New PEG Report on Multiyear Rate Plan Design Challenges
Focus on Skewed Utility Spending Patterns
The Ontario Energy Board has released a Pacific Economics Group report on a challenge in multiyear rate plan ("MRP") design and administration: the penchant of some utilities to shift their spending to later years of the plan, when it can boost rates in the next plan. Utility witnesses often claim that customer benefits from MRPs chiefly take the form of lower rates in the next plan. Skewed spending can materially reduce this benefit. PEG surveyed the academic literature on skewed spending and did statistical research on its magnitude in Ontario MRPs. Informed as well by discussions with several regulatory commissions, various means of mitigating problematic skewness are discussed in the paper. Designing MRPs to benefit customers is one way to address the heightening affordability challenge facing utility regulators today. Our report can be accessed here: Spending Pattern Analysis Report
