must document its
calculation of the levelized annual incremental cost of eligible renewable
resources. Utilities are encouraged, but not obligated, to use the following
Step 1: Calculate the net present value of the
cost of the utility's eligible renewable resource and substitute resource over
an equivalent contract length or facility life.
Step 2: Calculate equal nominal values over the
appropriate contract length or facility life that have a net present value
equal to those calculated in Step 1, using the same discount rate.
Step 3: Calculate the annual difference between
the levelized delivered cost for the eligible renewable resource and the
substitute resource to determine the levelized incremental cost of the eligible
A utility that uses the annual update methodology must document
the basis for any change to the levelization methodology used in a prior June 1
report to levelize the costs of an eligible renewable resource and its
associated substitute resource.
(2) Regardless of the methodology chosen to
levelize costs, utilities must document the basis for their chosen method for
must document the basis for the discount rate used in its levelized cost
(4) Utilities must
document how the discount rate used to perform the levelized cost calculations
is consistent with the inflationary assumptions incorporated into the delivered
cost projections for the eligible renewable resource and substitute
(5) Utilities must
document how the method and assumptions used to levelize delivered costs for
the eligible renewable resource are consistent with those used to levelize the
delivered cost of the associated substitute resource.