Customer cost allocations using the Minimum Distribution System method.
Michael T. O’Sheasy is a vice president with Christensen Associates Energy Consulting and a longtime and frequent contributor to Public Utilities Fortnightly, on topics involving cost of service and rate design. Mr. O’Sheasy worked previously at Georgia Power Co., where he was the architect of the company’s Real-Time Pricing and FlatBill programs, the largest programs of their type in the United States.
Joshua Rogers is an Engineering Supervisor II with Gulf Power Company, a Southern Company, and oversees the distribution system for Panama City Beach, Fla. Mr. Rogers is a licensed Professional Engineer in Florida.
The minimum distribution system (MDS) is a method used to determine the percentage of an electric utility's distribution system required to serve customers. It's based on the equipment that is theoretically needed for a customer to simply receive service, regardless of energy consumption. This percentage becomes the customer-cost-related portion for the purpose of calculating cost of service for the distribution plant account, under the cost accounting manual followed by the U.S. Federal Energy Regulatory Commission (FERC). The MDS concept is an accepted methodology throughout the industry and can be found also in the cost allocation manual accepted by NARUC, the National Association of Regulatory Utility Commissioners.
One method to identify the customer percentage is called zero intercept. The zero-intercept method plots the load-carrying ability of distribution equipment versus the equipment's cost.