FEUR in Fortnightly
The November issue of Public Utilities Fortnightly featured the fifth report in Berkeley Lab’s Future Electric Utility Regulation series, Recovery of Utility Fixed Costs: Utility, Consumer, Environmental and Economist Perspectives.
The article, “Rethinking Rate Design,”¹ is a round-table discussion by the report authors about recovery of utility fixed costs, from various perspectives. The authors are:
-Utility experts Lisa Wood, Institute for Electric Innovation and The Edison Foundation, and Ross Hemphill, RCHemphill Solutions
-Consumer advocate John Howat, National Consumer Law Center
-Environmental advocate Ralph Cavanagh, Natural Resources Defense Council
-Economist Severin Borenstein, University of California, Berkeley
The report discusses proposed changes to retail rate designs, particularly for residential customers, to recover so-called “fixed costs” to serve customers – generally, costs that do not vary over the course of a year regardless of electricity usage.
Today, most residential customers pay a small monthly fixed charge plus a payment for each kilowatt-hour of electricity they consume. The less power they use, the less they pay. Proposals to address the potential gap between fixed utility costs and revenue collection mechanisms, particularly where loads are flat or declining, include significantly increasing the fixed charge, adding a demand charge based on the customer's highest energy usage in the billing period, formula rates that automatically adjust rates when earnings fall above or below a set level, and time-varying rates.
The report and the Fortnightly article are available online, as is the recording of a webinar by the authors and the slide deck for a presentation to the National Conference of State Legislatures by project manager Lisa Schwartz.The report was funded by the U.S. Department of Energy’s Energy Policy and Systems Analysis Office and the Office of Electricity Delivery and Energy Reliability - Electricity Policy Technical Assistance Program.
¹This article is posted with permission from Public Utilities Fortnightly.