As utilities address the rate design challenges posed by distributed generation sources, some are moving away from conventional rate design in favor of high fixed charges. At a meeting of the Solar Electric Power Association, Jim Lazar explored the pitfalls of high fixed charges and offered alternative rate designs options that are more equitable for all consumers.In other competitive industries, such as telecommunications and cable television, high fixed charges succeeded only in driving away a significant portion of the providers’ customer base. Rather than heading down this same path in the energy industry, Mr. Lazar recommends a minimum bill rate that only applies if a customer uses less than a set amount of power each month. Minimum bills ensure that the distribution utility receives sufficient revenue from each customer, including very low usage customers, but does not cause as large a change in the per-kWh rate—protecting the incentive to conserve, securing universal service, and accurately aligning usage rates with long-run marginal costs.