LDCs may get big lost revenue claims, even if behind on CDM targetsAn IndEco article
You may be entitled to a significant claim for lost revenues, even if you are behind on your CDM targets
Depending on how your local distribution company (LDC) has incorporated projected reductions in energy use from conservation and demand management (CDM) programs into your load forecast (if you did), you may still be entitled to a significant claim for lost revenues, even if you are behind on meeting your targets.
This can happen because of the way forecasting models allocate demand across rate classes. If you specified a single number for projected reductions in energy sales, these reductions may have been allocated disproportionately to rate classes with lower rates. Of course, if you did not incorporate load reductions from CDM into your load forecast yet, you may also be entitled to a significant lost revenue adjustment mechanism variance account (LRAMVA) claim.
Are you prepared for LRAMVA (and April 30th)?
LDCs will be aware that the Ontario Energy Board (OEB) released new Guidelines for CDM. The guidelines changed slightly the way that you can recover lost revenues from CDM programs. This affects how your LDC tracks and accounts for lost revenues.
There are two notable changes:
1. LDCs are expected to incorporate the impacts of CDM programs into their load forecasts. The result of this, of course, will be to increase rates in sectors likely to be impacted by CDM, while decreasing the need for a later adjustment to rates (an LRAM rider). This is beneficial to LDCs, and fairer to customers. However, at least for some LDCs, the amount of load reduction from CDM captured in the load forecast is implicit (not explicit) and it may or may not be properly allocated across rate classes.
2. LDCs are to track and report the balance in their LRAM variance account, as they do for other variance accounts. They are to be included in the trial balance (due before April 30 each year) and are to be updated when Ontario Power Authority (OPA) final results become available (before September 30 each year). In addition, carrying charges are to be recorded monthly. This means that LDCs don’t wait until the rate application after the OPA releases its final results before thinking about lost revenues from CDM, but need to be estimating them on an on-going basis.
The specific requirements are outlined in the following documents:
· Guidelines for Electricity Distributor Conservation and Demand Management (PDF - 160 KB) (Apr 26, 2012) See pages 11-15
· OEB Accounting Procedures Handbook: Frequently Asked Questions (PDF - 295 KB) (July 2012) See pages 6-8
IndEco is pleased to have been working with some industry leaders to develop tools to assist in clarifying how CDM results are captured in forecasts and in this on-going tracking of LRAMVA. We would be pleased to work with you in addressing this and other CDM needs. Please contact David Heeney.