The way we generate, distribute, consume, and pay for power today has been slowly evolving over the past decades. Customers are generating some of their own power, advanced metering structures allow for more sophisticated rate design, and large industrial—and even some residential customers—are able to actively adjust their demand in reaction to price signals and peak events. At the “Utility 2.0” conference held by EUCI, Jim Lazar talked about both rate design within the power sector transformation and performance-based regulation of utilities.
As some utilities trend toward high fixed customer charges, Mr. Lazar draws on the RAP publication “Smart Rate Design for a Smart Future” to outline the key principles of equitable rate design. These include allowing customers to connect to the grid for no more than the cost of connecting to the grid, pricing power supply and grid services based on the quantity used and the time they are used, and providing fair compensation for customers supplying power to the grid. Best practices encourage time-of-use rates, critical peak pricing, and the value of solar tariff. Mr. Lazar also addresses performance-based regulation of utilities, recommending elimination of the “rate base” as a determinant of utility earnings in favor of performance metrics, such as technical service quality, customer service quality, energy efficiency, renewable energy, emissions, and other criteria specified by legislators or regulators.