Retailed electricity market 研究

We develop forward-looking estimates of the range in growth rates for key cost-related and non-cost-related rate drivers to better understand how they could affect retail rate growth for a generic U.S. investor-owned and vertically integrated utility.

Cost related: utilities’ capital expenditures, non-fuel operations and
maintenance (O&M) expenses, and fuel and purchased power costs

Non cost related : retail sales, peak demand, and customers


we assumed compound annual growth rates (CAGRs) for each of the rate drivers and bounded them with a range of Low, Medium, and High values to characterize the potential variability

Assuming all cost-related rate drivers continue to grow at their me dium CAGR, the retail rate components with the highest CAGRs are associated with CapEx. Specifically, the rate component for transmission CapEx grows by 9.1%/year, for distribution CapEx by 8.7%/year

Though the transmission CapEx rate driver grows on a compound annual basis by 9.1%/year, which is the highest CAGR of all rate drivers, its starting year value is considerably lower than generation CapEx, which represents only 10% of the total retail rate in 2020. This results in a modest increase (6% points) to its share of the total retail rate between 2020 and 2030.



Although FPP costs, generation CapEx, and generation O&M account for over half of the retail rate in 2020, in 2030 rates are predominantly comprised of generation, transmission, and distribution CapEx-related costs (see Fig. 2).

2020 進口礦產仍是電價主要驅動, 到2030 已經轉變發電, 傳輸, 配電資本支出占最大宗

American Electric Power (AEP)  傳輸
ITC Holdings  傳輸

The largest component of rates goes from fuel and purchased power (27% ) in 2020 to generation CapEx (25%) in 2030. Interestingly, the second largest rate component is approximately 10% points smaller in both cases (i.e., generation CapEx (18%) in 2020 and transmission CapEx (16%) in 2030). Though the transmission CapEx rate driver grows on a compound annual basis by 9.1%/year, which is the highest CAGR of all rate drivers

The rate driver with the largest elasticity (in absolute value) is sales, coincident peak demand, and customers (Sales-CP-Cust) (see Fig. 3). A one percent increase in the growth of this rate driver resulted in a 0.88–0.93% decrease in retail rates

Other than an increase in total FPP costs, which are driven by aggregate sales multiplied by the average FPP cost, there were no changes in the annual budgets for CapEx or non-fuel O&M. So any increase in sales growth, ceteris paribus, lowered average retail rates by spreading the utility’s fixed costs over the larger sales base

On the cost side, a one percent reduction in the growth of either generation CapEx budgets ($) or fuel & purchased power costs ($/MWh) resulted in a 0.07–0.14% or 0.10–0.14% decrease in rate growth, respectively. This represents an order of magnitude difference in the absolute value of elasticities when compared to retail sales. Both of these cost drivers have fairly wide ranges in their elasticity values, while the rest of the cost-related rate drivers have considerably smaller and thus less variable elasticity values.

How sensitive is future retail rate growth to variability in the growth of all rate drivers, jointly?

Increases in sales and peak demand growth will likely create the need for additional CapEx by requiring new generation, trans mission, and distribution infrastructure to serve new and growing load. In turn, additional utility investment will likely result in higher O&M expenses over time to support new capital projects. Therefore, the joint uncertainty in all rate drivers must be considered for a more complete picture of future rate growth

We found that retail sales were highly positively correlated with distribution CapEx, distribution O&M, and other O&M, while retail sales were more modestly correlated with transmission CapEx, transmission O&M, and generation CapEx. Generally, there tended to be strong positive correlation across rate drivers of the same category (e.g., generation CapEx with generation O&M) and weaker correlation across categories of the same rate driver (e.g., gen eration CapEx vs. transmission CapEx). Finally,

When variability was applied jointly to all rate drivers, generation CapEx remained the largest rate component but was also the most un certain rate component (20–25% of total retail rate) (see Fig. 5)

Transmission CapEx comprised between 14% and 17% of the total retail rate, while distribution CapEx as well as FPP costs were between 11% and 15%.

Conclusion

We disaggregated retail rates into cost- and non-cost-related drivers and found through deterministic and stochastic analysis that generation CapEx costs, FPP costs, and retail sales are the most significant drivers that impact future retail electricity rate growth

First, higher growth in retail sales likely has the biggest potential to mitigate retail rate growth. This rate driver had nearly a unitary elas ticity (0.88–0.93), 

Since a number of utility costs are positively and strongly correlated with sales, peak demand, or customer growth

Third, FPP costs have the highest level of elasticity. As such, decreasing levels of FPP costs would decrease volatility of future retail rates. Since the majority of utility-scale renewable energy resources have no fuel costs to speak of, increased deployment could continue to drive down future impacts of FPP costs on retail rates

再生能源大量發展, 使的傳統發電媒鈾礦需求減少, 原料價格降低, 進而使發電成本降低

Generation costs for fossil plants, on the other hand, are subject to global market fluctuations in fuel prices. Most utilities pass these volatile costs directly onto their customers. Thus, rate components associated with fuel and purchased power costs should become more stable through policies and practices that result in the replacement of non-zero marginal cost generation resources with those having zero marginal costs.

 Together, these observations suggest that reducing levels and vola tility of future retail rates could be achieved via increased retail sales, decreased generation CapEx, and smaller FPP costs. Various interactions may come into play when trying to implement these changes. For example, increased electrification of heating and transportation will increase retail sales. However, to ensure that this does not increase peak demand at the same level, efforts to improve load factor will be neces sary. This may involve various strategies that could include changes in retail rate design to manage peak demand, incentive-based programs targeting peak demand reduction, resource planning to ensure a port folio of flexible resources, and/or others. Further, electrification while maintaining the same generation mix will likely result in higher FPP costs alone due to higher utilization. As such, increasing retail sales while maintaining low FPP costs will likely entail pairing electrification with decarbonization- both increasing built renewable capacity as well as increasing renewable utilization via wires or storage strategies. With any strategy, it will be important to understand the consequent impacts on ratepayers, with special attention paid to vulnerable populations.