Energy Regulation Fundamentals

• Who the regulators are
• Who regulates what on a state and national basis
• The purpose of regulation in the energy industry
• How regulation is set in regulatory proceedings
• The principles behind how regulations are determined
• What deregulation is, key principles for deregulating energy markets and how it has been implemented in the U.S.
• How rates and prices are set under regulation
• How regulation impacts opportunities for energy companies to make money

Quantity:

• Experienced natural gas and electric company employees who have limited knowledge of regulation
• Experienced professionals moving into the energy industry
• Recent hires into regulatory positions in gas and electric companies
• Energy professionals from departments such as operations, engineering, information technology and customer services who are becoming active in regulatory proceedings or who have interaction with regulators
• Gas and electric company supervisors and managers who will oversee participants in regulatory proceedings or interact with regulators
• Finance, legal, public relations, and regulatory professionals needing a better understanding of gas and electric regulation
• Recent hires at state or federal regulatory agencies
• Recent ISO/RTO hires who need to understand the regulatory parameters under which ISOs operate

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Introduction

• The role of regulation
• Course objectives

Basic Concepts of Energy Regulation

• What is regulation?
• Why industries are regulated
• Energy companies that are regulated and why it's important to regulate them
  • Natural monopolies (LDCs, UDCs, vertically-integrated electric utilities, ISOs/RTOs)
  • Essential facilities (transmission lines, gas pipelines, gas storage facilities, LNG terminals)
  • Competitive market participants (merchant generators, wholesale traders, financial services providers, retail marketers)

• Who are the regulators and who do they regulate?
  • Federal
  • State
  • Local

• What does regulation do?
• Impacts of regulation on energy companies
• Impacts of regulation on consumers
• Impacts of regulation on politicians
• A brief history of regulation in the U.S.
• The movement to deregulation in the U.S.
• The regulatory compact (federal and state)
• Six goals of regulators 
  • Safe and reliable energy 
  • Just and reasonable pricing 
  • Economic efficiency
  • Consumer protection 
  • Public goods programs 
  • Fair return to shareholders
• How regulation is determined
• The regulatory process
• The realities of regulation

Regulatory Proceedings

• The purpose of a regulatory proceeding
• Who initiates proceedings
• Proceedings initiated by a regulator
  • Rulemakings 
  • Inquiries and investigations
• Proceedings initiated by a regulated company
  • Cost of capital proceedings  
  • Rate cases  
  • Certificate cases
  • Applications  
  • Mergers and acquisitions approvals
• Proceedings initiated by others  
  - Complaints 
  - Petitions
• The regulatory process step-by-step: proceeding initiation, initial conference, opening briefs, discovery, hearings, closing briefs, draft decision, final decision, implementation, appeal
• Settlements
• Participants and their roles and goals: commissioners, presiding officer, commission staff, regulated energy companies, regulated energy company employees, intervenors
• Types of intervenors

Revenue Requirements and Ratemaking

• Types of ratemaking
• Determining cost-based rates 
  • Task 1: The cost-of-service study 
    Forecasting costs 
    Expense vs. capital items 
    Determining the rate base 
    Cost functionalization 
    Cost classification 
  • Task 2: Determining the cost of capital 
    What is fair and reasonable rate of return on equity? 
  • Task 3: Determining the actual rates 
    Billing determinants 
    Calculating a revenue requirement 
    Allocation to customer classes 
    Determining rate design 
    Allocating revenue to charge types 
    Calculating rates
• The rate case proceeding
• How rates are adjusted between rate cycles
• Setting rates for municipal utilities and co-ops
• Issues with cost-of-service ratemaking 
• Incentive regulation 
  • Performance incentives 
  • Market-based/benchmark incentives
• Market-based rates
• The unique case of the ISO
• Impacts on earnings from each type of ratemaking

Concepts of Natural Gas and Electricity Deregulation

• Reasons for deregulating an industry
• Unbundling the gas and electric industries
• Competitive wholesale markets and key transition issues 
  • Market liquidity 
  • Market power 
  • Transparent pricing 
  • Open access
  • Consistent rules

• Competitive retail markets and key transition issues
  • Multiple suppliers and open entry 
  • Provider of last resort function
  • Reliability and sufficient capacity
  • Unbundling services and funding social programs
  • Cost allocation
  • Consumer protection and education
• Transition mechanisms
• Transition issues for the unbundled utility, competitive market participants and consumers
• The evolution and current status of gas restructuring in the U.S. 
• Wholesale markets 
• Retail markets state-by-state
• The evolution and current status of electric restructuring in the U.S. 
  • Wholesale markets including current RTOs/ISOs 
  • Retail markets state-by-state

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• Professional audio and animated content developed by experienced education professionals: this is not a page turner!
• Online exercises and interactions: designed to cement your understanding.
• Reference materials: a list of acronyms and a glossary that you can view online with your course.
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