support integration of newer electricity system technologies when they benefit the public interest. During the webinar, speakers offered different perspectives and discussed answers to key questions about ADMS/DERMS facing utilities and utility regulators. The webinar and accompanying briefs examined the following subtopics: ADMS/DERMS definitions, deployment strategies, utility perspectives, regulatory considerations, and a state snapshot of the latest developments in Michigan.

    Moderator: Commissioner Joseph Sullivan, Minnesota Public Utilities

    Speakers: Chris Villarreal, Plugged in Strategies on behalf of the U.S. Department of Energy (DOE); Ali Ipakchi, Open Access Technology International, Inc. (OATI); Ted Burhans, Smart Electric Power Alliance (SEPA); and Commissioner Katherine Peretick, Michigan Public Service Commission

    Presentations
    Recording

  • Webinar: Regulators’ Financial Toolbox: Emerging Approaches to Building Electrification in Electric and Gas Utility Efficiency Programs May 26, 2022
    NARUC presented a Regulators’ Financial Toolbox Webinar on Building Electrification. This webinar and accompanying brief examined regulatory issues where technology meets bookkeeping. In this 90-minute webinar, speakers discussed technology, economic, accounting, and customer considerations related to building electrification programs. This webinar explained the current status and trends among some states and utilities of incorporating electrification into their energy efficiency portfolios, how benefits and costs are considered in these cases, and what regulators are asking utilities about with such approaches.

    Moderator: Joan White, Vermont Public Utility Commission

    Speakers: Edward Yim & Dan York, American Council for an Energy-Efficient Economy (ACEEE); Mark Schoenheider, Xcel Energy; Anthony Fryer, Minnesota Department of Commerce

    Presentations
    Recording

  • Webinar: What is Community Solar – Part 1: Benefits for Low- and Moderate-Income Consumers February 13, 2022
    Many states offer community solar or solar gardens as a way to enable people without access to rooftop solar the opportunity to enjoy cost savings benefits by using renewable energy. But do we really know if the costs savings are reaching the targeted customers? This panel reviews prominent community solar programs that have been successfully designed in whole or in part to serve, and provide cost savings to, low-to-moderate income and historically underrepresented customers. This panel will discuss the types of marketing and outreach needed to get targeted customers to participate, and what policies and procedures within the programs are necessary to make sure cost savings benefits are received as advertised. Join us to learn how community solar programs should be designed to reach these communities, whether workforce development programs paired with such programs are bringing jobs to the targeted communities, and how developers and utilities can effectively market and attract targeted customers to participate.

    Moderator: Hon. Eric Blank, Colorado

    Speakers: Richard Caperton, Arcadia; Chris Nichols, Groundswell; Ted Trabue, DC Sustainable Energy Utility

    Presentations
    Recording

  • Webinar: What is Community Solar – Part 2: Cost Impacts to Participants and Non-Participants February 13, 2022
    This panel reports on the costs to participants and non-participants created by a community solar program designed specifically for, or with a carve out for, serving the low-to-moderate and historically underrepresented customers. It seems that every state has different policies and procedures when it comes to the regulatory treatment of a community solar program, and this panel will help you identify which policies and rate designs are right for your state. The panelists will answer questions such as, what factors should be considered when designing the tariffs for these programs? Should the amount of the solar credit be set at the full retail rate, the energy only rate or something entirely different? and Should community solar program costs be included in rate base or be carved out such that only the participants pay for the program and how would that regulatory treatment impact participants’ savings? Creative alternative rate design proposals will be highlighted.

    Moderator: Jamie Barber, Director Energy Efficiency and Renewable Energy Unit, Georgia Public Service Commission

    Speakers: Speakers: Gabriel Chan, ; University of Minnesota; Matt McDonnell, Strategen Consulting; Katie Ottenweller, Vote Solar

    Presentations
    Recording

  • Webinar: Regulators' Financial Toolbox: Resilience Technologies August 25, 2021
    The Regulator’s Financial Toolbox series examines regulatory issues where technology meets bookkeeping. In this 90 minute webinar, speakers will address technology, economic, and accounting considerations for resilience technologies. This webinar explored current resilience technologies, utilities benefits, and regulatory considerations such as useful life, inclusion in rate base, and other decision-making information. Moderator: Commissioner Carrie Zalewski, Illinois Commerce Commission

    Speakers: Jennifer Kallay, Synapse Energy; Dr. Robert "Bobby" Jeffers, Sandia National Labs; Leuwam Tesfai, California Public Utility Commission; Julio Romero Aguero, Quanta Technology Speaker biographies and presentations

    Speaker biographies and presentations
    Recording
    Summary brief

  • Webinar: Regulator's Financial Toolbox: Communications Networks August 10, 2021
    The Regulators’ Financial Toolbox series is where technology meets bookkeeping. On the Communications Networks Toolbox webinar, regulators explored multiple perspectives on how communications networks work; what is unique about distribution system and grid edge communications vis a vis the distribution system and bulk power system communications; what their benefits are to the electricity system; and considerations specifically for regulators. Like many things, the perfect communications solution will be up to the jurisdiction, but this webinar provided a framework for making decisions and help regulators be prepared to engage with utilities on this thorny issue. Moderator: Gladys Brown-Dutrieuille, Pennsylvania PUC

    Speakers: Andrew Bordine (Anterix); Paul De Martini, Newport Consulting Group; Wendell Reimer, Xcel Energy; Jonathan Schrag, Taconic Advisory Services, LLC

    Speaker biographies and presentations
    Recording

  • Webinar: Regulator’s Financial Toolbox: Advanced Metering Infrastructure March 2, 2021
    Regulator’s Financial Toolbox Series examines regulatory issues where technology meets bookkeeping. In this 90-minute webinar, speakers examined technology, uses, costs and benefits, and what are the future opportunities for advanced metering infrastructure (AMI). This webinar will explain what AMI is and does, what are examples of the benefits of AMI, its role in enabling a more resilient system, what are regulatory considerations for AMI, and what is the future for AMI.

    Moderator: Commissioner Talina Mathews, Kentucky Public Service Commission

    Speakers: Dennis Reynolds, Florida Power & Light; Michael Jarro, Florida Power & Light; Jess Melanson, Utilidata; Joshua Ryor, Connecticut PURA; Chris Villarreal, Plugged In Strategies

    Recording
    Summary brief
    Presentation

  • Webinar: Regulators' Financial Toolbox: Cloud Computing, September 24, 2020
    The Regulator’s Financial Toolbox series examines regulatory issues where technology meets bookkeeping. In this 90 minute webinar, speakers will address technology, economic, and accounting considerations for cloud computing. This webinar examined what cloud computing is (and is not), and will address regulatory considerations for the utility leveraging cloud computing.

    Recording
    Summary brief
    Presentation

  • Webinar: Determining Utility System Value of Demand Flexibility from Grid-Interactive Efficient Buildings, April 6, 2020
    This webinar featured a synopsis of a new State and Local Energy Efficiency Action Network (SEE Action) paper. The report focuses on ways current methods and practices that establish the value of distributed energy resource (DER) investments to electric utility systems can be enhanced. These enhancements would improve analyses of the value of demand flexibility in grid-interactive efficient buildings (GEBs) that can provide grid services. The report introduces key valuation concepts that are applicable to demand flexibility and links to other documents that describe these concepts and their implementation in more detail.

    Presentations
    Report

Partners

Funder: NARUC is grateful to the U.S. Department of Energy, Office of Electricity and Grid Deployment Office, which enables most of the resources and activities described on this webpage.

For More Information

NARUC staff experts who support these activities: