Establishing Utility Revenue Requirements

An Analysis Group team led by Senior Advisor David Sosa participated in several rate proceedings, helping utilities verify that their revenue requirements are reasonable and meet evidentiary standards, and helping them respond to contrary claims from state regulatory commission staff and intervenors.

The team evaluated a publicly disputed econometric model that purported to calculate an alternative target for utility expense recovery that was substantially below the utility's recorded expenses. In his testimony, Dr. Sosa outlined the model's shortcomings and concluded that its specifications were so flawed as to render it useless. The team worked with counsel for the utility to prepare the cross-examination of the econometric model's sponsor. In its order, the state regulatory commission adopted the position taken in Dr. Sosa's testimony and rejected the proposed revenue adjustment.

The team reviewed a utility's regulatory and outside services expenses to determine their reasonability and to ensure that claims for cost recovery could be supported. The team coordinated the revenue requirement adjustments with the utility's staff prior to the rate case filing. Dr. Sosa filed direct and rebuttal testimony in support of the utility's claimed expenditures in the rate proceeding.

The team also evaluated a model that reduced a utility's recoverable employee compensation expenses based on measures of local economic conditions and national changes in aggregate productivity. Dr. Sosa sponsored testimony that described the problematic economic assumptions implicit in the model and recommended that its shortcomings should disqualify it from the state regulatory commission's consideration in establishing the revenue requirement.