Survey of Electric Utility Embedded Cost Methods for Generation and Transmission in North America

Fri May 07 16:24:00 EDT 2004
By Dr. Hethie Parmesano, Veronica Irastorza, et al.

In recent years there has been a major shift away from traditional generation and transmission embedded cost of service (COS) methods, which first came about in an era before the development of vibrant wholesale markets (e.g., fixed/variable classification, no time-differentiation, allocation based on class loads in a very few hours of the year). The new methods better reflect regional market conditions and the pattern of a utility's marginal or opportunity costs.

At the request of Manitoba Hydro, NERA Special Consultant Dr. Hethie Parmesano, Vice President Amparo Nieto, and Principle Veronica Irastorza surveyed a number of electric utilities in the United States and Canada to determine generation and transmission embedded COS methods currently employed, or methods used in the past where embedded cost studies for generation are no longer prepared.

The utilities chosen for the survey have significant hydroelectric capacity; are active participants in a competitive wholesale market; and have significant off-system sales.