Cost Allocation and Rate Design

The Brattle Group advises utilities and government agencies on the proper design of regulated rates in the electricity and natural gas industries. Our experts testify on rate structure and rate design matters before state regulatory commissions and the Federal Energy Regulatory Commission (FERC).

Recent advances in customer-side technologies and the ongoing rollout of advanced metering infrastructure are causing many in the industry to rethink rate design. Brattle has worked with a diverse range of international clients to design, test, and implement new rates to satisfy the ratemaking objectives of an evolving power grid. We prepare expert testimony and studies addressing electric retail ratemaking issues, such as automatic adjustment clauses, cost allocation, marginal cost of service, economic development rates, and performance-based ratemaking. We also provide consulting on incentives for energy efficiency programs, real-time pricing, interruptible demand tariffs, and other rate mechanisms designed to encourage greater demand response to changing wholesale prices. With regard to wholesale ratemaking, we address topics such as rate design for RTO transmission access and administrative charges, allocation of costs paid to “reliability must-run” generators, and allocation of gas pipeline expansion costs on an average versus marginal/incremental basis.

Our experts have experience in directing rate design studies, have frequently taught rate design and related subjects through organizations such as the Electric Power Research Institute (EPRI) and the Edison Electric Institute (EEI), and have presented before a number of industry groups, including the National Association of Regulatory Utility Commissioners (NARUC).