Rate Design Where Advanced Metering Infrastructure Has Not Been Fully Deployed
This paper identifies sound practices in rate design applied around the globe using conventional metering technology. Rate design for most residential and small commercial customers (mass market consumers) is most often reflected in a simple monthly access charge and a per-kWh usage rate in one or more blocks and one or more seasons. A central theme across the practices highlighted in this paper is that of sending effective pricing signals through the usage-sensitive components of rates in a way that reflects the character of underlying long-run costs associated with production and usage. While new technology is enabling innovations in rate design that carry some promise of better capturing opportunities for more responsive load, the majority of the world’s electricity usage is expected to remain under conventional pricing at least through the end of the decade, and much longer in some areas. Experience to date has shown that the traditional approaches to rate design persist well after the enabling technology is in place that leads to change.