Designing distributed energy rates for solar customers is a key component of a comprehensive cost of service study. Here’s a case study demonstrating how we assisted a client not only with Distributed Energy Resources (DER) rates but also in aligning customer classes with their cost of service.

The Science and Art of Rate Design

The cost of service represents the science, while rate design is the art. Any utility’s electric rate structure carries decades of embedded history and political decisions.

Evolving Towards Cost-Based Rates

Our approach emphasizes aligning rates with the cost of service. While inter-class subsidies in rate design still exist, there is a growing focus on closing these gaps.

The utility had not increased rates in five years and saw this as an opportunity to adjust customer rates to better reflect their cost of service and to integrate distributed energy resources (DER) and electric vehicle (EV) charging into their rate structure.

Collaboration and Innovative Rate Design

We collaborated with the utility to design rates that reflect the costs to serve each customer class. We helped the utility develop rate structures that provide incentives for customers, including:

- A residential time-of-use opt-out rate

- A DER rate with a system connection charge

- An EV off-peak charging rate

- A subscription charging rate (allowing EV customers to charge all they need for one monthly rate)

Encouraging Customer Engagement

Providing customers with choices incentivizes them to monitor their power usage and adjust their behavior to lower their bills. Although the percentage of customers who actively manage their usage might be low, the utility is confident that the lower rate structure of the time-of-use rate, which carries a 5% premium for opting out, will encourage more customers to stay in the rate.