Electricity use by non-residential customers accounts for nearly two-thirds of California’s total consumption. Many of these customers are interested in adopting distributed energy resources, and many have access to sophisticated energy management and load control technologies. These customers could therefore be an important source of support for power grid management—but the current design of rates at many utilities across the state does not adequately encourage the deployment and use of non-residential customer resources in that manner. Redesigned rates to send customers clearer price signals that reflect power system needs can encourage innovation and cost-effective usage.

This white paper, produced at the request of the California Public Utilities Commission to inform the Commission’s 2017 Electric Rate Forum, outlines principles for well-designed commercial and industrial rates based on the principles originally outlined in RAP’s Smart Rate Design for a Smart Future. Based on those principles, the white paper recommends an emphasis on time-varying rates, with a possible option of real-time pricing for customers that have access to more sophisticated energy management tools.