CCU Rate Design: Fixed Charges or Volumetric?

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    Dave Munk
    Dave Munk

    There’s a growing trend toward adopting two and three-part utility rate structures to ensure that fixed costs are covered. This is great for peace of mind and helps members understand both the value and costs of the grid itself, however this trend also threatens the value proposition for energy efficiency and site generated renewables. There have been many cases of members pushing back against high monthly charges or going off-grid entirely.

    A Consumer Centric Utility is focused on meeting the diverse needs of its members. There will be behaviors or energy uses which will not only be allowed, but also encouraged. Energy efficiency and local generation will be viewed as valuable enhancements to the distributed grid of the future, and we don’t want to drive these members off of our systems.

    Our co-op is beginning to grapple with these questions as we look to revise our rate structure. We have an active energy efficiency program, currently encourage rooftop and community solar, and are responding to active requests by towns for aggressive carbon reduction goals. A new Cost of Service study will be complete by the end of 2018. Then it will be our job to devise a thoughtful rate structure and effectively communicate it to our membership.

    The Smart Rate Design report from Jim Lazar will be a great tool for our planning. Jim is regarded by some as ‘The Godfather of Utility Rate Design’ and the report tackles these issues head-on. Our board and staff have this tool, among others, as we dive into this important job.

    How is your co-op addressing rate design?

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