Getting Tech into Rate Base
Tom Sloan is a recently retired twelve-term veteran of the Kansas Legislature and member of several federal agency and professional legislator organizations’ energy committees. He is now a Senior Advisor to Public Utilities Fortnightly and can be reached at tomsloan45@gmail.com.
During the past year, I have spoken and written about reducing risks associated with the deployment of innovative technologies. The focus has been on suggesting ways in which the regulatory community will recognize that potential mechanical failure rates are mitigated and such technologies may be deployed and placed into the rate base.
This risk reduction priority recognizes that regulators' primary concern is that customers do not pay twice for the same equipment or for replacement energy. Their perceived risk is greater when the developer of the new technology is a small, start-up, marginally capitalized company, the same companies that frequently are the most innovative.
Objective and Subjective Risks
Regulators, consciously or unconsciously, confront two types of risks: objective and subjective.
Objective risks are associated with the reliability and performance metrics of the new technology.
These risks can be mitigated in the minds of regulators by presenting evidence of other utilities using the same equipment from the same provider, third-party validation such as Department of Energy National Lab reports, performance assurance insurance, or other demonstrable and quantifiable means.