Refund Mechanisms in Line Extension Policies: Do They Work?
10 April 2002
By Amparo Nieto
Electricity distribution line extension policies need to address the often competing goals of simplicity, proper cost recovery, and non-discrimination. After industry restructuring, the distribution activity has become the core business of many utilities that now need to revisit their line extension policies to make sure that they do not face excessive risk. Key factors that influence the ongoing relationship between up-front connection charges and utility rates include: the form of the connection allowance; the company structure; and the mechanism used to provide refunds as new customers connect. In this presentation, delivered to energy rate managers at the meeting of the Marginal Cost Working Group in Dallas on 10 April 2002, NERA Senior Consultant Amparo Nieto discussed alternative refund mechanisms and their implications for utilities and consumers.
