ORIGINAL REPORTING: Are Customers Ready For The Coming Time Varying Rates

An emerging push for time-of-use rates sparks new debates about customer and grid impacts; Momentum is building behind time-of-use rates, but longstanding doubts about whether they are fair remain unresolved, threatening new efforts.

Herman K. Trabish, Jan. 28, 2019 (Utility Dive)

Editor’s note: Since this story ran, California’s new rate rollout began and calls for time varying rates are increasing across the country.

Pilot programs have shown smartly designed residential time-of-use (TOU) and other time varying rate structures can effectively shift power consumption away from peak demand and drive significant savings for both customers and utilities. But concerns about whether such rate structures are good for all customers remain. And doubts about whether they can be designed and implemented both fairly and effectively are emerging.

Traditional electricity rates for residential customers include a small fixed charge and a charge for each kWh of electricity they use. As energy efficiency (EE) and customer-owned distributed generation (DG) grow, residential customers use fewer kWh and utility revenues drop, making it harder to cover their costs.

A new idea is to vary the price of kWhs, making the price higher for residential customers during peak demand, and lower at other times, allowing for more precisely pricing kWhs at what they cost.

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With today's flat per-kWh rates, "customers who use the grid more during peak demand are underpaying for the costs of meeting that demand," Brattle Group Principal Ahmad Faruqui told Utility Dive. "Customers who use the same kWhs during off-peak times pay the same bill and are subsidizing the others. TOU rates can redress that inequity."

Three big questions about TOU rates have delayed large-scale implementation: Can well-designed TOU rates save customers money and reduce utilities' peak demand? Will customers be able to negotiate the differences between peak and off-peak prices? What about customers with limited flexibility and special needs? The answers to all three have so far come from limited pilot programs.

And if those answers are helpful to utilities and their customers, many will want to know why it has taken so long to put them to work. The short answer is that resolving consumer advocates' doubts about fairness and utility planners' doubts about rate design is complicated… click here for more

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