Baltimore Gas and Electric Requests alignment of the Annual true-up adjustment for its transmission formula rate
On October 26, 2020, Baltimore Gas and Electric (BGE), a subsidiary of Exelon, filed in Docket No. ER21-214 revisions to its transmission formula rate to align calendar year revenue and revenue requirement in its Projected Annual Transmission Revenue Requirement and in its Annual True-up Adjustment. To accomplish this alignment, BGE seeks to adjust the true-up mechanism in its Formula Rate to: (1) use actual revenues, rather than projected revenues, for a 12-month period as the basis for the true-up; and (2) true-up those actual revenues for a given January to December time period to actual costs for that same January to December time period, instead of truing up revenue projections for a June to May time period to actual costs for the January to December time period, as is done in BGE’s current transmission formula rate. This timing adjustment revision is consistent with FERC precedent and have been implemented for several utilities, including Potomac Electric Power Company, Delmarva Power & Light Company and Atlantic City Electric Company (all Exelon subsidiaries).
The filing also revises the method for developing the forecasted revenues for the upcoming year, which are used to establish BGE’s projected revenue requirement – the basis for its transmission rates. Under the new methodology, BGE will use projected values for plant, accumulated depreciation, depreciation and amortization expense, other income tax adjustment expense, and accumulated deferred income taxes (“ADIT”) for the upcoming year when developing its projected transmission revenue requirements. All rate base items in the projected and true-up revenue requirements will also be calculated using the average of 13 monthly balances with the exception of ADIT, which will use a simple average.6 Non-plant related rate base items and capital structure will continue to use historical data; however, this data will be 13-month average balances as opposed to year-end balances as done with the current Formula Rate. To adhere to tax normalization rules, ADIT would reflect the application of proration rules. Historical data will still be used for non-plant related rate base components of the projected revenue requirement (e.g., prepayments, reserves, materials and supplies), other expenses (e.g., Operating & Maintenance expenses and Taxes Other Than Income Taxes) and capital structure, as these items tend to have less year-to-year variability compared to plant-related items.
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Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.