Alternative Utility Cost Recovery Mechanisms
Utilities face unprecedented changes in the way power is generated and delivered. With the ramp up in distributed generation, energy efficiency and demand response, electric vehicles, smart appliances, and more, new rate designs will be needed to harmonize utility cost recovery with public policy goals. Janine Migden-Ostrander spoke to the Maryland Public Service Commission on alternative cost recovery mechanisms for utilities that address these trends. According to the principles of smart, equitable rate design, customers should be allowed to connect to the grid for no more than the cost of connecting to the grid, should pay for the grid in proportion to how much and when they use the grid, and, if they deliver power to the grid, they should receive full and fair value—no more and no less. Regulators can achieve equitable rate design through balanced cost recovery mechanisms, such as time of use rates, critical peak pricing, and value of solar tariff.