Electricity Policy


Last updateThu, 16 Mar 2017 7pm

ISSN 2331-1223  Twitter

Solving the Rate Problem: Fundamentals of the Metered Energy Efficiency Transaction Structure


by Tom Foley and Bill Campbell

Utility systems have long struggled with the rate impacts and core business impacts of helping customers improve the efficiency of their energy use.  In an economy that increasingly values efficient energy solutions, this new approach may hold promise.

tility rates are simple in concept.  Regulators set rates so utilities can recover their costs, including operating costs and a fair and reasonable return of and on invested capital.    That means the rates utility customers pay, collectively, are basically determined by this relationship:

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# Robert Borlick 2013-06-22 12:12
This is an interesting article; unfortunately it misdiagnoses the problem.

The "rate problem" described is caused by inefficient retail tariffs that are designed to recover the utility's fixed costs (i.e., those that do not vary with KWh consumption) through pricing that charges for KWh consumption! The obvious solution to this mismatch is to fix the retail tariffs such that they closely reflect the underlying costs. Focusing attention on elaborate, expensive "baseline" metering is misguided in that it papers over the source of the problem.

Fixing retail tariffs provides benefits that go far beyond eliminating cost shifting inequities. More efficient retail rates would promote more efficient consumption of electricity and would greatly facilitate the development of demand response among small customers.

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