Selected category: Utility Business Models

What is Good Rate Design, and How Will We Get There?

Good process blog post imageAs a former state utility regulator, I know the difficulty of balancing competing interests in making decisions and communicating those decisions to constituents. Solutions deemed “fair” by some parties may have harsh or unintended consequences for others.

This challenge of balancing competing interests is playing out with the current debate on electricity rate design as the system struggles to deal with the impact of new, distributed forms of energy like rooftop solar. From Nevada and Arizona, to Kansas and New Hampshire, we’ve seen these debates leave the hearing rooms of public service commissions and enter the public arena. Increases to fixed charges, changes to net metering, demand charges, time-of-use rates, minimum bills, or a combination of these options, are just some of the policies that states have either implemented in response to this debate, or are currently considering.

But many questions remain about the best path forward: What design will adequately compensate utilities for their investments, support the need to upgrade the electric grid, and encourage new technologies and innovation, while being perceived and accepted as fair? To answer these and related questions, a “good” rate design process needs to be put in place – one built on transparency, fairness, accessibility, and accountability. Read More »

Also posted in Electricity Pricing| Leave a comment

New York’s Standby Tariff: Standing in the Way of Distributed Energy?

AeonSolarcityviewLate last month, New York took a major step toward rethinking utility economics when it issued the “Order Adopting a Ratemaking and Utility Revenue Model Policy Framework” (also known as Track 2 Order). This action aims to better align New York’s electricity system with Reforming the Energy Vision (REV), the state’s initiative to transform the electric grid into a cleaner, more efficient, and affordable system.

But buried in this 180-plus page document is another important development for New York’s clean energy future: Nearly 10 pages are dedicated to re-examining the state’s controversial standby tariff.

Frequently cited as a major obstacle to distributed power generation (e.g. combined heat and power (CHP) systems, rooftop solar panels, energy efficiency, and storage), the standby tariff is a special electricity rate charged to large commercial and industrial customers who produce some of their own electricity but remain connected to the grid. While utilities say they need standby tariffs to recover the costs of maintaining a reliable electric grid, many potential and existing large electricity customers producing their own power see standby tariffs as perversely designed to undermine the business case for distributed generation.

Unless the standby tariff is fixed in a manner that clears the way for investment in customer-owned and sited distributed generation, it will be hard to make REV’s revolutionary vision for a decentralized, competitive electricity market a reality. Read More »

Also posted in Electricity Pricing, Energy Storage, New York, Solar Energy| Leave a comment

New York Takes a Major Step toward Rethinking Utility Economics

NY Lights BridgeThroughout the United States, utilities earn a profit through a tried and true regulatory model that has worked well for over 100 years. This model was built on the assumption that customers would use ever increasing amounts of electricity, and it worked for some time. But, as the need to save power and make electric systems more efficient becomes essential to adapt to climate change, this and other assumptions no longer hold true. Without changing how utilities are compensated, we run the risk of experiencing a true irony: utilities, the cradles from which our modern civilization rose, may become the chains preventing us from advancing toward a clean energy future.

Last week, the New York State Public Service Commission (PSC) – which regulates the state’s utilities – took action to transition to a new model aligned with Reforming the Energy Vision (REV), the state’s initiative to transform the electric grid into a cleaner, more efficient and affordable system. By issuing the “Order Adopting a Ratemaking and Utility Revenue Model Policy Framework,” the PSC is changing how New York’s utilities will be compensated, taking a major step to break the chains holding utilities back, and moving from a system where utilities get paid according to how much electricity they sell to one where utilities are compensated for producing environmental benefits aligned with the public good. Read More »

Also posted in Grid Modernization, New York| Read 9 Responses

3 Policies Driving Innovation in the Electricity Sector

solar photoAs rapid changes in energy technology – both in renewable and fossil fuel sources – transforms the way we power our lives, we have a chance to leave our children a prosperous world and reduce the effects of climate change. But, to scale fast enough, we need smart policies – at all levels of government.

National policies are essential to raise our level of ambition, put a price on carbon, limit emissions from key sectors, and spur innovation. For example, the Clean Power Plan would accelerate the adoption of clean energy technologies. But, many states are taking strides to promote innovative technologies and paving the way for national policy. Read More »

Also posted in Clean Power Plan, Climate, Electricity Pricing, Energy Efficiency, Grid Modernization| Read 4 Responses

Putting the Customer First: How California can Achieve a Distributed Energy Grid

3725860708_50e3dd08c7_zIf you have ever worked in the service industry and dealt with a difficult customer (or even seen one in action), you are likely inclined to recall the oft-used adage, “the customer is always right.” Clichéd as that phrase may be, it is not without merit. Here at Environmental Defense Fund (EDF), we believe the same truism applies to how utilities approach providing electricity.

In a recent ruling issued in the Integrated Distributed Energy Resources (IDER) proceeding, California Public Utilities Commission (CPUC) Commissioner Michel Florio found, quite properly, that utility business models need to be evaluated in order to put more customer and third party-owned distributed energy resources, like rooftop solar and energy storage onto the grid. Currently, utilities receive a rate of return if they build infrastructure necessary to support our central power grid (like pipelines for our aging natural gas system). If clean, distributed energy sources make that infrastructure less essential, it could jeopardize the utilities’ revenue stream, thereby discouraging them from including these cost-effective energy resources in our power mix. Read More »

Also posted in California, Grid Modernization| Read 6 Responses

A Bailout by Any Other Name: FirstEnergy Still Trying to Stick It to Ohio Customers

handshake_iStock_000000409076_L3You have to give some credit to FirstEnergy. It does hire creative lawyers.

After the Federal Energy Regulatory Commission (FERC) effectively killed the utility giant’s $4-billion bailout request to keep its uneconomic power plants online, those expensive attorneys figured they could redefine a few words and restore the subsidies. In an attempt to thwart FERC’s decision, the utility is asking the Public Utilities Commission of Ohio (PUCO) to consider “modifications” to its bailout plan. However, these changes will still result in increased customer bills at the rate of $4 billion.

For almost two years, FirstEnergy argued it needed to prop up its uneconomic generators with “power purchase agreements” (PPA) between the utility and its affiliate companies. After federal regulators declared such transactions were illegal because they distorted competitive markets, FirstEnergy lawyers are now saying, “Just kidding!” Instead of using the term “PPAs,” the utility now prefers “surcharges,” skirting FERC’s ruling and hoping it won’t notice there’s been no real change. Read More »

Also posted in FirstEnergy, Ohio| Comments are closed
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