Briefing on Cost of Service Study B i fi C t f S i St d - - PowerPoint PPT Presentation

▶
briefing on cost of service study b i fi c t f s i st d
SMART_READER_LITE
LIVE PREVIEW

Briefing on Cost of Service Study B i fi C t f S i St d - - PowerPoint PPT Presentation

Nov 17, 2022 564 likes •760 views

Briefing on Cost of Service Study B i fi C t f S i St d Michael Epstein Director of Financial Planning Stakeholder Meeting October 14, 2010 Agenda ge da Where we are Timeline Timeline GMC history Guiding Principles Guiding

slide-1
SLIDE 1

B i fi C t f S i St d Briefing on Cost of Service Study

Michael Epstein Director of Financial Planning Stakeholder Meeting October 14, 2010

slide-2
SLIDE 2

Agenda ge da

Where we are Timeline Timeline GMC history Guiding Principles Guiding Principles Activity Based Costing Overview Functionalization Cost Allocation of 2010 Revenue Requirement Comparison to other ISO/RTOs Potential Billing Determinants Key Calendar Dates

Slide 2

Stakeholder Feedback and Discussion

slide-3
SLIDE 3

Timeline for GMC 2012 Rate Structure

You are here

Overview Meeting

  • n cost of

service Request Board approval

  • f GMC

Meeting on cost of service study Meetings

  • n 2012

GMC Meeting

  • n 2012

GMC Meeting

  • n 2012

GMC

  • f 2012

GMC Process April 21, se ce study Buckets & allocations Oct 14

  • f GMC

structure Spring 2011 Billing determinants Nov 18, 2010 2011 as needed Dec 13, 2010 Jan 21, 2011 2010 Oct 14, 2010

Opportunities for Stakeholder Input

Slide 3

slide-4
SLIDE 4

Timeline for 2012 GMC e e o G C

Cost of Service Study

Current Define services (functionalization) Allocate costs (cost allocation) ( ) Next steps Billing determinants (classification) Bill impact analysis

Subsequent steps

Fi l t d t t Final rates and structure Revenue requirement cap Draft tariff

Slide 4

Board approval and FERC filing

slide-5
SLIDE 5

GMC History

Basic structure is the same as 2004 with limited changes

Added Market Usage Forward Energy (MUFE) Changed some billing determinants Changes for convergence bidding Changes for convergence bidding

Drivers for change

Corporate reorganizations Corporate reorganizations New office building debt Retirement of debt for new market in 2013 I l t ti f k t i 2009 Implementation of new market in 2009 Requests for clarity, predictability & simplicity from customers Commitment to do cost of service study in 2010 MUFE settlement

Slide 5

slide-6
SLIDE 6

Guiding Principles g p

  • Cost causation – properly allocate to category and charged to those

who use or benefit who use or benefit

  • Focus on use of services, not behavior – design fee structure to recover

ISO’s costs, charges that influence behavior should be in market structure structure

  • Transparency – costs and determinants highly visible to customers
  • Predictability – in advance Scheduling Coordinators (SCs) are able to

y g ( ) determine what costs will be

  • Forecastability – SC’s & ISO’s forecasts of determinants are more

accurate resulting in fewer quarterly changes accurate resulting in fewer quarterly changes

  • Flexibility – accommodate future market enhancements without new

buckets or charges

Slide 6

  • Simplicity – reduce current level of determinants and codes
slide-7
SLIDE 7

Recent Issues With Existing GMC ece t ssues t st g G C

  • Implementation of convergence bidding – required new category and

2 new charge codes 2 new charge codes

  • MUFE – original netting was challenged and mitigation implemented

prior to moving to gross and new review of Inter-SC Trades (ISTs)

  • Significant changes in rates – lower export volumes cause rate

increases which leads to reduction in exports – vicious cycle

  • Current design attempts to manage behavior – charge for

g p g g imbalances – difficult to forecast & uplift charges through market provide appropriate incentive

  • Congestion Revenue Rights (CRR) recovery – none currently

Congestion Revenue Rights (CRR) recovery – none currently

  • Settlements, Metering & Client Relations (SMCR) under recovery –

inappropriate way to recover indirect costs not related to cost of handling SCIDs

Slide 7

handling SCIDs

slide-8
SLIDE 8

Activity Based Costing (ABC) overview ct ty ased Cost g ( C) o e e

  • Started in 2009
  • 10 hi h l

l

  • 10 high level

activities

  • 125 sub (level 2)

activities

  • Tracking time for

some level 2 activities now

  • Level 2 mapping
  • ngoing through
  • ngoing through

2011

  • Time tracking on

le el 2 as mapped

Slide 8

level 2 as mapped

slide-9
SLIDE 9

Direct Level 1 Operating Activities ect e e Ope at g ct t es

  • Develop infrastructure – transmission planning
  • Develop markets – design & implement wholesale

market

  • Manage market & reliability data & modeling - full

network model M k t t & ti h d li &

  • Manage market setup & execution – scheduling &
  • utages
  • Operate real time market & grid

system operations

  • Operate real time market & grid – system operations
  • Manage operations support & settlements – metering,

settlements and market quality

Slide 9

settlements and market quality

slide-10
SLIDE 10

Indirect Level 1 Support Activities d ect e e Suppo t ct t es

  • Manage human capabilities – human resources
  • Plan & manage business – CEO, planning & governance
  • Support business services – IT, facilities, compliance &

pp , , p legal

  • Support customers & stakeholders – client & external

relations

Slide 10

slide-11
SLIDE 11

ABC Functionalization Leads To Services C u ct o a at o eads

  • Se

ces

Existing structure – little direct relationships Using products not practical – too many elements Using customers – similarities across customer classes New ISO market – common practice for all customers

Customers Market systems Energy flows

plus CRR management leads to three cost categories

Customers submit bids Market systems award schedules Energy flows

p us C a age e t eads to t ee cost catego es

Market Services System Operations CRR Services

Slide 11

p

slide-12
SLIDE 12

Mapping Activities & Software To Service Categories pp g g

Mapped activities and software to four categories:

Market services System Operations CRR services CRR services Indirect costs – no distinguishable attribute to either specific category

Used following rules:

100% or 0% if entirely in one category or not 50% / 50% if supports both market services & system operations

  • r its split after 10% went to CRRs thus 45% / 45%
  • r its split after 10% went to CRRs thus 45% / 45%

80% / 20% if partially in one activity or the other

Slide 12

slide-13
SLIDE 13

Cost Allocation of 2010 Revenue Requirement Cost

  • cat o
  • 0 0

e e ue equ e e t

Selected 2010 as it is current similar to 2009 & 2011 and Selected 2010 as it is current, similar to 2009 & 2011 and

can be used to measure effects of proposal

Revenue Requirement $ in thousands e e ue equ e e t $ t ousa ds O&M $162,695 Debt service & out of pocket capital 76,000 Oth i (8 100) Other income (8,100) Operating reserve credit (35,500) Total revenue requirement $195,095

Slide 13

slide-14
SLIDE 14

2010 O&M Costs 0 0 O& Costs

Broken down into two types: activity related & non-activity related

Mapped non-activity to indirect bucket

Activity related types made up of

di t ti t d t l l 2 ti iti d direct operating costs mapped to level 2 activities and support costs mapped at level 1 to indirect bucket

Used reported time from 1st quarter of 2010 to get % of costs

p q g centers time in the 10 level 1 activities

For time in the 6 direct operating categories - interviewed

managers and directors to get percentage breakdown of level 2 time

Mapped costs to buckets using %’s developed previously

Slide 14

Mapped costs to buckets using %’s developed previously

slide-15
SLIDE 15

Other Component s of 2010 Revenue Requirement Other Component s of 2010 Revenue Requirement

Debt service & out of pocket capital

Mapped software and other capital costs to buckets using %s developed previously

Other revenue & operating reserve credit

p g

Mapped to appropriate buckets

Results of allocation:

Revenue Requirement 2010 Budget Market Services System Operations CRR Services $ i th d $195 095 $52 756 $134 883 $7 456 $ in thousands $195,095 $52,756 $134,883 $7,456 % of budget 100% 27% 69% 4%

Slide 15

slide-16
SLIDE 16

Comparison to other ISOs Co pa so to ot e SOs

ISO/RTOs with a nodal market

NYISO – 3 major buckets added new one for virtual bids ISO NE – 3 buckets PJM – 3 major buckets, 2 minor ones j , MISO – 3 buckets

Cal ISO – 7 buckets and 17 charge types All have generic market services & system operations 3 have bucket related to congestion All allocate indirect costs based on direct costs (salaries)

Slide 16

slide-17
SLIDE 17

Potential Billing Determinants

  • te t a

g ete a ts

Allocation to demand -

load & exports or

Allocation to supply and demand –

generation & imports load & exports

Transaction fees Transaction fees

Bid fee Inter -SC trade fee

Administrative charges

Monthly SCID charge

Slide 17

slide-18
SLIDE 18

Key Calendar Dates & Next Steps ey Ca e da ates & e t Steps

  • Stakeholder comments on discussion paper due

Oct 21 p p

  • Discussion paper on billing determinants

Nov 11

  • Stakeholder meeting on billing determinants

Nov 18

  • Stakeholder comments on discussion paper due

Nov 29

  • Stakeholder meeting

Dec 13

  • Stakeholder meeting

Jan 21 Stakeholder meeting Jan 21

  • Stakeholder meetings

as needed

Slide 18