ENERGY ECONOMICS/UTILITY REGULATION

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• Because the transition to competition in the electric industry presented new challenges and opportunities, Memphis Light Gas & Water Division commissioned Spectrum Economics to forecast the structure of the industry in the future and formulate strategies for MLGW to economically provide power. As part of our efforts we used financial, production costing and market clearing price models to forecast the future rates of TVA, the market clearing price of power in the area around Memphis and the relative economics of various construction and market purchasing strategies for meeting the demand for electricity. We also evaluated the technological, fuel supply and regulatory considerations influencing MLGW’s decision.

Merger between Western Resources and Kansas City Power and Light

• On behalf of the City of Topeka, Kansas, provided testimony to the Kansas Corporation Commission regarding the rate treatment of new generating plants and revenues from power trading activities, why the proposed merger was in the public interest and why the requested acquisition adjustment should not be permitted. Also, before the Federal Energy Regulatory Commission presented testimony regarding system cost and rate parity.

• For Memphis Light Gas & Water Division, evaluated options for gas supply through 2000. Projected future gas costs, pipeline rates and demand by customer segment. Built an optimization model to estimate the optimal level of firm demand for future years given historical weather patterns. Evaluated economics of expanding a LNG facility. Performed a strategic analysis of various gas supply and transport portfolios.

• For many utilities, Spectrum has weather normalized hourly electric loads using model simulations with historical weather. Nonlinear regression models accounted for day of week, hour of day, temperatures, previous days temperatures, holidays, and daylight hours. Loads for both the system and large customers were weather normalized. The results of simulations were converted into monthly load duration curves, which were averaged for each hour and then resorted using the current year load pattern. The results also included probability distributions for monthly peak demands. Similar projects were performed for several natural gas utilities and one such project included a method for computing the expected peak at any time during the month given the peak sendout that had occurred to date. Tips
• For the same utilities, we have programmed modeling software to forecast and weather normalize monthly electric or natural gas sales by tariff. The results have been used for budgeting, for computing weather normalized revenue requirements, and to compute the effects of abnormal weather for use in financial reporting. The models were constructed in SAS using billing cycle weighted (rather than calendar month) degree days.Tips

• For the American Public Gas Association, prepared a white paper entitled Local Gas Distribution Companies and Pipeline Market Power: Workable Competition or Unregulated Monopolization for presentation by the APGA, to Congress, the FERC and other interested parties. Our study included a survey of municipal LDCs, quantification of the extent of cost shifting and development of alternative regulatory policies.

• The Townsend Capital Summit Technology Center is a one million square foot industrial complex situated on 300 acres in Lee’s Summit, Missouri. Spectrum served as the project coordinator for a team that solicited bids for energy supply including cogeneration and trigeneration. Our team evaluated those bids and assisted the client in negotiating a more favorable rate from the electric utility on the basis of the avoided cost of self-generation. We also solicited bids for gas supply to the plant and assisted the owners in selecting a new gas supplier and in negotiating with the local gas utility for carriage from the city gate.

• On behalf of the Agricultural Energy Consumers Association, presented testimony in Pacific Gas and Electric's 1991 ECAC proceeding and 1992 General Rate Case regarding marginal cost, value of service and revenue allocation to the agricultural class.

• In several studies, we matched electric billing records with temperature data and modeled the energy savings from conservation program participation to determine whether the program was cost effective. The models were estimated in SAS with nonlinear least squares and degree day variables based on meter read dates.