Many state net-metering laws allow consumers installing rooftop solar arrays to incur net-bills for zero or very few kilowatt-hours, depending on the geographic location and the design of the net-metering tariff. To improve revenue stability and collect distribution system costs from PV customers, some utilities are arguing that “fixed” costs should be recovered in fixed customer charges.
This short policy brief reviews the primary purpose of utility regulation—enforcing the pricing discipline on monopolies that competitive markets impose on most firms—and the impact of higher customer charges and minimum bill options on customers. For regulators seeking to increase the contribution to utility system costs from customers with minimal consumption, RAP recommends the minimum bill option. It ensures that all customers contribute to distribution costs, but without significantly stimulating consumption by higher-use customers or raising the bills of lower-income, low-use customers.