Electricity Rate Design Review Paper Part 1: Charge Without a Cause

Vote Solar has intervened in rate cases around the country in which utilities have proposed demand charges on residential customers. For those not familiar with demand charges, these are charges that are determined by a customer’s highest electricity usage over an entire monthly billing period, even if that peak is just for a few minutes. This means that an unlucky coincidence of events – your air conditioner automatically cycles at the same time that someone is using the hair dryer and bread is in the toaster – and the result is an unexpected bill increase. We work to make the case that these charges – which are so difficult to predict and manage – are bad for solar customers, bad for customers with low or fixed incomes, and are really just bad rate design.

Today we’re releasing a new paper, co-authored by Vote Solar and five other regulatory and rate expert groups, that takes a closer look at what demand charges mean for utilities and customers. As the National Association of Regulatory Utility Commissioners (NARUC) holds its 2016 Summer Meetings starting July 23 in Nashville – which include rate design discussions — this new paper unpacks the key elements of demand charges and their effect on fairness, efficiency, customer acceptability and utility cost recovery. The big takeaway: most applications of demand charges for small customers perform poorly in all categories.

You can read the paper for yourself here: Charge without Cause (PDF)