ORIGINAL REPORTING: New state action due on customer empowering rate designs and business models

2020 Outlook: New state action on customer empowering rate designs and business models; Regulators, utilities and stakeholders will pilot simple price signals and work toward agreement on a performance-based framework, but California may be in for a surprise.

Herman K. Trabish, January 23, 2020 (Utility Dive)

Editor’s note: Policymakers are moving forward with rate designs that will be the financial foundation of a future power system.

In 2020, the way utilities charge customers and the business models they use could change electricity users’ role in the energy transition and support the enhanced adoption of new technologies.

Only about 6% of U.S. electricity customers now pay through rates that give them a role in the types of energy they use and when they use it. The rest use a rate that discourages customer interest, encourages no change in the power mix and gives utilities no motive to evolve, according to advocates for more dynamic rates. But 2020 promises major advances by state regulators in rate design and power provider incentives.

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Efforts by state regulators and legislators in 2020 will show "the power of the states over the future of the electricity system in the absence of federal action," Energy Innovation (EI) Director of Electricity Policy Michael O’Boyle told Utility Dive. "States can and will move on their own and they are creating a framework and a foundation for change."

Utilities can now use new technologies, like smart meters and solar+storage, and new power system dynamics, like the shifting time of peak energy demand, to benefit their customers and their systems. In 2020, advanced rates with price signals to direct electricity use and business model reforms to align customer and provider needs could begin delivering big benefits. But one of 2020's biggest steps forward, to be taken by California, may be a misstep, a leading rate design authority said.

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In Q3 2019, "28 states plus D.C. took actions to reform rate designs, regulatory structures or utility business models," the newest quarterly policy update from the North Carolina Clean Energy Technology Center (NCCETC) reported. Rate design reforms were considered in 21 states and utility business model or ratemaking adjustments were undertaken in D.C. and 22 states.

Decisions and implementations of time of use (TOU) and other time-varying rates, including critical peak pricing, peak time rebates, and demand charges, and of simple subscription rates and of performance-based regulation (PBR) are coming in 2020, NCCETC Senior Policy Research Manager and quarterly lead author Autumn Proudlove told Utility Dive. These rates’ price signals discourage customer electricity usage during peak demand periods and support utility model evolution… click here for more

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