WELCOME
Welcome to the website of the Pacific Economics Group companies. The PEG consortium consists of two companies that are active in the fields of litigation and utility regulation. Principals of these companies are based in California and Wisconsin and include several nationally recognized economists. Please explore the site and learn more about the PEG companies and the services we provide.
PEG NEWS
Springtime in Madison
PEG Research employees are enjoying the springtime weather at the company's office in Madison, Wisconsin. From our perch above Capital Square, we have watched the grass turn green, the tulips bloom, and the oak trees burst into leaf. We wish you all the best in this season of hope and renewal.
March 2010
The Ontario Energy Board has posted a report by PEG Research on revenue decoupling. The report, authored by company president Mark Newton Lowry and entitled Review of Revenue Decoupling Mechanisms, is the outcome of a months long study. It is intended to provide Ontario policymakers with a solid background for considering new directions for its decoupling policy. The report discusses all three established approaches to decoupling: lost margin trackers, decoupling true-up plans, and straight fixed variable pricing. There is an authoritative review of key precedents and an analysis of the circumstances in which each decoupling approach is advantageous. A discussion of the design of revenue adjustment mechanisms draws on the company's extensive experience with this complex subject. Linkages between decoupling and other regulatory issues are stressed, including rate design and the choice between forward and historic test years. The report also reviews Ontario's decoupling policies and considers promising new directions. The Board recently established a consultation process (EB-2010-0060) to address provincial decoupling strategy. A conference to discuss the report is scheduled for April 19 in Toronto. Ontario energy distributors have extensive DSM programs that slow growth in average use by small volume customers. Conservation and long displacement generation are also encouraged in the province by the recently passed Green Energy and Green Economy Act. A copy of the report is available here.
February 2010
The Hawaii Public Utilities Commission today approved the revenue decoupling plans proposed by the three Hawaiian Electric companies. The proposals feature decoupling for all service classes. The revenue requirement adjustment mechanism has a "hybrid" design like that which has been used in many California decoupling plans. It includes indexation of O&M expenses and budgets for plant additions. The HECO plans continue the trend in the electric power industry away from the revenue per customer approach to decoupling that is common in the natural gas industry. The proposal was detailed in a settlement between HECO and the state consumer advocate. HECO had agreed to a wide range of measures to promote conservation and clean energy. PEG Research President Mark Lowry was a witness for the HECO companies in the proceedings.
December 2009
On Friday December 4, the Colorado Public Utilities Commission approved a settlement in the rate case of Public Service of Colorado. The company's featured evidence was based on a forward test year (FTY). PEG Research provided statistical support for the FTY filing. It showed that the company's proposed O&M expenses reflected a good level of operating performance. The sample used in the benchmarking study was also used to show that the trend in the O&M performance of companies operating under forward test years was similar to, and a little better than, that of companies operating under historic test years. The approved revenue requirement is based on an historic test year with extraordinary adjustments for future business conditions, including the costs of a smart grid project. The settlement also provides that Public Service will file forward test year evidence in its next rate case but also provide historic data and a thorough deviations analysis. The company will work with interested parties to improve reporting requirements with respect to budget and actual data to facilitate the review of future cases.
November 2009
PEG Research won a bid to investigate the use of "top down" techniques for estimating the reductions in gas consumption from utility DSM programs. The estimates would be developed by applying econometric methods to gas distributors' billing data, in an effort to identify the changes in gas consumption that result from energy efficiency programs. These "top down" estimates could potentially substitute for the "bottom up" methods that are currently used to calculate gas savings, and which are based on assumptions regarding projected savings from particular measures and programs. PEG Research will develop statistical models that can be used for the "top down" measurement and verification of utility DSM programs and prepare a white paper that evaluates the merits of a top-down approach compared with the current methodology.
November 2009
PEG Research was recently selected by the Edison Electric Institute in Washington DC to prepare a white paper on forward test years in the U.S. electric utility industry. Roughly half of all investor-owned electric utilities are still required to use historic test years in their rate case filings. The results are increasingly uncompensatory in today's rising unit cost environment. States that have in recent years moved away from historic test years include Idaho, New Mexico, Wyoming, and Utah. The paper will present data on the financial harm caused by historic test years and explain the forward test year alternative.
September 2009
Mark Newton Lowry, President of PEG Research LLC, filed testimony in Rhode Island on behalf of the Energy Efficiency and Resource Management Council. The testimony supported the general outline of a revenue decoupling proposal recently filed by National Grid in the state. Dr. Lowry discussed basic approaches to decoupling, decoupling precedents, and criteria for choosing between alternative decoupling methods such as decoupling trueup plans and straight fixed variable ("SFV") pricing. He commented that "the trueup approach to decoupling is the best practice approach because it encourages, at a reasonable administrative cost, the full range of measures that can promote clean energy. These advantages help to explain why decoupling trueup plans are spreading rapidly in the gas and electric power industry and are used or scheduled for use in most states that have a strong commitment to clean energy".
Summer 2009
As a result of recently passed legislation, the New Zealand Commerce Commission is required to set up new electricity distribution rate plans for the period 2010-2015. The plans will utilize the format of CPI-X to escalate rates. Total factor productivity (TFP) is the preferred basis for setting the X factor. PEG Research Senior Advisor Larry Kaufmann has been retained to evaluate the Commission's proposals on behalf of the Electricity Networks Association. PEG Research personnel have extensive experience in New Zealand, having testified in the previous price controls for electricity and gas distributors. A final decision on the price controls is expected in December 2009.
June 22, 2009
The Oklahoma Corporation Commission staff filed responsive testimony today in Oklahoma Gas & Electric's (OG&E) rate case. As part of its testimony, it reviewed the February 2009 PEG Research report, filed as evidence by OG&E in the rate case. The report stated that OG&E was a top performer at minimizing non-fuel O&M expenses, which are the company's chief controllable cost. Staff's testimony concluded that "Staff is in agreement [with the PEG Research study] that OG&E is a very cost-conscious company in its O&M expenses as compared to other utilities".
Spring 2009 
Public Utilities Reports has published Charlie Cicchetti's latest book, Going Green and Getting Regulation Right: A Primer for Energy Efficiency, which responds to the rising interest in energy efficiency and demand-side management programs by exploring the important lessons that can be learned from earlier mandated conservation efforts. Going Green and Getting Regulation Right is a valuable resource for regulators, legislators, utilities, public advocates, and other policy makers. The book draws on a vast database of results from utility programs throughout the nation over the past 15 years. Energy efficiency programs are addressed both quantitiatively and comprehensively. These analyses are complemented by a thorough qualitiative and institutional review of the different approaches to conservation and efficiency that have been taken across the nation and over time. For more information or to order, visit http://www.pur.com/books/55.cfm
April 16, 2009
Bay State Gas today filed a revenue decoupling plan with the Massachusetts Department of Public Utilities (DPU). Bay State proposes to add revenue decoupling to its existing PBR plan, where rates escalate in accordance with a GDPPI-X formula with an X factor of 0.51%. This is the first decoupling plan to be filed in Massachusetts which conforms to DPU guidelines that decoupling plans can be PBR plans with revenue adjustment mechanisms that feature revenue adjustment mechanisms which provide automatic relief for price inflation.
In today's filing, PEG Research Senior Advisor Larry Kaufmann testifies that the existing PBR plan and the revenue decoupling proposal are compatible. His testimony also supports the continued use of Bay State's existing X factor. PEG Research personnel have supported PBR in Massachusetts numerous times over the past 15 years, including the research underpinning the current power distribution rate plan of NStar Gas & Electric and testimony in support of the original and current rate plans of Boston Gas and the current Bay State plan.
March 4, 2009
The Essential Services Commission of Victoria (ESC) today filed comments in an examination of the merits of adding a total-factor productivity (TFP)-based regulatory option in Australia's energy regulatory framework. This examination is being undertaken by the Australian Energy Market Commission (AEMC). The ESC advised the AEMC that a TFP-based option was feasible and appropriate and provided details on a specific, TFP-based regulatory approach. The ESC was advised by Larry Kaufmann when preparing its submsission.
Click here for more details of recent PEG work on our What's New page.