Investment Recovery for Retired Utility Assets

June 26, 2024 | Online :: Central Time

0624-investment-recovery

“Speakers were knowledgeable and provided thoughtful answers.” Settlements Analyst, Eugene Water & Electric Board

In the midst of the energy transition, utilities, regulators, and ratepayers are confronted with the challenge of cost recovery of past investments at retiring assets. This course focuses on strategies for success and lessons learned while covering:

• Typical standards and criteria considered by regulators in determining the appropriateness of full cost recovery of past investments (return on and return of) at assets that are no longer used for serving the utility customers
• Methods used, when deemed appropriate by regulators, for recovering such costs, including:
  • traditional methods like accelerated depreciation and regulatory asset creation
  • innovative solutions such as securitization, aimed at mitigating the financial burden on ratepayers

Drawing from the expertise of industry professionals such as analysts, consultants, accountants, general counsels, and regulatory affairs officers, participants will gain valuable insights and practical knowledge on effectively managing asset retirement cost recovery.

By learning from past experiences and exploring forward-thinking approaches, attendees will be better equipped to navigate the evolving landscape and prepare for the future.

Learning Outcomes

• Review the historical perspective of recovering the cost of investment of energy transition
• Discuss strategies to recover past investment costs through tools and case studies
• Assess the impact of coal retirement by using tools like securitization
• Identify how states across the country are managing recovering assets of retired plants
• Recognize how state policies impacted the retirement of a coal plant through a case study
• Estimate the retirement costs of utility assets

Wednesday, June 26, 2024 : Central Time

9:00 – 10:00 a.m. :: “Stranded Costs” and the Energy Transition

As policy makers institute more and more ambitious clean energy goals, utilities find themselves facing the retirement of a variety of different asset classes before the end of their previously expected useful lives, raising the potential for these assets to be “stranded.”

This session will provide:

• A historical perspective on “stranded costs”
• A discussion of the philosophical challenges facing regulators
• Possible methodologies for addressing or mitigating stranded costs
• In-depth case studies to demonstrate how these issues have been addressed

10:00 – 11:00 a.m. :: Managing Coal Plant Costs for an Orderly Transition

As the utility moves to the recovery of past investment costs, this session discusses economic principles and regulatory options, including:

• Economic principles for determining prudence of investment and retirement decisions
• Coal plants’ exposure to economic and policy drivers
• Keys for success in recovering past investment costs
• Cost recovery mechanisms, and
• Examples for regulatory treatment of past investment costs at retiring coal plants

11:00 – 11:15 a.m. :: Morning Break

11:15 a.m. – 12:15 p.m. :: Shaping an Equitable Coal Transition Through Securitization

Utilities have used securitization for decades to lower customer costs for unanticipated expenses, and recently the tool has been applied to support coal phaseout. In the context of coal retirement, securitization is akin to refinancing a mortgage. This session will review:

• The history of securitization in the electric utility space and more recent uses around coal plant retirements and cost recovery
• Securitization basics: how securitization works, legislative requirements and best practices
• Case studies: Michigan, Colorado, New Mexico, Wisconsin & Missouri
• Federal Opportunities for Innovative Cost Recovery: The Energy Infrastructure Reinvestment Program (EIR)

12:15 – 1:00 p.m. :: Lunch Break

1:00 – 2:00 p.m. :: Case Study on How PNM Handled a Retirement

This session will review how PNM works toward replacing its fossil fuel generation sources by closing a plant. This move is predicated by various factors including economics, public perception of fossil fuels and state policies aimed at reducing emissions in light of climate change.

The speakers will share state policies including the Energy Transition Act, which PNM had a hand in drafting. Finally, the session will look at the closure of the San Juan Generating Station several years ago and how PNM has managed it.

2:00 – 3:00 p.m. :: Estimating the Retirement Assets of Utilities

When plants retire before the end of their useful lives, regulators must account for the value remaining on the utilities’ books. Typically, these “plants in service” and related accounts still hold significant value because of on-going investment to keep them running, particularly when fossil plants are retired earlier than their planned retirement dates. The remaining book value of retired plants, already included in consumers’ electricity rates, will stay in rates until regulators decide to change these values. How long these assets continue earning returns for shareholders and costing customers depends on how quickly their remaining asset value depreciates to zero. As a result, depreciation schedules determine starting points for refinancing discussions as part of the financial transition from fossil to clean energy. This session will share with attendees the methodology and tools for estimating depreciating assets used by utilities.

3:00 – 3:30 p.m. :: Afternoon Break

3:30 – 4:00 p.m. :: How Rate Adjustment is Handled after Retiring Assets

When coal plants are being retired, some states are seeing rate reductions for consumers. Other states have considered using ratepayer-backed bonds to pay off remaining debt. Some have raised rates but believe those should come down in the future. This session will look at the ways utility regulators may adjust rates for consumers and how the future will change based on recovery of assets.

4:00 – 4:30 p.m. :: A Roundtable of Speakers to Discuss What’s Ahead in this Space

4:30 – 4:45 p.m. :: Review and Open Q&A

4:45 p.m. :: Conference Adjourns

Dr. Metin Celebi, Practice Leader, Brattle

Lillian Federico, Research Director-Energy, S&P Global

Christian Fong, Senior Associate, RMI

Steve Olea, Advisor, Arizona Corporation Commission

Nick Phillips, Director, Atrium Economics

We will be using Microsoft Teams to facilitate your participation in the upcoming event. You do not need to have an existing Teams account in order to participate in the broadcast – the course will play in your browser and you will have the option of using a microphone to speak with the room and ask questions, or type any questions in via the chat window and our on-site representative will relay your question to the instructor.

• Microsoft recommends downloading and installing the Teams app if possible. You may also use the Edge browser or Chrome.
• You will receive a separate email with a unique link to a personalized landing page which will include links to join all sessions of this event.
• If you are using a microphone, please ensure that it is muted until such time as you need to ask a question.
• The remote meeting connection will be open approximately 30 minutes before the start of the course. We encourage you to connect as early as possible in case you experience any unforeseen problems.

Please Note: This event is being conducted entirely online. All attendees will connect and attend from their computer, one connection per purchase. For details please see our FAQ

If you are unable to attend at the scheduled date and time, we make recordings available to all attendees for 7 days after the event

REGISTER NOW FOR THIS EVENT:

Investment Recovery for Retired Utility Assets

June 26, 2024 | Online

Your registration may be transferred to a member of your organization up to 24 hours in advance of the event. Cancellations must be received on or before May 24, 2024 in order to be refunded and will be subject to a US $195.00 processing fee per registrant. No refunds will be made after this date. Cancellations received after this date will create a credit of the tuition (less processing fee) good toward any other EUCI event. This credit will be good for six months from the cancellation date. In the event of non-attendance, all registration fees will be forfeited. In case of conference cancellation, EUCIs liability is limited to refund of the event registration fee only. For more information regarding administrative policies, such as complaints and refunds, please contact our offices at 303-770-8800

Credits

EUCI is accredited by the International Accreditors for Continuing Education and Training (IACET) and offers IACET CEUs for its learning events that comply with the ANSI/IACET Continuing Education and Training Standard. IACET is recognized internationally as a standard development organization and accrediting body that promotes quality of continuing education and training.

EUCI is authorized by IACET to offer 0.6 CEUs for this event

Requirements for Successful Completion of Program

Participants must Log in and be in attendance for the entirety of the course to be eligible for continuing education credit.

Instructional Methods

Case studies, PowerPoint presentations and group discussion will be used

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Upon successful completion of this event, program participants interested in receiving CPE credits will receive a certificate of completion.

Course CPE Credits: 7.5
There is no prerequisite for this Course.
Program field of study: Specialized Knowledge
Program Level: Basic
Delivery Method: Group Internet Based
Advanced Preparation: None

EUCI is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its web site: www.nasbaregistry.org

 

Who Should Attend

• Utility accountants
• General counsels
• Regulatory affairs officers