Serving the energy industry for over 30 years
By - Jon Brown

Marginal Cost of Electricity Services
June 30, 2020 | Online :: Central Time

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Marginal generation capacity costs have been set according to the least-cost means by which capacity can be provided. The $/kW-year costs associated with simple cycle CT capacity, however determined, has served as the benchmark methodology for some time. As a practical matter, recent developments challenge this well-anchored approach. First, lower levels of expected inflation and ongoing cost efficiencies introduce institutional concerns with respect to the carrying charges on capital. Second, emerging storage technology can supplement, if not supplant, the standard benchmark.

The course will explore these two issues, providing conceptual and institutional background, reviewing technical underpinnings and formulae, and presentation of recommendations, going forward.

Learning Outcomes

  • Discuss the concepts and definitions of marginal cost
  • Review the various electricity services including generation, transmission, distribution and customer as well as output metrics
  • 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 customer service as they pertain to the incremental costs of providing services, by service type



EUCI has been accredited as an Authorized Provider by the International Association for Continuing Education and Training (IACET).  In obtaining this accreditation, EUCI has demonstrated that it  complies with the ANSI/IACET Standard which is recognized internationally as a standard of good practice. As a result of their Authorized Provider status, EUCI is authorized to offer IACET CEUs for its programs that qualify under the ANSI/IACET Standard.

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


Requirements for Successful Completion of Program

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

Instructional Methods

Case Studies and PowerPoint presentations


Tuesday, June 30, 2020 – Central Time

9:00 – 9:15 am :: Login

9:15 am – 4:45 pm :: Course Timing

12:30 – 1:15 pm :: Lunch Break

Short breaks will be taken every hour.

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 and Output 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

Generation Services

  • Energy services
    • Short-run marginal costs
      • Energy costs
      • Internal production costs; market-based opportunity costs
      • Reliability costs as scarcity rent proxies
      • Environmental costs including CO2 and other emissions
    • 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
      • Capital divisibility; attenuation of long-run capacity cost proxies based on reliability cost metrics (LOLP, LOLH, EUE)
    • Reserve services
      • Short-run marginal costs
        • 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
        • Capacity costs; reliability and operating reserve parameters (NERC standards)
      • 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
      • Batteries: new least-cost means to satisfy capacity requirements

Transmission Services

  • 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 and reduced congestion
      • Problem of capital indivisibility

Distribution Services

  • 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 line losses and improved reliability
      • Customer-related delivery costs; connection services

Customer 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.

Online Delivery

Our courses are designed to be the best possible use of your valuable time – get the information you need to improve your position in the market in an interactive, dynamic format.

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.

  • 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

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