Alliance Takes Key Step in Development of New Utility Rate Designs

The Alliance to Save Energy announced on November 2 that it has successfully completed the first round of negotiations with utility and energy efficiency advocates in a Rate Design Initiative that will change how millions of Americans use and pay for energy in their homes.

Indeed, by next summer, the Alliance hopes to develop four rate design templates that utility regulators across the country could use as guides in setting rates.

The group’s members – a coalition of business, government, environmental, and consumer leaders – agreed unanimously on a set of core principles guiding their work toward developing new utility rate designs that encourage the efficient and productive use of energy.

“What we’re trying to do is bring all the parties to the table to come up with models for how we can meet these broader societal goals of incentivizing efficiency and delivering cleaner, more reliable power while also making sure that the economics are structured so that consumers are protected and utilities can adequately recover their fixed costs,” said Alliance SVP Kelly Speakes-Backman.

She added, “It’s a bit of a puzzle that people have been wrestling with for years, but there are some great ideas out there for how we can be smarter about how we’re consuming and paying for electricity. Particularly with all the innovation going on with smart meters, timed appliances and other new technologies, we felt it was time to bring everyone together and try to find some consensus for moving forward in today’s regulatory environment. I think we have the right people at the table, at the right time, to begin to solve this puzzle.”

The group’s work passed a key threshold when the initial companies – including Exelon, Ingersoll Rand, Johnson Controls, Lockheed Martin, National Grid, Pacific Gas & Electric, Schneider Electric, Southern Company, Washington Gas, and Whirlpool – agreed on core principles guiding the work.

 Specifically, the group agreed that:

  • Rate designs should include the ability to collect for the use of the energy grid and to compensate customers for investments that provide verifiable local and system-wide cost savings, compared to alternatives.
  • Rates should be designed, as much as possible, to reflect the real-time, localized costs of service while assuring equity, limiting complexity and minimizing rate shock.
  • Rates that more accurately reflect the costs and savings resulting from time and location dependent demand management should be introduced as a platform for delivering innovative new energy services to customers.
  • Utility business models should be complementary with state energy goals and priorities.

In the coming months additional participants will join the initiative, including regulatory experts and consumer advocates, to continue building consensus and develop more specific recommendations.

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