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30 Environmental Advocacy Groups Call on NARUC for Holistic Rate-Setting Guidelines

June 30, 2016 By Cheryl Kaften

On June 23, the leaders of 32 national and state environmental advocacy groups sent a letter to Travis Kavulla, president of the National Association of Regulatory Utility Commissioners (NARUC), asking for “frank discussions … of the rapidly evolving electricity rate-design issues arising in today’s fast-changing energy landscape.”

In order to protect consumers and encourage the adoption of renewable energy, the signatories said, regulators must “pay close attention to how customers interact with and pay for the energy and services they use, as well as how utilities finance their capital investments.”

Describing the letter in an Environmental Defense Fund blog on June 27, Diane Munns, senior director of Clean Energy Collaboration for EDF stated, “From Nevada and Arizona, to Kansas and New Hampshire, we’ve seen these [discussions] leave the hearing rooms of public service commissions and enter the public arena: Increases to fixed charges, changes to net metering, demand charges, time-of-use rates, minimum bills, or a combination of these options, are just some of the policies that states have either implemented … , or are currently considering.

“But many questions remain about the best path forward.” Munns noted. “What design will adequately compensate utilities for their investments, support the need to upgrade the electric grid, and encourage new technologies and innovation, while being perceived and accepted as fair?

“To answer these and related questions,” she said, a ‘good’ rate design process needs to be put in place – one built on transparency, fairness, accessibility, and accountability.”

As part of that process, she and the other letter signatories applauded NARUC’s action to establish the Subcommittee on Rate Design and its development of a manual to assist state commissions. As part of that effort, the subcommittee recently conducted a poll on the subject of rate designs, challenges, and key cases.

“We do,” the signatories said, “however, offer specific recommendations on what a good regulatory process looks like in evaluating rate-design changes.”

Among the recommendations the signatories offered to inform and advance the rate design process are the following;

  • Assessment and analysis. Understanding the pace for making change should be a first step, they said. Do state-specific conditions require immediate action, or should state regulators continue with intentional monitoring, and establish guideposts and goals for taking future action?
  • Commissions should have processes available to discuss goals and assess different methodologies and their impacts outside traditional, contested rate cases. In an open, docketed process, stakeholders and regulators can evaluate the pros and cons of different rate design alternatives based on clear policy goals. Regulators should require utilities to share any models upon which they base claims for cost shifts or other impacts so that stakeholders can run alternative scenarios. An open process can help regulators assess trade-offs and choose designs that meet the majority of goals, rather than being locked into binary yes/no choices. Mitigation measures can be taken in those areas where compromise needs to be pursued.
  • Data-driven. During collaboration, commissions should start the process of defining and collecting the data necessary to inform future policy discussions. For solar PV, this data may include, but is not limited to, deployment rates and locations; diversity of system sizes deployed; load shapes; hourly production profiles, including south and west arrays; hourly line losses; distribution costs; and hourly load data for individual circuits…. Collecting data to put actual numbers to these costs and benefits is an important step.
  • Testing. Pilots, shadow-billing and opt-in rates are all widely accepted methods for testing new rate designs and managing risk prior to wide-scale adoption.
  • Special attention to low income/vulnerable population impact. While any process should include thorough analysis of anticipated impacts of rate design changes, particular attention should be given to low-income and vulnerable populations to ensure that rate design or the imposition of new costs do not undermine the home energy security of these households. The process should incorporate review and approval of effective programs and policies to mitigate these impacts.
  • Consumer education. Some rate designs strive to change customer behavior through price signals. Customers must be able to respond and – critically – [to] understand how to respond for these designs to be effective.

NARUC President Travis Kavulla responded to the letter in an email to Munns, thanking the group for the effort, Utility Dive reported.”As you can imagine, our staff subcommittee has received a large quantity of advocacy and feedback of all sorts on this topic, and I am grateful when groups like all of yours go to the diligent effort of finding common ground,” he said.

For a complete list of signatories to the letter, click here.

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