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Building a detailed rate forecast for a G&T with multiple rate classes

Background

A large G&T sought to replace a black-box forecasting model with a tool that could support detailed forecasting of revenue requirements that matched the utility’s cost of service for each of its member classes.

Solution

MCR implemented its Financial and Regulatory Strategy Tool (FRST™) with a client team comprising experts across the finance and planning groups. The model needed to be configured to develop a revenue requirement for each of the G&T’s generating assets as member participation in each asset defined the rate class. FRST™ was configured to enable a dispersed planning process where internal experts developed detailed plans in various models and database tools. Each of these outside models was configured to generate an upload file that can be quickly uploaded into FRST™. The modeler responsible for coordinating the forecast has minimal inputs beyond a handful of miscellaneous entries and key drivers. The model’s ledger is mapped to the latest cost of service, which allows a consistent view of the forecast over time and allows members to see the impact of various strategies on the cooperative as a whole as well as their individual rate.

Results

The FRST™ model was implemented quickly and has continued to prove its value. Recently, the model was used to evaluate the shutdown of various coal resources. This analysis was simplified given the model was configured to provide a forecast of revenue requirements of each individual generating station, thereby easily showing the total revenue requirement with and without the assets. Each member was able to see the direct impact on their distribution cooperative supporting a more informed decision by the board.