Below is the text version for the video, Technical Assistance: Utility Rates and Tariffs. In this video, Peter Cappers of the Lawrence Berkeley National Laboratory discusses utility rate and tariff analysis as part of the technical assistance offered through the U.S. Department of Energy’s (DOE's) Energy Transitions Initiative Partnership Project (ETIPP).
[Music plays, title screen shows “Energy Transitions Initiative, U.S. Department of Energy: Partnership Project, Technical Assistance”]
[Man with blonde hair speaking]
Hello, my name is Peter Cappers and I am a research scientist at Lawrence Berkeley National Lab. Now, for the past 20 years or so, I’ve done work on utility regulation, business models, ratemaking and tariff programs.
Today, I’ll be your guide for the next four to five minutes, as we discuss opportunities that exist for rate and tariff analysis as part of DOE’s Energy Transitions Initiative Partnership Project.
[Graphic appears on screen. Pie chart showing Utility Costs= Capital Expenses, Operating Expenses, and Maintenance Expenses points to a graphic showing Customer Rates: Volumetric $/KWH and Charges $/Gal; Max. Deman $/KW and Charges; Customer $/Customer and Charges]
Now, electric, water, and other utility rates are set to accurately reflect the costs to serve customers in your communities. But their design, if pursued strategically, can have profound effects on a myriad of issues.
[Video returns to man with blonde hair speaking]
First, they can motivate customer investment in things like efficiency improvements and various forms of distributed energy resources, like solar PV or battery storage systems. In turn, such investments can help improve both the grid as well as customers’ personal reliability and resiliency.
Properly designed rates and programs can also drive how and when customers consume utility services. By sending more appropriate and accurate price or control signals out to customers, they in turn can better support a reliable and resilient grid, reducing costs for everyone.
Now take for example the U.S. Virgin Islands. Electric rates there are some of the highest in the United States, hovering around 40 cents per kilowatt hour. The islands frequently have to deal with hurricanes, which can cause customers to go without power for extended periods of time.
[Image of a home in a forest/jungle]
Accordingly, the islands are ripe for customer investment in distributed energy resources.
The electric utility’s previous compensation system for excess production from solar PV systems was great for promoting customer adoption, but it really did create a number of challenges for the electric utility.
[Graphic showing two boxes. Left box title: “Utility Revenue & Retail Rate Impacts,” underneath the title states, “Determine how current and alternative DER excess compensation mechanisms influence avoided costs and revenues for utilizes as well as rate and bill impacts for non-participants” Right-hand box title, “Technical Impacts on Distributed Grid,” underneath the title states, “Determine how DER deployment is affecting the distribution grid and explore approaches through utility planning, operational practices, and excess compensation reforms to mitigate these detrimental impacts.” Footnote states, “Adapted from Tongsopit, S., Saelim, S. Keereepart,T., Darghouth, N. Aznar, A. O’Shaughnessy, E., and Chaitusaney, S. (2019) Distributed Photovoltaic Economic and Technical Impact Analysis in the Philippines. Prepared for U.S. Agency for International Deployment. May 29.”]
First, as electric sales dropped due to increased reliance on customer-owned PV systems, the utility was increasingly challenged to cover its costs and so had little choice but to raise rates. This increased the bills of those who could not or would not make such investments.
In addition, distribution networks were not designed to accommodate high penetrations of PV systems that could push substantial amounts of power back onto the grid.
So, the incumbent electric utility embarked on a redesign of their net metering program in order to better ensure sufficient cost recovery as well as to better manage the electric exports to the grid from such customer systems.
[Video returns to man with blonde hair speaking]
The subsequent excess compensation program, which I worked with the utility and stakeholders to design as part of a technical assistance activity, much like what might be proposed by one of you, reduced the value of those exports to a level that was closer to what they were worth, in turn, incentivizing greater self-consumption of the produced power from the PV systems.
Well, the reforms also promoted investment in battery storage systems to further limit electricity exports.
In the future, the utility is considering the development of an additional tariff program that would leverage these solar PV and battery storage systems. The goal would be for such systems to directly provide grid services that the utility would purchase from these customers, especially those services that support reliability and resilience.
Now, for those of you thinking about including rate or tariff issues in your proposals, here are some questions you might want to pose internally to your team during the development process:
Since rates and tariff programs are the utility’s responsibility, what role will the utility play on the team, specifically, and in your proposal, more generally?
What specific aspect or elements of certain rates or tariff programs are causing or exacerbating problems with reliability or resilience in your island or remote community?
How supportive is the utility as well as their regulatory authority, like a public utility commission, in altering or reforming these rates or tariff programs?
And finally, what is the time horizon for designing, gaining approval of, and implementing these reforms to rates or tariff programs?
Well, with that I’m basically out of time. But I really do look forward to seeing your proposals and hopefully working with you in the future on one of these types of projects.
[Music plays, title screen with “Energy Transitions Initiative, U.S. Department of Energy – Partnership Project | Technical Assistance, Office of Strategic Programs| Solar Energy Technologies Office| Water Power Technologies Office | Office of Electricity]