In a November 23, 2015 story, Utility Dive examined the some of the top trends in energy policy and rate design, noting that policy uncertainties pose a challenge for the integration of distributed generation. Among the challenges is cost allocation and the policy surrounding fixed charges and demand charges, according to the story.
“High fixed charges are punitive to small use customers,” said RAP Senior Advisor Jim Lazar, co-author of a recent RAP report (Smart Rate Design for a Smart Future)—cited in the Utility Dive story.
“Demand charges are similarly punitive to small-use customers for a different reason,” Mr. Lazar said, noting that small-use customers can share infrastructure, but that demand charges impose system costs upon them as if they were a single big consumer using the infrastructure full time. In the Utility Dive story, Lazar also says that in some current dockets, utilities are failing to look toward the future.
“The main concern I have is that many of the analyses are backward-looking,” he said. “Instead of asking who should pay for past distribution system investments, they should be asking how to avoid future costs” that could include new peaking power plants and more distribution infrastructure and avoid the fuel cost risk, fuel supply risk, and emissions, Mr. Lazar said.