Three key steps in designing rates for solar power

KQED posted a good summary of how solar power is driving the residential rate design rulemaking at the CPUC. (M.Cubed works for EDF there.) I offer three steps that should be taken to address the issues of how to change ratemaking for a changing energy marketplace:

1) Consumers should see time varying prices (time of use or TOU being among that menu). Tiered rates make it impossible to see the current price for consumption, and tiered rates have been shown not to induce any additional conservation across the customer base. Consumer surveys show that customers want more control over their electricity use and the price signals to direct them.

2) Consumers should be offered a meaningful menu of rate options. This means rates that differ in risk exposure both over time of day and time horizon. Customers should be able to hedge against peak day prices or participate in demand response. They should be able to accept changes in hourly prices or buy a multi-year contract. Utilities already offer these contract options to their suppliers; why not treat their customers as they they are valued?

3) Any calculation of grid costs and responsibility should reflect the changing demand by consumers. The grid charges proposed by the utilities assume that future consumers will install the same-sized equipment as they do today and that they will consume in the same pattern. Solar panels are ready today to “island” a home from the network, and EV charging could create greater load diversity even at the circuit level. That will radically change utility investment. The distribution planning rulemaking is an important step toward resolving that issue but the CPUC hasn’t yet linked the proceedings.

Only the first issue is being addressed head on in the rulemaking and it hasn’t really delved into the importance of emerging consumer choice.

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