Rate Design for DERs Not Consistent, and Could Be Better Say Some Experts

Ben Faulkinberry

UtilityDive gathered the opinions of industry experts regarding a fast-growing trend in a traditionally slow-moving world of utility rates: As distributed energy resources (DERs) and distributed generation (DG) are implemented, utility companies face shrinking revenues with which to cover their fixed costs and return value to shareholders.

The experts interviewed suggest well-designed utility rates can act as a compromise to both preserve revenues and adequately compensate for DERs.

  • At a national level, the number of rate cases aimed at raising fixed charges for customers with rooftop solar and other DG facilities more than doubled in the past year, from 23 rate cases in November 2014, to approximately 50 currently.
  • The standoff between some utility companies and advocates of solar will galvanize as utility systems add more DERs in response to incentives under the EPA’s Clean Power Plan.
  • The experts interviewed say rate design ought to consider the current market penetration of DERs in the utility’s territory, but currently does not in many cases.
  • Additionally, the experts note that while customers with DERs should not be unnecessarily discouraged in low-penetration markets, rates also should reflect the decreasing marginal value of DERs to the grid system in highly-penetrated markets.
  • It is their opinion that when constructing rates, utilities should not focus on resisting net energy metering, but on their concern for fixed cost recovery. The experts suggest solar advocates should be mindful of the true incremental value being offered by solar in each market.

How a local utility currently structures its rates for customers with DERs should play a large part in the decision-making process when considering new DER projects. However, as noted in the article, this is one part of the utility arena that is changing relatively quickly. Rate cases in progress may give an indication of where a local utility is heading in its response to increased implementation of DERs.

Read UtilityDive’s full article for more information.

Also, read about how New York is disrupting the traditional utility business model.


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