Grid modernization programs cannot move forward without demonstrating value to regulators and customers. Yet the grid modernization cost-benefit analysis methodologies applied in rate case filings vary widely across jurisdictions: there is no single industry standard, and the choice of framework matters. Understanding which cost-benefit tests best support a grid investment business case before a Public Service Commission can be the difference between a program that advances and one that stalls.
In this paper, ScottMadden defines the five most commonly used cost-benefit tests and examines how utilities have applied them to build successful grid investment business cases. The five tests covered are the Utility Cost Test (UCT), the Total Resource Cost test (TRC), the Societal Cost Test (SCT), the Ratepayer Impact Measure (RIM), and the Participant Cost Test (PCT). Each measures cost-effectiveness from a different stakeholder perspective, and selecting the right combination is a critical step in the utility regulatory approval process.
National Grid’s 2020 New York rate case, Entergy Mississippi’s advanced metering infrastructure program, and Xcel Energy’s Conservation Improvement Program each show how these tests perform under real regulatory scrutiny. The cases examine how the Societal Cost Test, periodic cost-benefit reporting, and scenario analysis have strengthened grid investment business cases before a Public Service Commission, and what utilities can take from those outcomes.
Download the full paper for a detailed breakdown of each test, the case study results, and guidance on building your grid modernization cost-benefit analysis for regulatory filing.
Additional Authors: Mike Kerrigan and Sarah Vondracek
