The Process Priority: Inspiring Good Rate Design For Our Modernizing Grid

Tuesday August 2, 2016

New technology is evolving electricity transmission from a centralized, one-way system to a more distributed, interactive one. This system necessitates new electricity rates, and the National Association of Regulatory Utility Commissioners (NARUC) unveiled this week at its annual summer meeting a draft manual that will help states across the U.S. design them.

The Distributed Energy Management Compensation Manual is basically a compendium of rate design options that regulators can consider, and it outlines each option's pros and cons. NARUC President Travis Kavulla charged his staff with writing the manual a monumental undertaking and we commend the organization for this effort.

I was pleased to speak during the Town Hall event at which NARUC rolled out the draft manual, and my remarks focused on one critical need: good rate design process. Choosing the right electricity rate for a state is important, but so too is the process by which regulators arrive at that decision. Early in the document it recognizes, A jurisdiction will need to identify its current status regarding DER [distributed energy resources], what role it expects DER to have in the future, understand the nature of DER adoption rates, and identify necessary policy developments to accommodate that future.†Now is the time to encourage NARUC to include in the manual a dedicated section that shows states how to build a process for ratemaking that will be sustainable, benefit consumers, and advance in tandem with electricity distribution technology. 

NARUC manual's strengths

Leading up to the summer meetings this week, Environmental Defense Fund (EDF), former public utility commissioners (like myself), and more than 30 consumer, clean energy, environmental advocacy organizations from across the country signed and sent a joint letter to NARUC recommending a common set of principles that each state can apply to identify consensus and get electricity rate design done right for its citizens and businesses. The joint letter identifies six key principles that, to my delight and NARUC's credit, the draft manual reflects throughout. Here's where the manual gets it right:

  1. Appropriate pace: The draft manual acknowledges that once the quantit...
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