Demand rates can encourage efficiency, savings

March 30, 2016

Experts and organizations from a variety of interests, including clean-energy and environmental groups, energy consulting firms, utility trade associations and regulatory agencies, identify demand rates as an effective solution to fixing the broken, century-old rate model still used by U.S. energy companies.

Demand rates encourage customers to use energy more efficiently, create more opportunities to save and make the costs of delivering energy to all customers more transparent.

Here’s what they are saying:

“Separating out demand charges may be a good way to promote more fairer cost allocation among ratepayers, while also motivating customers to reduce strain on the system.”
Rocky Mountain Institute
RMI Outlet blog: “Are Residential Demand Charges The Next Big Thing in Electricity Rate Design?” (May 21, 2015)

“Responding to a demand charge does not require that the customers know exactly when the interval of maximum demand will occur. If customers generally know to avoid the simultaneous use of electricity-intensive appliances, they could easily reduce their maximum demand without ever knowing when it occurs.”
Ryan Hledik, Principal, The Brattle Group
Presentation at EUCI Residential Demand Charges Summit “Rolling out Residential Demand Charges” (May 2015)

Demand charges are significantly easier to work with than fixed charges, according to GTM Research Sr. Solar Analyst Cory Honeyman. In conjunction with time of use (TOU) rates, demand charges “allow more opportunities for customers to adapt their habits.”
Utility Dive
5 maps that show where the action is on solar policy” (March 22, 2016)

“The primary merits of a demand charge are that it sends an actionable and predictable price signal to NEM customers to manage on-site electricity that align with transmission and distribution (T&D) cost of service.”
Natural Resources Defense Council
California Public Utilities Commission proceeding 14-07-002: “Proposal of the Natural Resources Defense Council (NRDC) in Determining a Net Energy Metering Successor Standard Contract or Tariff” (Aug. 3, 2015)

“(Demand charges) are revenue neutral since the demand costs are already embedded in tariffs. What demand charges do is make those costs transparent, and by doing so, enable all customers, low income included, to shape their demand in ways that can reduce their bill.”
Ashley Brown, Executive Director, Harvard Electricity Policy Group
Surrebuttal testimony in UNS Electric rate case (Feb. 23, 2016)
“Metering and communications technology improvements, DG penetration, and recent regulatory issues have made its adoption for residential and small general service customers possible, appropriate, timely, and even necessary.“
Tom Broderick, Director – Utilities Division, Arizona Corporation Commission
Direct testimony in UNS Electric Rate Case (Dec. 9, 2015)

You can read more excerpts in this document, which is also available as a download.