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By Rich Alexander, Product Manager, ACRT Services
A Long-Term Process with an Even Longer-Term Impact
As a professional working at an investor-owned utility (IOU), you will undoubtedly be familiar with an important process known as a rate case (also called a distribution rate case). This monumental undertaking involves virtually every department and function in the utility in order to prepare an extensive application to increase the utility’s rate to customers for delivering their power, water, or gas.
Whether a rate case is conducted annually, every few years, or once every other decade ultimately depends on the utility, its circumstances, and its long-term financial needs, but it is generally required in order to justify and receive approval for an increase in the cost of service to its customers. If you’ve worked on a rate case before, you’ll know the timeline and process can be extensive — let alone the actual rate case application itself.
Typically anywhere from a few to several thousand pages, rate cases provide in-depth information and analysis on the utility’s existing infrastructure and delivery system, its financials, its immediate and long-term needs, and why the increase in cost to customers is necessary. There are multiple phases of review, both within the utility and by the state Public Utilities Commission, that ultimately lead to a decision.
There are many reasons why a utility rate case may be needed, but the end goal remains the same: to adapt to changing circumstances and conditions and secure the funding needed to continue providing service and achieve other goals.
Vegetation management departments have a distinct challenge when it comes to rate cases, particularly as this function has one of the highest operations and maintenance costs within the utility. The information that vegetation management teams provide as part of the greater rate case application will heavily influence the final decision of the PUC and will subsequently impact vegetation management’s budget and thus its priorities. That impact will be immediate and can continue to influence priorities for years to come.
Understanding the Vegetation Management Portion of a Utility Rate Case Application
While the rate case application and documentation itself is vast, vegetation management’s part in justifying the increase is by no means small. Extensive information about the vegetation on the system, vendors, and equipment needed to control it, and more must all be detailed. Thus, the vegetation management team must have in-depth strategic knowledge of its system in order to prepare its portion of the rate case and demonstrate its ability to be a good steward of ratepayers’ resources. Examples of what vegetation management teams include in a rate case include:
The Vegetation Management Data Challenge
One of the key challenges with gathering and mapping out all of the above data is where — and when — it comes from. Without an understanding of how all of these data points work together to influence vegetation management budgets, utilities are simply left with the data and a best guess on what the most ideal budget looks like.
Typically, vegetation management teams rely on historical data to inform rate cases (which is problematic because of what it is: data about the past and not about the future). Local knowledge from employees that have been with the utility for much of their careers is also a source, but with older generations approaching or already at retirement age, much of that knowledge is being lost. Additionally, another curveball: the recent supply chain and logistics issues of recent years have had long-lasting effects that continue to impact utilities and the companies they work with today, along with high interest rates.
Again, the aim of a rate case is to create a justification for a higher cost to customers in order to continue meeting their need for reliable electric, gas, and water supply, and for the utility to sustain its operations. Without success, service reliability and even safety suffer because there are fewer dollars available for key infrastructure upgrades, vegetation management work, safety programs, and more.
But without data that looks to the future to identify and weigh risks, workflow, resources, timelines, and other factors, utilities can’t get the most realistic budget target to pursue. Static data from years past also won’t be helpful — it needs to be dynamic to account for what could happen. While a common strategy is to shoot for the moon with rate cases and hope for something in the middle, it’s not the most ideal because even that approach can’t see what lies in wait in the months and years ahead.
As an example, what if the vegetation information on an existing current system could be used to justify switching from a three-year pruning cycle to a five-year cycle? The result, of course, is a significantly reduced vegetation management budget. This exact scenario has happened many times before at utilities nationwide that leverage their system data in intelligent ways to identify opportunities for improvement.
Use the Tools That Are Available
Technology specific to utility vegetation management has been available for some time but is continuing to evolve to help teams more proactively plan out their work — not just for the current cycle but for much further in the future. The key here is how system data is used in this planning. Remember, static data leads to static decisions and plans. Dynamic data — influenced by the ability to adjust the inputs based on needs and situations — allows for much more effective use of vegetation management dollars.
At ACRT Services, we have been able to leverage the Arborcision platform to take sample data sets from a system and create data-driven, actionable cycle plans that factor in timeline, all of the variables discussed above, and cost benefits to give utility leaders their best next step. More importantly, this data allows vegetation management leaders to create better plans and budgets. And when it comes to navigating a rate case, knowing what has the potential to impact the program down the road can make all the difference.
How have you been able to use system data to make more effective decisions? Have you leveraged new tools to help you with a recent or upcoming rate case effort? We’d enjoy hearing from you. Anyone interested in carrying on the conversation can reach out to me directly at email@example.com.
ACRT is the largest independent utility consulting company in the U.S. and empowers utilities to proactively manage vegetation across their entire rights-of-way. We consistently stay on top of and share relevant industry content with our employees and customers around the country.