Page 232 - Sustainable Cities and Communities Design Handbook

206 Sustainable Cities and Communities Design Handbook

RL t Revenue loss from reduced sales in year t
TC t Tax credits in year t
UAC at Utility-avoided supply costs for the alternate fuel in year t
UAC t Utility-avoided supply costs in year t
UIC t Utility-increased supply costs in year t

Appendix C
Derivation of RIM Lifecycle Revenue Impact Formula
Most of the formulas in the manual are either self-explanatory or are explained
in the text. This appendix provides additional explanation for a few specific
areas where the algebra was considered to be too cumbersome to include in the
text.

Rate Impact Measure
The Ratepayer Impact Measure lifecycle revenue impact Test (LRI RIM )is
assumed to be the one-time increase or decrease in rates that will reequate the
present valued stream of revenues and stream of revenue requirements over the
life of the program.
Rates are designed to equate long-term revenues with long-term costs or
revenue requirements. The implementation of a demand-side program can
disrupt this equality by changing one of the assumptions upon which it is based:
the sales forecast. Demand-side programs by definition change sales. This
expected difference between the long-term revenues and revenue requirements
is calculated in the NPV RIM . The amount by which the present valued revenues
are below the present valued revenue requirements equals NPV RIM .
The LRI RIM is the change in rates that creates a change in the revenue
stream that, when present valued, equals the -NPV RIM *. If the utility raises (or
lowers) its rates in the base year by the amount of the LRI RIM , revenues over
the term of the program will again equal revenue requirements. (The other
assumed changes in rates, implied in the escalation of the rate values, are
considered to remain in effect.)
Thus the formula for the LRI RIM is derived from the following equality
where the present value change in revenues due to the rate increase or decrease
is set equal to the NPV RIM or the revenue change caused by the program.

N
LRI RIM E t
X
NPV RIM ¼
t 1
t¼1 ð1 þ dÞ