Case Study - Designing Rates for Emerging Customer Classes
Designing distributed energy rates for solar customers is a part of a “routine” cost of service study. Here is a case study of how we assisted a client not only with DER rates, but began moving customer classes to their cost of service.
The cost of service is the science, and the rate design is the art. The electric rate structure of any utility has decades of embedded history and political decisions.
The approach now is more towards basing rates on the cost of service. There are still inter-class subsidies in rate design, but more focus has been on closing those gaps.
The utility had not increased rates in 5 years and wanted to take the opportunity to move customer rates towards their cost of service and to incorporate distributed energy resources (DER) and electric vehicle charging into their rate structure.
We worked with the utility to design rates to reflect the costs to serve each customer class. We assisted the utility in developing rate structures to provide incentives for customers, including a residential time-of-use opt OUT rate and a DER rate with a system connection charge.
We also designed an electric vehicle off-peak charging rate and a subscription charging rate (i.e., the EV customer can charge all they need for one monthly rate).
Giving customers choices incentivizes them to monitor their power usage and shift how they use electricity to lower their power bills. The percentage of customers that take an interest in doing so is not high. Still, with opt-out rates carrying a 5% premium, the utility is pretty certain that the lower rate structure of the time-of-use rate will spur more customers to stay in the rate vs. opting out.
