Massachusetts DPU Sets National Grid’s X Factor Based on Study by CA Energy Consulting

Categories: Rate Design, Total Factor Productivity

October 29, 2021 - Nicholas Crowley and Mark Meitzen

National Grid operates under a revenue cap formula that adjusts its revenue requirement annually at the rate of inflation less an X factor, where the X factor is the difference between the gas distribution industry and economy-wide total factor productivity, plus an input price differential. This revenue cap formula aligns with economic theory that aims to promote efficiency in the service of gas customers while allowing the utility to recover reasonable rates.

Christensen Associates Energy Consulting experts Dr. Mark Meitzen and Mr. Nick Crowley conducted a total factor productivity study to determine the X factor for National Grid’s revenue cap formula. The findings of that study were filed as testimony before the Massachusetts Department of Public Utilities (Massachusetts DPU). On September 30, 2021, the Massachusetts DPU issued its Final Order under Docket DPU20-120, citing the results from Meitzen and Crowley’s study to approve their suggested X factor of -1.30%.