When a regulated utility wants to change its base rates, it has to ask in public. That request, and the months of review that follow, is a rate case.
For anyone who owns a utility budget, a rate case is the closest thing to advance notice the industry offers. The proposed prices, the reasons and often the bill impact by customer class are published long before new rates take effect. Most budget owners still learn about a case when the new rates show up on a bill.
What a rate case is
Investor-owned utilities such as Xcel Energy have their rates set by a state commission. In Colorado, that is the Public Utilities Commission. The utility files an application showing what it costs to serve customers and what it wants to collect. The commission decides what it may charge.
Municipal utilities, such as Colorado Springs Utilities and Fort Collins Utilities, set rates through their own city process instead, usually with public notice and a vote by a council or utility board. The steps differ, but the budget question is the same: what will we pay, and from when?
How a case moves
Every commission has its own procedure, but most cases follow the same broad path.
- Filing. The utility submits its application, testimony and proposed tariff sheets.
- Notice. Customers are notified, often through a bill insert or a published notice.
- Intervention. Commission staff, consumer advocates, large customers and other groups join as parties.
- Testimony and discovery. Parties question the utility’s numbers and file their own.
- Settlement or hearing. Many cases settle among some or all parties; others go to a full hearing.
- Decision. The commission issues an order, often changing what the utility asked for.
- Compliance tariff. The utility files revised tariff sheets that match the order.
- Effective date. New rates apply from a set date, sometimes prorated across the bill that spans it.
From filing to effective date commonly takes several months and often most of a year. Some states allow interim rates while a case runs, sometimes subject to refund. The commission’s orders state what applies.
Revenue and rate design are separate
A rate case answers two questions, and budget owners often hear only about the first.
How much revenue may the utility collect? This is the headline number: the requested increase in total revenue. It is a figure for the whole utility, not for your bill.
Who pays it, and through which charge? This is rate design. It divides the revenue among customer classes, then among the service charge, energy charge and demand charge within each schedule. Some commissions decide it in the same case; others take it up separately.
Rate design can move a site’s bill more than the headline does. A 2017 National Renewable Energy Laboratory analysis of more than 10,000 tariffs in 48 states found that demand charges “can account for anywhere from 30% to 70% of a customer’s electricity bill.” When a case shifts cost from energy into demand, or the reverse, two sites with the same annual kWh can see very different changes.
Does this case affect you?
Not every filing touches every account. Before spending time on one, answer four questions:
- Which utility and commodity? An electric case at one utility does nothing to a gas bill at another.
- Which classes? Some cases change every class; others change one schedule or one rider.
- Which of your sites are on those schedules? Your meter map, with the schedule code on each account, answers this in minutes.
- How large is the change for your class? The bill impact exhibits show it for a typical customer in each class.
If the answer to the first three is yes and the fourth is more than your budget tolerance, the case is worth pricing site by site.
Base rates versus riders
A rate case changes base rates. Many other charges on the bill move outside it.
Riders for fuel or commodity costs, transmission, efficiency programs and specific investments often reset on their own schedules, monthly, quarterly or annually, through separate filings. A budget that tracks only rate cases will miss those. A budget that treats every rider as fixed will miss them too.
For each site, split last year’s cost into base charges and rider charges. Then forecast each on its own calendar.
Read the filing without a lawyer
A rate case filing can run to thousands of pages. You need a handful of them.
- The application summary. The requested increase and the proposed effective date.
- Proposed tariff sheets. The new prices for your schedule, often with a redlined version against the current sheets.
- Bill impact exhibits. Typical bills by class, current against proposed. Find the class and schedule your sites use.
- Rate design testimony. Any proposal to change how cost splits between fixed, energy and demand charges.
The commission’s online filing system holds all of it, searchable by utility and proceeding number. The utility’s own website often posts a plainer summary with the customer notice.
From filing to budget line
With the proposed sheets in hand, you can price your own sites rather than relying on a typical bill.
- Rerun last year. Take each site’s 12 months of bills and recalculate them on the proposed schedule.
- Set a range. Treat the utility’s full request as the high case and current rates as the low case. A settlement or order often lands somewhere between.
- Apply the timing. If the likely effective date is mid-year, only part of the budget year carries the new rates.
- Layer the riders. Forecast rider charges separately, on their own reset calendars.
- Write the assumption down. Note the proceeding number, the scenario and the date you priced it, so the next update starts from the same place.
In this example, a site spends $80,000 a year on electricity, of which $50,000 is base charges. Suppose the proposed sheets would raise that site’s base charges by 8% on last year’s load, and the new rates start at mid-year. The high case adds about $2,000 to next year’s budget. The low case adds nothing. The budget can carry the range with a one-line note.
Run the same steps for each site on the affected utility. Sites on demand-heavy schedules and sites on flat schedules can land in very different places from the same filing.
Update when the order lands
The proposed sheets are the start, not the answer. When the commission issues its order, the utility files compliance sheets with the approved prices.
Rerun the same 12 months on the compliance sheets and replace the range with a single number. Then check the first bill after the effective date line by line: the new prices, the proration across the change date and any riders that reset at the same time. Every account gets repriced at once, so the first bill on new rates deserves a full read.
When to comment
Rate cases accept public comment, and large customers sometimes intervene as parties, usually with counsel. Commenting costs little. Intervening costs a great deal more and is a decision for your legal team; this note is not legal advice.
Put the dates on a calendar
Rate case milestones belong on the same calendar as your budget and benchmarking deadlines. The Colorado Energy Office says Building Performance Colorado benchmarking reports and fees are due November 1 each year, which makes autumn a natural season to price pending cases at the same time. Our compliance calendar lays out a month-by-month rhythm for benchmarking, budgets and rate reviews.
Plan for more than one year
A rate case is one input to a longer view. The Portfolio Energy Plan is a five-year plan for up to 40 sites that sets which site gets which upgrade when, priced against the tariffs each site is likely to face. Our tariff analysis work prices a pending case against your actual bills, site by site. To start smaller, send three bills for a free Three-Bill Read.
