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Synapse and Clean Virginia outline design rules for effective multi‑year rate plans
Summary
Synapse Energy Economics and Clean Virginia presented design principles stakeholders should use if Virginia adopts multiyear rate plans: include most costs in the revenue cap, avoid annual reconciliations, prefer external indices for escalation, and calibrate earning‑sharing and stay‑out periods to preserve cost containment.
Melissa Whited of Synapse Energy Economics presented a framework for designing multiyear rate plans (MRPs) and warned that poor design can turn MRPs into broad trackers that shift risk to customers without producing cost savings.
"A poorly designed MRP only allows utilities to recover costs more quickly without providing cost containment incentives," Whited said. She emphasized that design elements must be considered together: what costs the MRP includes; how revenues are escalated between rate cases; whether reconciliation to actual costs occurs; the structure of any earnings‑sharing mechanism; and the length of the stay‑out period.
Synapse's recommendations for a Virginia‑focused MRP - Include the bulk of utility costs in the revenue requirement covered by the MRP so the utility shares the upside and downside of…
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