ORIGINAL REPORTING: New Rate Design To Grow New Energy
Could rate design help California's struggle with flat demand? The commercial and industrial sector could be the front line for rate design experimentation
Herman K. Trabish, Dec. 27, 2017 (Utility Dive)
Editor’s note: Experiments in rate design to get more from New Energy are now appearing across the country.
Utilities are facing fewer kWh to bill as demand remains flat. While the reasons for the diminishing number vary, utilities and regulators face the challenge to cover the costs for delivering electricity as sales diminish. Proliferating rooftop solar and energy efficiency have also caused peak demand to grow. With these hurdles in mind, utilities and regulators are increasingly turning to rate design options for residential and commercial and industrial consumers. California is at the forefront of these efforts as the state sets ambitious renewable energy and climate goals. As access to customer-owned generation resources grows, utilities also face possible defection from consumers. The C&I sector, which makes up two-thirds of the state's power demand, the right rate design could unlock potential of their purchases of distributed energy resources (DER) to be used as grid assets.
To get grid services from DER, the California Public Utilities Commission and utilities are considering new types of rates for its C&I sector as they seek to answer two overarching questions: What is the rate design utilities will support? And what will it take to get customer buy-in for that rate design? The key economic goal for rate design is to motivate customers to use electricity only when the value is greater than the full additional cost to society, Severin Borenstein, an energy economist at the University of California at Berkeley said at a recent forum in California. That is called ‘economic efficiency of consumption.’ Distributing costs fairly, based on ‘societal views of fairness’ and enabling equal access to electricity are two other the goals of rate design. And the fourth is to allow power providers to recover all costs, including their cost of capital… click here for more
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