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301 Moved Permanently

301 Moved Permanently


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The rise of solar, storage, electric vehicles and other advanced technologies is giving consumers more control over their energy usage. This shift has made the traditional power sector anxious about the sustainability of its business model based on growing demand coupled with large investments in electricity generation and distribution. To preserve this model, many utilities are pushing for sweeping rate reforms that are bad for customers and stifle solar development.

For decades, residential customer bills have been based on a two-part rate: a small monthly fixed charge that covers utilities’ long-term investments in infrastructure and a per-kilowatt-hour usage charge that varies based on how much electricity a customer uses.

The most popular utility proposal for preserving revenues has been a hefty increase to the fixed monthly charge portion. This blunt fixed-charge increase undermines customers’ control over their energy bills, severely weakens investments in efficiency and solar as savings measures, and hits low-usage and low-income customers the hardest.

These fixed-charge proposals have been met with strong - and largely successful - opposition from consumer and environmental advocates alike. In one such case last year, Vote Solar and Earthjustice prevented New Mexico utility El Paso Electric Co. from imposing discriminatory fees and rate hikes on solar customers.

With advocates defeating fixed-charge proposals, utilities have turned to another bad idea: imposing demand charges on residential customers. Demand charges are incurred on top of fixed charges and per-kilowatt-hour charges and are set based on a customer’s single peak use of electricity during an entire billing period.

Utilities assert that demand charges will send a price signal to customers that will result in flatter energy use, which would lower system costs related to peak demand. But there is little evidence to hold up this claim. Technologies that could enable customer response to price signals are still expensive and far from widespread adoption. In the absence of that visibility and control, an unexpected coincidence of events - for example, a customer’s air conditioner automatically cycles at the same time the consumer is using the hair dryer and toaster - would result in a significant bill increase. Because demand charges are so difficult to predict and manage, they’ve typically only been used for commercial and industrial customers. Placing the burden of constantly monitoring power consumption on residential customers is simply unrealistic and unfair.

Utilities and regulators should be looking to more sophisticated rate design options that fully and fairly value customer electricity use and production. If properly designed and phased in, time-of-use rates are one such forward-looking alternative. Time-of-use rates are similar to the existing rate design, in that customer charges are based on the kilowatt-hours consumed. However, they take advantage of new metering capabilities to charge different prices to better reflect the value of that electricity at different times of the day or year. A recent review of time-of-use rates by the Rocky Mountain Institute showed that these rates have resulted in an up to 50% peak load reduction and reduced total energy consumption by up to 10%, and it found that there was broad customer acceptance of time-of-use rates both for opt-in rates and opt-out (default) rates.

It’s critical that solar advocates understand these rate design proposals and engage in the regulatory process to help shape their outcomes. Regulators should pursue open, thorough processes, which means taking the time to obtain and secure solid data, hear from diverse stakeholders, and consider the impacts on consumers, particularly low-income consumers. Our end-game should be rate design that supports investments in rooftop solar; preserves customer choice; and delivers energy that is reliable, affordable and - increasingly - clean for all consumers.

 

Ed Smeloff is managing director of the regulatory team at Vote Solar. Briana Kobor, the nonprofit’s program director of DG regulatory policy, also contributed to this article.

Sundown

Rate Reform Poses Both Challenges And Opportunities

 

 

 

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