Updating Distribution Transformer Loss Costs to 2018


Would you pay thousands more for a car that cuts your gas bills in half? It depends – a vehicle that’s a financial loser if gas is fifty cents a litre could be a paying proposition at five times that price. Distribution Transformer Loss estimates are in for 2018.

Would you pay more for your transformers in return for sharply reduced loss costs? Once again, it depends. And your customers and shareowners are entitled to ask: “How much more?” Distribution transformers in a municipal utility can account for more than ten per cent of the book value of its assets, and last decades, so it’s crucial to obtain the maximum possible net benefits from them – equivalent to minimizing their total ownership costs.

The Long-Term Energy Plan (LTEP), announced in October 2017 by Ontario Energy Minister Glenn Thibeault, forecast lower electricity prices for consumers. Since transformer loss costs are largely proportional to electricity prices, this forecast prompted a review of our earlier estimates.

Our calculation method is unchanged – add up the present values of losses over expected transformer life, using maximum-likelihood estimates of future electricity prices, weighted average cost of capital (WACC), peak responsibility factor, and load factors. We assumed WACC equals 5.67 per cent per year, the Ontario Energy Board-deemed figure at the time of writing. As table 1 shows, the 2018 estimates of transformer loss costs are lower than USF’s earlier figures.

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