Accelerating the Energy Transition Through Advanced Rate Design

Executive Summary:

Ratemaking is an art and a science, blending quantitative analysis with pricing structures that balance the needs and preferences of consumers, utilities, and regulators. Regulators and utilities must consider economic conditions, social equity, and the broader policy landscape to craft rates that are fair, transparent, and responsive to the dynamic nature of our energy sector.

In contrast to traditional utility rates, advanced rate design (ARD) aims to create more dynamic, flexible, and responsive pricing, or direct load control mechanisms, that can better accommodate customers while also aligning with the changing dynamics of energy markets, consumer behavior, and grid management. ARD is foundational for the clean energy transition, providing a structured process to ensure price signals evolve with a power grid integrating more renewable resources.

“Accelerating the Energy Transition Through Advanced Rate Design" provides an overview and comprehensive strategy of ARD so that electric utilities can harness this approach to better optimize existing infrastructure, align customer behavior with system needs, and enhance overall grid reliability. The white paper proposes a multifaceted approach that includes stakeholder collaboration, equity and affordability, technological innovation, regulatory innovation, and a comprehensive cost analysis. By adopting the recommendations outlined in this paper, regulators and utilities can craft rates that advance energy equity and justice, combat climate change, and promote energy efficiency, conservation, electrification, grid reliability, and grid resilience.

Authors:

Jennifer Potter and Alex Pfeifer-Rosenblum

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