Jim Lazar makes the case against straight fixed/variable rate design, in which all costs claimed to be fixed are recovered in a monthly charge, and only those considered variable are recovered on a per kilowatt-hour basis. This approach stabilizes utility revenue, but has many adverse impacts on consumers and energy policy—discouraging the uptake of distributed generation and rewarding higher consumption, among other issues. The paper also looks at how other competitive markets treat fixed costs, noting that from gas stations to grocery stores, they are recovered volumetrically. (This paper originally appeared as Appendix D to RAP’s “Smart Rate Design for a Smart Future.”)