ORIGINAL REPORTING: New Energy Rate Designs – Demand Charges Vs. Time-Of -Use Rates

Rate design roundup: demand charges vs. time-based rates; A new RMI report compares the two strategies transforming utility rate designs across the country

Herman K. Trabish, June 2, 2016 (Utility Dive)

Editor’s notes: The rate designs regulators pick for the emerging modern grid will determine how big a place New Energy can have on it.

For years, the typical method for compensating owners of distributed generation like rooftop solar has been through retail rate net energy metering (NEM) — crediting owners for the generation they send back to the grid at the rate at which they buy electricity. But where rooftop solar and other DER penetration is reaching high levels, regulators are revising NEM structures over concerns about utility finances. In place of net metering, many policymakers are looking for a new kind of rate structure that will encourage DER adoption without imposing a burden to the rest of a utility’s rate base. While not mutually exclusive, two central policy options have emerged — residential demand charges and time-of-use rates.

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A new report from the Rocky Mountain Institute, a clean energy think tank, takes a close look at the potential of rate design reforms and what real-world experience can teach utilities and policymakers about both demand charges and time-based rates (TBR). TBR vary by time of day to more accurately reflect costs. These price signals can motivate customers to alter their usage patterns in ways that can reduce both peak and overall load. With a demand charge, customers pay a fee based on their period of highest consumption or their usage during a pre-defined peak period. That sum is added to customers’ volumetric and fixed bill charges…” click here for more

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