Foundations for Electric Utility Rate Design
In support of the State of Missouri’s development of a Comprehensive Energy Plan, Rich Sedano discussed the basics of electric utility rate design at a public meeting in Kansas City. Drawing on “Rate Design Where Advanced Metering Infrastructure Has Not Been Fully Deployed,” Mr. Sedano highlighted Bonbright’s principles for utility regulation and demonstrated how those can translate into a variety of different rate designs. He also provides an overview of cost allocation, establishing the customer charge, and the recovery of fixed costs through volumetric charges. Mr. Sedano concluded by reminding participants of the importance of establishing forward-looking rates that reflect the long-run marginal cost of new resources.