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PEG Personnel Pioneered Gas Utility Statistical Cost Research
Dr. Lowry Has Made Several Altreg/PBR Presentations
PBR is Spotlighted in the 4th Edition of PEG's Authoritative Survey
PEG places inflation forecasts on solid research foundation
Dr. Lowry Spoke at Seven Conferences
Power Distributor Productivity Growth Surged Under PBR
Dr. Lowry Made Several Appearances
Past PEG Interns and Junior Economists Have Entered Prestigious Grad Programs
Session addressed multiyear rate plans and other kinds of performance-based regulation
Benefits and challenges of PBR discussed
Archived News
December 2017 Dr. Lowry filed testimony December 21st in Minnesota on behalf of Northern States Power-Minnesota. NSPM recently began operating under a multiyear rate plan. The Minnesota Public Service Commission convened a hearing to review the company's performance metric system and consider new performance metrics and targeted performance incentive mechanisms. Dr. Lowry reviewed NSPM's regulatory system and discussed appropriate adjustments to the performance metric system. Also in December, PEG Research won a competitive bid to advise the Ontario Energy Board on a new multiyear rate plan for Ontario gas utilities. Enbridge Gas Distribution and Union Gas have proposed a merger and an unusual ten-year rate plan. Their filing includes testimony on a productivity study deemed pertinent in the choice of an X factor for the proposed revenue cap index. PEG will review this evidence and, if warranted, prepare an alternative study and file testimony in the proceeding. October 2017 Mark Newton Lowry filed extensive testimony for Xcel Energy in a Colorado rate proceeding which is accessible here . Public Service of Colorado is proposing a multiyear rate plan ("MRP") for its electric services in the proceeding. The plan includes revenue decoupling. Colorado's Public Utilities Commission recently approved revenue decoupling for the company's electric services but did not approve any mechanism for escalating the revenue requirement. Dr. Lowry's testimony discusses general merits of MRPs for electric utilities under today's business conditions and appraises the specific rate plan proposed by Public Service. His evidence includes statistical benchmarking of the company's proposed revenue requirements for the four years of the plan. The need for automatic revenue escalation when electric utilities operate under revenue decoupling is discussed with supportive empirical evidence. Dr. Lowry gave a presentation on performance based regulation on October 10th at the Wisconsin Public Utilities Institute's Energy Utility Basics Course. On October 31, he conducted a seminar on his research at the Department of Applied Economics at the University of Wisconsin. Dr. Lowry is an alumnus of the department. September 2017 PEG Research LLC has won a competitive bid to assist the Ontario Energy Board with a Hydro One Networks ("HON") rate filing. HON is Ontario's largest power distributor. The company has proposed a custom incentive regulation ("IR") plan. The Board requires utility custom IR proposals to be supported by statistical benchmarking and productivity evidence. HON has submitted a report on its productivity growth along with several benchmarking studies. PEG will review the benchmarking and productivity evidence and prepare testimony in the proceeding if needed. Also in September, Dr. Lowry spoke at a training session on Distribution Systems and Planning for the New England Council of Public Utility Commissioners in Hallowell, Maine. The session was organized by the Grid Modernization Laboratory Consortium of the U.S. Department of Energy. Dr. Lowry spoke on Regulation of Modernizing Power Distributors: Results from Research on Performance Based Regulation. August 2017 Dr. Lowry gave a webinar for Lawrence Berkeley National Laboratory August 4th to discuss results of his recent research paper for the lab on multiyear rate plans for U.S. electric utilities. Also in August, he served as an instructor at the Edison Electric Institute's Electric Rates Advanced Course in Madison WI. He presented a session on Alternative Regulation and supervised an Altreg workshop. July 2017 Lawrence Berkeley National Laboratory has issued a report by PEG Research on Performance-Based Regulation Using Multiyear Rate Plans for U.S. Electric Utilities. Multiyear rate plans ("MRPs") are a comprehensive approach to performance-based regulation that is popular in Canada, Britain, and many other countries overseas. Their use is growing in the United states, especially for vertically integrated electric utilities. The paper, available here , details key plan design issues, presents several case studies, and considers the impact of MRPs on electric utility performance. Results are presented on the recent growth in the productivity of 86 U.S. utilities in the provision of power distributor services. The research suggests that utilities operating under well-designed MRPs (and, more generally, infrequent rate cases) tend to achieve better operating performance. June 2017 Green Mountain Power has retained Pacific Economics Group to assist it in the development of a new regulatory strategy. Vermont's largest electric utility, an affiliate of Montreal-based Gaz Metro, is a national leader in the transition to cleaner sources of energy. The Company announced its intent to develop a new regulatory system in recent testimony. With PEG's assistance, it will participate in a collaborative process initiated by the Department of Public Service to consider new approaches to regulating Vermont electric utilities. Mark Newton Lowry filed extensive testimony June 2 in support of a multiyear rate plan ("MRP") for the gas division of Public Service of Colorado. Public Service is a unit of Xcel Energy and one of the largest U.S. gas utilities. Dr. Lowry discussed general merits of MRPs and appraised the specific plan proposed by Public Service. His appraisal included statistical benchmarking of the company's proposed revenue requirements for O&M expenses and total cost during the three years of the plan. He also reported recent trends in the productivity of U.S. gas distribution utilities. The testimony and report can be found here . May 2017 Mark Newton Lowry participated in a National Regulatory Research Institute webinar on multiyear rate plans. The webinar discussed Ken Costello's recent NRRI white paper on these increasingly popular plans. PEG congratulates Ken on his recent selection by the Financial Research Institute to receive the 2017 Crystal Award. The award was created to recognize an individual who has made outstanding and sustained contributions to the design, implementation, or analysis of public utility regulatory policy. Dr. Lowry also spoke at the National Conference of Regulatory Attorneys in Portland, Oregon. The theme of the conference, held May 7- May 10, was New Horizons - The Future of Utility Regulation . Dr. Lowry discussed his paper, nearing completion, on multiyear rate plans for US electric utilities. The work is funded by Lawrence Berkeley National Laboratory of the U.S. Department of Energy. April 2017 The Regie de l'Energie in Quebec issued its long-awaited decision on PBR for the power distributor services of Hydro Quebec. The Regie has directed the company to operate under a four-year multiyear rate plan featuring a revenue cap index. The index will reflect input price inflation, customer growth, and trends in the multifactor productivity of power distributors. The company has also been directed to develop an incentive mechanism for its power procurement services. The plan largely conforms to the recommendations of Mark Newton Lowry, an expert witness in the proceeding. PBR is required in Quebec by provincial statute. The statute states the goals of PBR to be continuous improvement in utility operating performance sharing of benefits streamlining of the regulatory process. February 2017 Mark Newton Lowry filed testimony February 24th on incentive regulation for the power transmission services of Hydro-Quebec. Provincial law requires regulation of the company's transmission and distribution services. Designing an incentive regulation mechanism for transmission is especially challenging since there are few precedents for this in North America. Dr. Lowry proposes a multiyear rate plan with revenue escalated between rate cases by an index or "California-style" hybrid methodology. January 2017 Mark Newton Lowry and Tim Woolf of Synapse Energy Economics addressed the Technology and Economic Development Committee of the Washington State House of Representatives January 31. They discussed their recent research on performance-based regulation for Lawrence Berkeley National Laboratory. January 2017 Dr. Charles Cicchetti and Colin Long have joined Berkeley Research Group ("BRG") as Managing Directors. Both were founding members of Pacific Economics Group and were Senior Advisors to PEG Research LLC. Questions about the transition can be addressed to Colin Long at clong@thinkbrg.com or 213.261.7696. We wish Charlie and Colin the very best in their new endeavor.
December 2016 The Alberta Utilities Commission reached a decision December 16th on the outlines of next-generation performance-based ratemaking ("PBR") plans for Alberta's gas and electric power distributors. Distributors will once again operate under multiyear rate plans with rates (or revenue) escalated by rate indexes with an inflation - X formula. The X factor slows escalation and was a central issue in this proceeding. The Commission chose an X factor of 0.30% that was similar to the 0.43% estimate of the productivity growth of U.S. power distributors provided by Pacific Economics Group ("PEG") Research President Mark Newton Lowry. November 2016 Mark Newton Lowry and David Hovde of PEG filed testimony in November for the Ontario Energy Board on the design of an incentive regulation mechanism for Ontario Power Generation. PEG proposed a multiyear rate plan featuring a price cap index with an inflation - X formula. His recommended 0.59% X factor is based on a study of the productivity trend of North American hydroelectric power generators. Methods for measuring productivity growth have been a central issue in the proceeding. November 2016 Dr. Blaine Gilles, a Senior Advisor at PEG Research, recently completed a multi-million dollar funding raise for Conversion Energy Systems, Inc. ("CES"). CES has developed a propriety system for processing hazardous wastes using a gasification process which allows recovery of recyclable metal and glass and produces significant heat energy. Dr. Gilles formulated the firm's launch strategy, developed its financial model and represented the firm before investors. November 2016 Mark Newton Lowry made a presentation November 17th to the Vermont Future of Electric Utility Regulation Workshop. The workshop was held at the offices of Green Mountain Power in Colchester, Vermont. Dr. Lowry discussed his recent research on performance-based regulation for Lawrence Berkeley National Laboratory. August 2016 PEG Research filed testimony in a Minnesota proceeding on behalf of Fresh Energy. The testimony, prepared by PEG economist Kaja Rebane and company President Mark Newton Lowry, reported on a study of the incentives provided by Minnesota regulation for Otter Tail Power to embrace demand-side management and other distributed energy resources. The study found problems with the company's current incentive structure that are particularly large in the areas of rate design, peak load management, and distributed generation and storage ("DGS"). The authors recommend reforms to Otter Tail's regulatory system that include revenue decoupling and an expanded scope for performance incentive mechanisms to encourage efficient peak load management and DGS. May 2016 PEG Research won a competitive bid to advise the Ontario Energy Board in a proceeding to develop a performance-based ratemaking ("PBR") plan for the hydroelectric operations of Ontario Power Generation. OPG is one of the largest hydroelectric power producers in North America. The project will include productivity and econometric cost research using data from OPG and a sample of US hydroelectric power generators. The project will be led by PEG President Mark Newton Lowry. April 2016 Dr. Mark Newton Lowry, President of PEG Research, spoke at the Annual Financial Forum of the Society of Utility and Regulatory Financial Analysts on forward test years . He has been active in the forward test year field since writing a white paper on this alternative regulation tool for the Edison Electric Institute. A copy of this paper can be accessed here . March 2016 Dr. Lowry testified for the Natural Resources Defense Counsel in Harrisburg PA at an en banc hearing of Pennsylvania's Public Utility Commission. The hearing was convened to consider alternative ratemaking methodologies, such as revenue decoupling , that strengthen incentives for energy utilities to pursue aggressive conservation and efficiency initiatives. Dr. Lowry provided strong support for revenue decoupling as part of a package of regulatory reforms to encourage utility embrace of demand-side management programs. The recommended reform package also includes multiyear rate plans and demand-side management performance incentive mechanisms. A copy of his written evidence in the proceeding can be accessed here . Dr. Lowry was invited by the Wisconsin Public Service Commission to make a presentation on performance-based regulation at the Wisconsin Retreat on Utility Business Models of the Future. The retreat is organized by the National Governor's Association and was held March 29th in Madison. Other speakers at the event included nationally recognized experts Peter Kind and Ken Costello. Larry Kaufmann was invited by Naturgas, the Colombian natural gas association, to speak at its 19th Annual Convention. He participated in an international panel on international regulatory issues, and his presentation addressed two issues: the challenges in efficiency measurement, and building trust in regulatory institutions. Larry Kaufmann has published an article titled "Natural Gas Market Reforms in Mexico" in the latest issue of Geopolitics of Energy . The article reviews natural gas reforms in Mexico's natural gas sector over the last 20 years and analyzes which reforms have been successful and which have not. The article also shows why the natural gas reform experience is relevant to the sweeping changes in Mexico's oil and gas industries that have taken place in recent years. Dr. Kaufmann is a Senior Advisor to Pacific Economics Group Research and in 2015 became a Fellow at the Canadian Energy Research Institute, which publishes Geopolitics of Energy . February 2016 Dr. Lowry made his second presentation to Minnesota's e21 Initiative February 26th in Minneapolis. This nationally prominent "utility of the future" initiative, now in Phase II, is considering alternative kinds of performance-based compensation for Minnesota electric utilities. The initiative is spearheaded by the Great Plains Institute. Dr. Lowry spoke on Performance-Based Regulation in a High Distributed Energy Resources Future. January 2016 Mark Newton Lowry has been involved in the past year in the preparation of five reports that consider regulation of the electric "utility of the future". This work has included a role as consulting economist to the Powering Tomorrow Initiative, which was funded by the Energy Foundation and a diverse stakeholder group that included some of the nation's largest electric utilities and third party energy companies. Phase 2 of the Initiative considered alternative industry structures and appropriate regulatory systems for embracing higher levels of distributed energy resources. Powering Tomorrow has now released its Phase 2 final report entitled New Utility Industry Structures and Regulatory Packages in An Era of Increasing Energy Decentralization . A copy of the report is available here . Also in January, Lawrence Berkeley National Laboratory published a paper Dr. Lowry coauthored entitled Performance-Based Regulation in a High Distributed Energy Resources Future . A copy can be obtained here . This paper explains disincentives electric utilities experience under traditional rate regulation to embrace efficient levels of demand-side management, distributed generation, and other kinds of DERs. Two well-established approaches to strengthening incentives to embrace DERs are considered: multiyear rate plans ("MRPs") and targeted performance incentive mechanisms ("PIMs"). The authors find that the strongest incentives to embrace DERs are provided by a "four-legged stool" supported by MRPs, revenue decoupling, the tracking of DER-related expenses, and PIMs that provide rewards for efficient DERs. The scope of PIMs should be extended beyond their traditional focus on conservation to encourage peak load management and distributed generation and storage. A variety of other strategies are detailed that can apply to utilities in various special situations. A webinar to discuss results of the project was held January 27th. The webinar and associated slides can still be accessed on the LBNL website here .
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