Utilities face unprecedented changes in the way power is generated and delivered. With the ramp-up in distributed generation, energy efficiency and demand response, electric vehicles, smart appliances, and more, the industry must rethink its rate structures to accommodate and encourage these innovations. Progressive rate design can make the difference in cost-effectively meeting public policy objectives—to use electricity more efficiently, meet environmental goals, and minimize adverse social impacts—while ensuring adequate revenue for utilities.

In a webinar held on August 4, 2015, Jim Lazar and Janine Migden-Ostrander of RAP, and Wilson Gonzalez of Treehouse Energy and Economic Consulting discussed the profound impact that different rate designs have on the choices made by customers, utilities, and other electric market participants. Drawing from the paper “Smart Rate Design for a Smart Future,” they define the three guiding principles of rate design—customers should be able to connect to the grid for no more than the cost of connecting to the grid, customers should pay for power supply and grid services based on how and when they use them, and customers supplying power to grid should receive full and fair compensation. They also highlight smart rate designs that effectively balance all major interests, provide a framework for stable regulation of utilities, and enable the growth of renewable energy and energy efficiency to meet electricity requirements.