IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v105y2017icp354-362.html
   My bibliography  Save this article

Trends in transmission, distribution, and administration costs for U.S. investor-owned electric utilities

Author

Listed:
  • Fares, Robert L.
  • King, Carey W.

Abstract

This paper analyzes the cost of transmission, distribution, and administration for U.S. investor-owned electric utilities. We analyze data reported to the Federal Energy Regulatory Commission (FERC) from 1994 to 2014 using linear regression to understand how the number of customers in a utility's territory, annual peak demand, and annual energy sales affect annual TD&A spending. Then, we use Edison Electric Institute data for 1960 to 1992 to show trends in TD&A spending between 1960 and 2014. We find that the number of customers in a utility's territory is the single best predictor for annual TD&A costs. Between 1994 and 2014, the average cost per customer was $119/Customer-Year for transmission, $291/Customer-Year for distribution, and $333/Customer-Year for utility administration. Total TD&A costs per customer have been approximately $700–$800/Customer-Year since 1960, but the cost per kWh of energy sold was significantly higher in the 1960s because the average customer used less than half as much energy annually versus 2014. Thus, TD&A costs per kWh are likely to increase if kWh energy sales decline in the future unless cost recovery is transitioned to a mechanism not based solely on kWh sales.

Suggested Citation

  • Fares, Robert L. & King, Carey W., 2017. "Trends in transmission, distribution, and administration costs for U.S. investor-owned electric utilities," Energy Policy, Elsevier, vol. 105(C), pages 354-362.
    • Handle: RePEc:eee:enepol:v:105:y:2017:i:c:p:354-362
    DOI: 10.1016/j.enpol.2017.02.036
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421517301118
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2017.02.036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Costello, Ken, 2011. "Some Advice to Regulators on Formula Rate Plans," The Electricity Journal, Elsevier, vol. 24(2), pages 44-54, March.
    2. Eid, Cherrelle & Reneses Guillén, Javier & Frías Marín, Pablo & Hakvoort, Rudi, 2014. "The economic effect of electricity net-metering with solar PV: Consequences for network cost recovery, cross subsidies and policy objectives," Energy Policy, Elsevier, vol. 75(C), pages 244-254.
    3. Burns, Philip & Weyman-Jones, Thomas G, 1996. "Cost Functions and Cost Efficiency in Electricity Distribution: A Stochastic Frontier Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 48(1), pages 41-64, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Küfeoğlu, Sinan & Pollitt, Michael G., 2019. "The impact of PVs and EVs on domestic electricity network charges: A case study from Great Britain," Energy Policy, Elsevier, vol. 127(C), pages 412-424.
    2. Saleh Abushamah, Hussein Abdulkareem & Skoda, Radek, 2022. "Nuclear energy for district cooling systems – Novel approach and its eco-environmental assessment method," Energy, Elsevier, vol. 250(C).
    3. Langlois-Bertrand, Simon & Pineau, Pierre-Olivier, 2018. "Pricing the transition: Empirical evidence on the evolution of electricity rate structures in North America," Energy Policy, Elsevier, vol. 117(C), pages 184-197.
    4. Simeone, Christina E. & Gagnon, Pieter & Cappers, Peter & Satchwell, Andrew, 2023. "The bill alignment test: Identifying trade-offs with residential rate design options," Utilities Policy, Elsevier, vol. 82(C).
    5. Wang, Yifei & He, Rui & Tian, Zhigang, 2023. "Opportunistic condition-based maintenance optimization for electrical distribution systems," Reliability Engineering and System Safety, Elsevier, vol. 236(C).
    6. Palmer, Graham, 2017. "An input-output based net-energy assessment of an electricity supply industry," Energy, Elsevier, vol. 141(C), pages 1504-1516.
    7. Rahdan, Parisa & Zeyen, Elisabeth & Gallego-Castillo, Cristobal & Victoria, Marta, 2024. "Distributed photovoltaics provides key benefits for a highly renewable European energy system," Applied Energy, Elsevier, vol. 360(C).
    8. Rauschkolb, Noah & Limandibhratha, Nathalie & Modi, Vijay & Mercadal, Ignacia, 2021. "Estimating electricity distribution costs using historical data," Utilities Policy, Elsevier, vol. 73(C).
    9. Gorman, Will & Jarvis, Stephen & Callaway, Duncan, 2020. "Should I Stay Or Should I Go? The importance of electricity rate design for household defection from the power grid," Applied Energy, Elsevier, vol. 262(C).
    10. Beaufils, Timothé & Pineau, Pierre-Olivier, 2019. "Assessing the impact of residential load profile changes on electricity distribution utility revenues under alternative rate structures," Utilities Policy, Elsevier, vol. 61(C).
    11. Gorman, Will & Mills, Andrew & Wiser, Ryan, 2019. "Improving estimates of transmission capital costs for utility-scale wind and solar projects to inform renewable energy policy," Energy Policy, Elsevier, vol. 135(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Riechmann, Christoph, 2000. "Strategic pricing of grid access under partial price-caps -- electricity distribution in England and Wales," Energy Economics, Elsevier, vol. 22(2), pages 187-207, April.
    2. Bessi, Alessandro & Guidolin, Mariangela & Manfredi, Piero, 2021. "The role of gas on future perspectives of renewable energy diffusion: Bridging technology or lock-in?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 152(C).
    3. Jamasb, T. & Söderberg, M., 2009. "Yardstick and Ex-post Regulation by Norm Model: Empirical Equivalence, Pricing Effect, and Performance in Sweeden," Cambridge Working Papers in Economics 0908, Faculty of Economics, University of Cambridge.
    4. Avilés A., Camilo & Oliva H., Sebastian & Watts, David, 2019. "Single-dwelling and community renewable microgrids: Optimal sizing and energy management for new business models," Applied Energy, Elsevier, vol. 254(C).
    5. Klaus Gugler & Mario Liebensteiner, 2016. "Productivity Growth and the General X-factor in Austria’s Gas Distribution," Department of Economics Working Papers wuwp236, Vienna University of Economics and Business, Department of Economics.
    6. Mountain, Bruce R., 2019. "Ownership, regulation, and financial disparity: The case of electricity distribution in Australia," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    7. repec:bdr:ensayo:v::y:2005:i:49:p:88-132 is not listed on IDEAS
    8. Fabian Feger & Nicola Pavanini & Doina Radulescu, 2022. "Welfare and Redistribution in Residential Electricity Markets with Solar Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(6), pages 3267-3302.
    9. de Oliveira, Lucas Guedes & Aquila, Giancarlo & Balestrassi, Pedro Paulo & de Paiva, Anderson Paulo & de Queiroz, Anderson Rodrigo & de Oliveira Pamplona, Edson & Camatta, Ulisses Pessin, 2020. "Evaluating economic feasibility and maximization of social welfare of photovoltaic projects developed for the Brazilian northeastern coast: An attribute agreement analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 123(C).
    10. Christoph Schick & Nikolai Klempp & Kai Hufendiek, 2021. "Impact of Network Charge Design in an Energy System with Large Penetration of Renewables and High Prosumer Shares," Energies, MDPI, vol. 14(21), pages 1-26, October.
    11. Castaneda, Monica & Jimenez, Maritza & Zapata, Sebastian & Franco, Carlos J. & Dyner, Isaac, 2017. "Myths and facts of the utility death spiral," Energy Policy, Elsevier, vol. 110(C), pages 105-116.
    12. Cherrelle Eid & Rudi Hakvoort & Martin de Jong, 2016. "Global trends in the political economy of smart grids: A tailored perspective on 'smart' for grids in transition," WIDER Working Paper Series 022, World Institute for Development Economic Research (UNU-WIDER).
    13. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
    14. D. Giannakis & T. Jamasb & M. Pollitt, 2003. "Benchmarking and Incentive Regulation of Quality of Service: an Application to the UK Electricity Distribution Utilities," Working Papers EP35, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    15. Lacchini, Corrado & Rüther, Ricardo, 2015. "The influence of government strategies on the financial return of capital invested in PV systems located in different climatic zones in Brazil," Renewable Energy, Elsevier, vol. 83(C), pages 786-798.
    16. Savelli, Iacopo & Morstyn, Thomas, 2021. "Electricity prices and tariffs to keep everyone happy: A framework for fixed and nodal prices coexistence in distribution grids with optimal tariffs for investment cost recovery," Omega, Elsevier, vol. 103(C).
    17. Loza, Andrés & Margaretic, Paula & Romero, Carlos, 2003. "Consistencia de medidas de eficiencia basadas en funciones de distancia paramétricas y no paramétricas: una aplicación al sector de distribuidoras de electricidad en la Argentina [Consistency of ef," MPRA Paper 15269, University Library of Munich, Germany.
    18. Thomas Weyman-Jones, 2001. "Yardstick and incentive issues in UK electricity distribution price controls," Fiscal Studies, Institute for Fiscal Studies, vol. 22(2), pages 233-247, June.
    19. Fridgen, Gilbert & Kahlen, Micha & Ketter, Wolfgang & Rieger, Alexander & Thimmel, Markus, 2018. "One rate does not fit all: An empirical analysis of electricity tariffs for residential microgrids," Applied Energy, Elsevier, vol. 210(C), pages 800-814.
    20. Lucy Baker & Jon Phillips, 2019. "Tensions in the transition: The politics of electricity distribution in South Africa," Environment and Planning C, , vol. 37(1), pages 177-196, February.
    21. Koumparou, Ioannis & Christoforidis, Georgios C. & Efthymiou, Venizelos & Papagiannis, Grigoris K. & Georghiou, George E., 2017. "Configuring residential PV net-metering policies – A focus on the Mediterranean region," Renewable Energy, Elsevier, vol. 113(C), pages 795-812.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:105:y:2017:i:c:p:354-362. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.