Time-Variant Electricity Pricing: Theory and Implementation
Rich Sedano joined the CSIS Energy and National Security Program for a panel discussion on time-variant electricity pricing as part of our ongoing series, “Electricity in Transition.” For a century, the retail rate structure in the United States has remained virtually unchanged. Nearly all retail customers in the U.S. pay a flat rate regardless of the time of day or the actual cost of electricity. While this pricing structure insulates consumers from price volatility, it may also lead to inefficiency in resource allocation. Enabled by the increasing deployment of smart meters, some states have been experimenting with new retail rate designs that reflect the fact that wholesale electricity prices vary over the course of the day. Time-variant pricing allows utilities and regulators accurately reflect market dynamics for customers, encouraging more efficient resource distribution. But do consumers actually respond to changing prices? Can time-variant pricing impact the adoption of new distributed energy technologies? What impact does time-variant pricing have on low-income consumers? What challenges do regulators face as they consider moving away from flat rate pricing? What have policymakers and industry learned to date from state implementation of time-variant pricing, and what challenges remain?
The panelists discussed the objectives of moving to time-varying electricity rates, including the advantages and disadvantages of different rate structures, the distributional impacts of time-variant pricing, and the broader energy, environmental, and economic impacts of time-variant pricing. In addition, panelists will discuss recent experiences with time variant rates in different jurisdictions. We hope you can join us for this important and timely discussion.