Minimum Distribution Charges

Larry VogtDirector, Rates

Mississippi Power

1

Wisconsin Public Utility Institute

June 28, 2017

Costs of Service vs. Cost RecoveryResidential Service Example

2

Assuming that all defined customer-related costs are recovered throughthe Customer Charge.

Principal Cost-of-Service Study Cost Components

3

The classification step of the cost-of-service study assigns all of the functionalized cost elements to the fundamental cost-causation components of Energy, Demand, and Customer.

Energy-related costs – variable costs which are dependent on kWh energy requirements.

Demand-related costs – fixed costs which are dependent on kW load requirements.

Customer-related costs – fixed costs which are independent of load or energy requirements.

• Energy Costs: VARIABLE

• Demand Costs: FIXED

• Customer Costs: FIXED

Minimum Distribution System (MDS)

Fuel

Classification of Functional Costs

4

Distribution SystemLines and Facilities Costs

55

FERC Description360 Land and Land Rights361 Structures362 Station Equipment363 Storage Battery Equipment364 Poles, Towers & Fixtures365 OH Conductors & Devices

Switches Reclosers & Sectionalizers

366 UG Conduit367 UG Conductors & Devices368 Line Transformers

Regulators Capacitors Cutouts Arresters

369 Services370 Meters373 Street Lighting

SUB

SR

N.O.

N.C.

N.C.N.C.

1,500 cKVAR

333-333-33350-50-50

75

15

25 37.5

336.4 MCM ACSR

4/0

CU

NO. 2 ALC/N

1/0 CU

M

Distribution System O&M Costs

6

FERC Description

Distribution Expenses (Excluding Substations)580 - 589 Operation590 - 598 Maintenance

901 - 905 Customer Account Expenses - Operation

906 - 910 Customer Assistance Expenses – Operation

911 - 917 Sales Expenses – Operation

Administrative and General (A&G) Expenses (Allocated portion)920 - 933 Operation935 Maintenance

Cumulative 1-Phase ResidentialCustomer Cost Components

7

MDS Customer CostsRevenue Requirementper Customer per Month

Minimal Customer Costs

Minimum Distribution System

What is MDS?MDS is an analysis module of the cost-of-service study in which primary and secondary voltage distribution system investment and O&M costs are classified between demand-related and customer-related cost components.

Why is MDS important?MDS quantifies those fixed costs that are independent of load or energy usage and thus provides a cost-justification basis for inclusion in the Customer Charge portion of the rate structure.

8

The Access Function Of The Distribution System

99

All primary and secondary voltage customers are connected to a distribution voltage source, i.e., a local substation.

There is a physical path which brings voltage to the customer’s premise.

Maintaining the voltage path ensures customer access to electrical power.

SUB

The Capacity Function Of The Distribution System

1010

Primary and secondary distribution system facilities and lines must be sized to adequately handle the customers’ demand for power.

Electric service facilities are rated in terms of kVA capacity (conductors rated in terms of ampacity).

Customer Load

Feeder Load

10

Objective of the Minimum Distribution System Analysis

11

To assess each device utilized in the distribution system in terms of its “mission” in order to determine if its function is:

Dependent on kW load requirements and therefore demand related,

or

Independent of kW load requirements and therefore customer related.

Customer or Demand?

12

MW

TIME

Capacitor-Based Voltage Control

SUBFEEDER

120 V

108 V

132 V+10%

‐10%

DISTANCE

13

Customer or Demand?

14

Protection SchemeTemporary Fault Condition

RCBSUB

15

Protection SchemePermanent Fault Condition

RCBSUB

16

Protection SchemePermanent Fault Condition – No Load

RCBSUB

17

Customer or Demand?

18

Classification of Distribution Plant for the Cost-of-Service

1919

Demand Customer

Distribution Substations X

Primary Lines* X X

Line Transformers* X X

Secondary Lines* X X

Other Line Equipment* X X

Service Lines X

Meters X

* Minimum Distribution System facilities.

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Zero-Intercept Methodology

THE Y-AXISINTERCEPT

IS THE UNITCOST OF ZERO CAPACITY

CAPACITY

UNITCOSTS

××

××

× COST OF A STANDARDSIZE UNIT

Applied to: Line Transformers Conductors Poles

Line Transformers

21

Zero-Intercept Example

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Single-Phase Overhead Transformers1. ZERO-INTERCEPT: $463.975/transformer

Based on various kVA sizes of 7.2 kV - 120/240 V, single bushing, pole-mount transformers

2. TOTAL NUMBER OF OVERHEAD TRANSFORMERS: 98,278CUSTOMER COMPONENT = $ 463.975 × 98,728 = $45,807,307

3. TOTAL OVERHEAD TRANSFORMER COST: $109,960,813DEMAND COMPONENT = $109,960,813 - $45,807,307 = $64,153,506

CUSTOMER COMPONENT = 41.7%

DEMAND COMPONENT = 58.3%

Primary and Secondary Conductors and Poles

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PRIMARY

NEUTRAL

SECONDARY

UNDERGROUNDPRIMARY CABLE

CONDUCTOR

CONCENTRICNEUTRAL

24

CONDUIT FORUNDERGROUND CABLES

RIGID PVC FLEXIBLE

25

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Distribution PolesTypes Of Materials

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ALUMINUM CONCRETE FIBERGLASS STEEL WOOD

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

1.0%

ALUMINUM CONCRETE FIBERGLASS STEEL

27

Pole HeightsRelative Frequency Distribution

0%

5%

10%

15%

20%

25%

30%

35%

40%

30' 35' 40' 45' 50' 55' 60' 65' 70' 75' 80' 85' 90' 95'POLE HEIGHTS

Clearance Requirements

2828

Poles lines must be designed to ensure proper safety clearances, such as specified in the National Electric Safety Code (NESC), Section 23.

The NESC provides specific minimum clearances of power lines located over: Roadways, parking lots, driveways, pedestrian areas, railroad

track rails, water ways, etc.

Other electric conductors and services, trolley/electric train cables, communications cables, etc.

29

Pole Line Grading

IMPROPER GRADING:POLES ALL HAVE THE SAME HEIGHT

PROPER GRADING:POLES WITH VARYING HEIGHTS

Distribution Pole ClassificationConclusion On Pole Height

3030

Pole height requirements are mainly a function of clearances and line grading, which are related to safety and mechanical design.

In some situations, a pole height may need to be increased (e.g., from a 40’ to a 45’) to accommodate some facilities.

Overall, pole height is not a predominant function of load.

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Pole Class

32

Standard Pole ClassesExample: 35’ Wood Pole

No. 139.0”

No. 236.5”

No. 334.0’

No. 431.5”

No. 529.0”

No. 627.0”

No. 725.0”

MINIMUM CIRCUMFERENCE OF SOUTHERN YELLOW PINE POLES (@ GROUND LINE)

33

Pole Class RequirementsBased On Transformer Capacity

0

1

2

3

4

5

6

7

10 15 25 37.5 50 75 100 167 250TRANSFORMER kVA

POLE

CLA

SS

1 TRANSFORMER 2 TRANSFORMERS 3 TRANSFORMERS

Distribution Pole ClassificationConclusion On Pole Class

3434

The physical sizes and weights of line transformers and conductors are related to their current carrying capabilities.

Pole class must be increased in order to carry heavy mechanical loads caused by large line transformers and conductors.

Overall, pole class is a predominant function of load.

Example MDS Analysis ResultsPoles, Transformers, and Conductors

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Customer DemandPoles• Wood 66.4% 33.6%• Concrete 47.3% 52.7%• Steel 57.5% 42.5%

Transformers• 1Φ OH* 41.7% 58.3%• 1Φ UG** 61.5% 38.5%• 3Φ UG** 34.2% 65.8%

* Basis for classifying transformer vaults** Basis for classifying transformer pads

Customer DemandConductorsPrimary• Bare ACSR OH 21.0% 79.0%• 15 kV CN UG* 57.4% 42.6%

Secondary• WP AL OH 38.4% 61.6%• Duplex OH 31.4% 68.6%• 1-Conductor UG* 60.7% 39.3%

* Basis for classifying conduit

Example MDS Analysis ResultsDistribution Line Devices

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Primary SecondaryCustomer Demand Customer Demand

Regulators & Capacitors 100%

Reclosers and Sectionalizers 100%

Cutouts & Arresters• Line Transformers (OH) 41.7% 58.3%• Regulators & Capacitors 100%• Reclosers & Sectionalizers 100%• Line Protection 100%

Bypass Switches• Regulators 100%• Reclosers & Sectionalizers 100%

OH Line Switches* 21.0% 79.0%UG Line Switches* 57.4% 42.6%* Based on conductors

Example Cost-of-Service ResultsFor Three Low Voltage Customer Classes

37

Larry Vogt

Q&A

38

Appendix Materials

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Weighted Linear RegressionFor Distribution Line Transformers

4040

N = Total number of all transformers of a given type, e.g., 59,800 7.2 kV -120/240 V, single-bushing, pole-mount units

n = Number of a given size transformer, e.g., 9,935 15 kVA

X = Transformer size in kVA, e.g., 5, 7.5, 10, 15, etc.

Y = Transformer unit cost in $ per unit, e.g., $724.48 (cost of a 15 kVA unit)

22

nXnXN

nYnXnXYNm

NnX

NYn

mb

SLOPE

y‐INTERCEPT

41

Zero-Intercept AnalysisThe Problem With Vintage Costs

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

0 10 20 30 40 50 60 70 80 90 100

Analysis of Pad-Mount Line TransformersBased on Booked Installed Costs

kVA

Unit C

ost

1Φ

3Φ

42

Zero-Intercept AnalysisUtilizing Current Costs

3Φ

1Φ

Analysis of Pad-Mount Line TransformersBased on Rebuild Costs

kVA

Unit C

ost

$0

$1,500

$3,000

$4,500

$6,000

$7,500

$9,000

$10,500

$12,000

$13,500

$15,000

0 10 20 30 40 50 60 70 80 90 100

Zero-Intercept Example

43

Primary Overhead Conductor1. ZERO-INTERCEPT: $0.396/ft

Based on various MCM sizes of bare ACSR conductors

2. TOTAL LENGTH OF PRIMARY CONDUCTORS: 15,708,000 ftPRIMARY CIRCUIT LENGTH: 15,708,000 × 2 = 31,416,000 ftCUSTOMER COMPONENT = $0.396 × 29,898,000* = $11,827,081* Minimum Distribution System Length

3. TOTAL PRIMARY CONDUCTOR COST: $56,416,253DEMAND COMPONENT = $56,416,253 - $11,827,081 = $44,589,172

CUSTOMER COMPONENT = 21.0%

DEMAND COMPONENT = 79.0%

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Determination Of OverheadCircuit Lengths For The MDS

4444

SUB

PRIMARY

SECONDARYUNDERBUILD

PRIMARY NEUTRAL COMMON NEUTRAL SECONDARY NEUTRAL

SECONDARYTAPS

TOTAL POLE MILES

Weighted Linear RegressionFor Distribution Conductors

4545

N = Total feet of all conductors of a given type, e.g., 47,557,568 ft of ACSR conductors

n = Number of feet of a given size conductor, e.g., 26,194,939 ft of #2 ACSR

X = Conductor size in MCM (a #2 wire is 66.36 MCM), e.g., 26.24, 41.74, 52.62, 66.36, etc.

Y = Conductor unit cost in $ per feet, e.g., $0.659/ft (cost of a #2 ACSR conductor)

22

nXnXN

nYnXnXYNm

NnX

NYn

mb

SLOPE

y‐INTERCEPT

Pole Capacity

4646

Poles have no electrical capacity component, but they do have a mechanical capacity (strength) component that can be viewed as a proxy for electrical loading.

Pole class (or circumference) can represent loading capability for wood poles, but it does not work for steel or concrete poles since different classes can have the same physical dimensions.

Ground line moment capacities do differ by class for all poles.

Transverse WindLoad of 1,200 lb

Example: 35’ 5-C Pole

GLMC = 33,000 ft-lbs = 33 kips

Weighted Linear RegressionFor Distribution Poles

4747

N = Total feet of all poles of a given type, e.g., 55,642 ft of 40 ft wood poles

n = Number of feet of a given size pole based on its GLMC, e.g., 21,137 ft of 76.80 kilopounds (kips) poles

X = Ground Line Moment Capacity in kips, e.g., 48.0, 60.8, 76.8, 96.0, etc.

Y = Pole unit cost in $ per feet, e.g., $12.05/ft (cost of a 76.8 kips pole)

22

nXnXN

nYnXnXYNm

NnX

NYn

mb

SLOPE

y‐INTERCEPT

Zero-Intercept Example

48

Wood Poles1. ZERO-INTERCEPT: $7.883/ft

Based on various kip ratings of 40’ southern pine poles

2. TOTAL LINEAR FEET OF WOOD POLES: 5,579,390 ftCUSTOMER COMPONENT = $7.883 × 5,579,390 = $43,982,773

3. TOTAL WOOD POLE COST: $66,254,744DEMAND COMPONENT = $66,254,744 - $43,982,773 = $22,271,971

CUSTOMER COMPONENT = 66.4%

DEMAND COMPONENT = 33.6%

48

49

Differentiated Cost AllocationBased on Voltage Magnitude & Phase

3-Phase vs. 1-Phase CustomersCost-of-Service Weighted Allocators

50

CUSTOMER VOLTAGE CLASS 1Φ LV 3Φ LV 1Φ HV 3Φ HV

1Φ OH Line Transformers L1 L3 × 3

Services:1Φ Lines L13Φ Lines L3

Meters:Watt-hour (non-demand) LN11Φ Demand LD1 H13Φ Demand L3 H3LV CT LD1 L3 × 3LV VT LD1 L3 × 3HV CT H1 H3 × 3HV VT H1 H3 × 3

L1 = # of 1Φ LV customers (LN1 + LD1); L3 = # of 3Φ LV customers H1 = # of 1Φ HV customers; H3 = # of 3Φ HV customers