Marginal or Avoided Costs of Electricity Services
February 17, 2022 | Online :: Central Time
“This course was relevant and thought provoking. Time very well spent!” – Manager, Rates and Finance, BC Hydro
“Great speakers, thorough coverage of topics, knowledgeable presenters.” – Staff Rate Analyst, PSE&G
A proper marginal cost study provides pertinent information on a utility’s avoided cost of energy and capacity due to reduced demand in different time periods and locations. Marginal cost estimates can be used to evaluate and design energy efficiency and demand response programs, as well as renewable resources. Marginal generation capacity costs have been set according to the least-cost means by which capacity can be provided. An avoided-cost analysis provides the utility manager with a broader spectrum of possibilities as avoided costs can be used to compare demand options to demand options, supply options to supply options, and demand options to supply option.
In recent years the increase of low-cost renewables has increased the uncertainty for utilities when it comes to calculating avoided or marginal costs. Avoided cost analysis must now capture future states in ways that cannot be accommodated with traditional approaches. This course will explore the changing landscape for determining marginal/avoided costs, provide conceptual and institutional background information, review technical underpinnings and formulae and provide recommendations that your company can contemplate.
- Discuss the concepts and definitions of marginal cost
- Review the various electricity services including generation, transmission, distribution, and customer as well as output metrics
- Explore the estimation methods including contemporary estimation issues
- Review the elements of generation services including short and long run marginal costs
- Review the elements of transmission services including locational marginal pricing
- Review the elements of distribution services including load- and customer-related incremental costs
- Discuss the elements of customer service as they pertain to the incremental costs of providing services, by service type
Thursday, February 17, 2022 : Central Time
8:45 – 9:00 a.m.
Log In and Welcome
12:30 – 1:15 p.m.
9:15 a.m. – 4:45 p.m.
9:00 – 9:15 a.m. :: Welcome and Introductions
Short breaks will be taken in the morning and afternoon.
Cost Concepts and Definitions
- Financial and accounting costs, and economic costs
- Average and marginal costs
- Incremental costs
- Avoided costs
- Short- and long-run marginal costs
- Internal marginal costs, and opportunity costs
- Costs differentiated by time and location (LMP)
Electricity Services, Output and Cost Metrics
- Generation services
- energy supply
- operating reserves
- capacity—means of satisfying energy and reserve requirements
- Transmission services
- transport and interconnection services
- Distribution services
- delivery services, including transport and connection services
- Customer services
- specialized and tailored services including CDM and site services such as enhanced power quality and water heating
- Specific to timeframe and service
- Historically observed costs, changes in costs/changes in services provided
- Forward simulation of demand and supply
- accounting for uncertainty and cost risks
- dimensions of uncertainty are many
- Contemporary estimation issues:
- Incorporation of renewables and storage in supply portfolio
- electric vehicle market penetration, and evolved load profiles by time and location
- Technology choices
- old-world choice set
- modern technologies and choices
- renewables, storage
- Energy services
- Environmental costs including CO2 and other emissions
- Short-run marginal costs
- energy costs
- internal production costs; market-based opportunity costs
- reliability costs as scarcity rent proxies
- operating reserve demand curves
- opportunity costs
- example optimization of energy and reserve costs, determined simultaneously through auction processes
- start-up and no-load costs
- commitment problem under conditions of uncertainty
- reserves, reliability, and scarcity rents
- Long-run marginal costs
- energy costs as forward-looking estimates of energy costs/prices
- capacity costs and the relationship to reliability and customer outage costs
- capacity costs as long-run cost proxies
- distinction of capacity costs from capital costs for fuel cost savings
- capacity auction markets
- bid-based auction markets; example procedures
- capital divisibility: attenuation of long-run capacity cost proxies based on reliability cost metrics (LOLP, LOLH, EUE)
- Marginal costs differentiated by location (Locational Marginal Prices)
- short-run marginal costs
- energy costs in the form of line losses
- technical methodology including load flow studies
- congestion costs resulting from line constraints, obtaining locational marginal prices
- reliability costs; criteria-driven decisions of system operators
- Long-run marginal costs
- capacity costs; equivalence to the cost savings associated with lower line losses
- problem of capital indivisibility
- short-run marginal costs
- Marginal costs differentiated by type of service and area
- load- and customer-related incremental costs
- short-run marginal costs
- load-related costs in the form of line losses and reliability
- Long-run marginal costs
- load-related capacity costs; equivalence to the cost savings associated with reduced power outages
- customer-related delivery costs; connection services
- Incremental costs of providing services, by service type
Robert Camfield, Senior Regulatory Consultant, Christensen Associates
Robert Camfield is Senior Regulatory Consultant at Christensen Associates. He has extensive experience in the energy industry and the economics of regulation, including resource decisions, regulatory governance and incentive plans, market restructuring, cost allocation, energy contracts, cost of capital, and performance benchmarking. Mr. Camfield has managed numerous projects involving wholesale and retail markets, including market restructuring in Central Europe. He served as the program director for EEI’s Transmission and Wholesale Markets summer program from 1999 – 2008 and is credited with innovations related to web-based energy services, cost analysis, and two-part tariffs for transmission. Prior to joining Christensen Associates, he served as system economist for Southern Company and chief economist for New Hampshire Public Utilities Commission.
Nick Crowley, Economist, Christensen Associates
Nicholas Crowley, MS (University of Wisconsin–Madison) is an Economist at Christensen Associates. His professional work is primarily with natural gas pipeline and electricity regulation, including wholesale and retail markets. For electricity, he has participated in numerous costing and pricing projects, which involve computational analytics and econometrics, performance-based ratemaking, marginal cost estimation, total factor productivity estimates, and load response with respect to efficient time-of-use tariff options within retail markets. Mr. Crowley’s analyses and study results have been summarized in major reports and formal studies filed with regulatory authorities in Canada and the U.S. Prior to joining CA Energy Consulting, he served as an economist with the Federal Energy Regulatory Commission, where his work experience was concentrated in natural gas pipeline regulation and assessment of electricity markets. Mr. Crowley was also involved in FERC’s performance-based regulation of oil pipeline rates.
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.
- IMPORTANT NOTE: After November 30 you will not be able to join a Teams meeting using Internet Explorer 11. Microsoft recommends downloading and installing the Teams app if possible. You may also use the Edge browser or Chrome.
- You will receive a meeting invitation will include a link to join the meeting.
- Separate meeting invitations will be sent for the morning and afternoon sessions of the course.
- You will need to join the appropriate meeting at the appropriate time.
- 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 registrants for three business days after the event
|Single Connection - Marginal or Avoided Costs of Electricity Services||US $ 795.00|
|Pack of 5 connections||US $ 3,180.00|
|Pack of 10 Connections||US $ 5,565.00|
|Pack of 20 Connections||US $ 9,540.00|
|Call us at 303.770.8800 if you have any specific questions on the volume discounts|
|* all other discounts do not apply to license packs|
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 January 14, 2022 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