ORIGINAL REPORTING: Rate Design Innovations That Can Boost The Energy Transition

From Maryland to California and beyond, rate design innovations are boosting the energy transition; Success with time-of-use rates can allow utilities to start integrating more variable and distributed generation, leading to more sophisticated time-varying rates.

Herman K. Trabish, Nov. 25, 2020 (Utility Dive)

Editor’s note: This study suggests rate design could be an under-appreciated tool in the energy transition.

Three Maryland investor-owned utility (IOU) pilots of new time-of-use (TOU) rates significantly reduced peak demand and customer bills, a September 2020 Brattle Group assessment found. The success was built on the power system's emerging transition to variable and distributed renewables and customers' greater access to enabling technologies and familiarity with responding to price signals, the study found.

"Rate designs differ widely in the accuracy of the price signals they send to customers, from flat rates to day-of real-time rates," said California Solar & Storage Association Regulatory Affairs Senior Advisor and rate design authority Scott Murtishaw. "The more precise the price signal, the more customers can help address variable energy sources with flexible loads and storage to accelerate decarbonization."

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Maryland was ready for new rates because it had deployed smart meters, its customers were familiar with alternative rates, and distributed energy resources (DER) are growing there, said Brattle Principal Sanem Sergici, who led the study of the pilots. The success of these new rates moves Maryland along the energy transition trail that states from Hawaii and California to South Carolina have recently blazed.

Those states have shown that success with TOU rates can allow utilities to begin to integrate more variable and distributed generation and lead to more sophisticated time-varying rates. And those more sophisticated rates like Brattle's study of June 2019 through May 2020 impacts of Brattle's study of June 2019 through May 2020 impactsMaryland's TOU pilots, which allow for higher penetrations of variable and distributed generation that further advance the energy transition.

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A TOU rate's varying prices are higher during peak demand periods, which signals customers to shift usage to lower-priced off-peak periods. That can reduce the individual customer's bill. Reducing a utility's need to invest to meet rising peaks can also reduce all customers' bills. In Maryland and many other states, TOU and other new rate designs are possible because of the deployment of advanced metering infrastructure (AMI). AMI's "digital link" between utilities and customers allows "expanded services" like home energy management, usage alerts and "time-varying" rates, the Edison Foundation reported in December 2019.

Through Maryland's peak time rebates (PTR) program, put in place in 2008, customers get rewards for voluntarily reducing usage when pre-notified of a coming demand spike and is "the most succesful such program in the U.S.," Brattle's Sergici said. "Since 2014, roughly 1.5 million Maryland customers have participated" in significantly reducing these intermittent critical peaks when demand is highest. With customer-sited DER emerging, Maryland can begin assessing the potential of time-varying rates' price signals to empower "customers, utilities and all other stakeholders," the order initiating the PC44 grid modernization docket said… click here for more

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