The future of rate design: Why the utility industry may shift away from fixed charges
Less than three years after the utility industry first introduced fixed charges into its playbook, state regulators and utilities across the country appear to be looking for a new approach to growing concerns over load defection.
In January 2013, the Edison Electric Institute, the national trade group for investor-owned utilities, released its landmark “Disruptive Challenges” report. The report’s most notable recommendation was to advise utilities to increase fixed charges to make up for stagnant load growth and customers installing their own distributed generation.
Utilities across the nation took to the recommendation. Last November, Utility Dive reported that there were at least 23 separate fixed charge proposals being considered by state regulators across the country, and the trend has continued through 2015. A recent report from the NC Clean Energy Technology Center found that there were 26 open dockets in 18 states relating to fixed charge increases in the third quarter of this year.
But as quickly as fixed charges came into vogue, they now appear to be on the way out.
After two years of contentious battles between utilities and solar advocates, the blowback against the wave of fixed charge proposals has led regulators and stakeholders to seek a new approach. Recently, even the author of the original “Disruptive Challenges” paper reversed his original position on fixed charges in a recent paper for Ceres, plotting out a new approach for utility business models that doesn’t include high fixed charges.
Regulators call for balanced approach at NARUC
The new approach to rate design was on display last week at the annual meeting of the National Association of Utility Regulatory Commissioners (NARUC) in Austin, Texas.
At a panel on the future of rates, Samantha Williams, attorney and energy policy advocate at the Natural Resources Defense Council (NRDC), explained that most regulators have not viewed the fixed charge trend kindly.