May 23, 2016

Report by Brattle Economists Assesses Impact of Potential New Distribution Tariffs on Electricity Consumers in Great Britain

Brattle economists have authored a report that examines the landscape of emerging domestic distribution tariff design options in Great Britain (GB) and the impacts they may have on electricity consumers. The report finds that the alternative tariff options differ significantly in terms of their potential to improve fairness and efficiency in electricity pricing.

The ongoing GB smart metering rollout, growing adoption of distributed energy resources, and decarbonization of the economy are driving interest in revisiting the way electricity distribution tariffs are designed. Prepared for Citizens Advice, the Brattle study includes insights from interviews with industry stakeholders, a survey of tariff reform activity in other countries, and detailed modeling of the distribution of bill impacts from the new tariff designs, accounting for likely consumer response to the tariffs.

Overall, the Brattle report finds that there are opportunities to offer new tariffs that will improve fairness and provide consumers with an incentive to use electricity more efficiently. From a policy standpoint, it will be important to account for how the new tariffs will impact a diverse base of consumers, particularly those with limited incomes.

Accounting for likely consumer response to the new tariff designs, most options have the potential to produce average bill savings for low income consumers. The research also finds that under the current tariff design, there is some shift in who pays for the distribution system, with consumers with distributed generation underpaying and consumers without it paying more. However, some tariff design options can minimize this cost shift, reducing the impact on consumers without distributed generation. The Brattle authors also identify several recommendations to consider for future tariff reform.

“The Tariff Transition: Considerations for Domestic Distribution Tariff Redesign in Great Britain,” is authored by Brattle Principals Ryan Hledik, Ahmad Faruqui, Jurgen Weiss, and Toby Brown, and Research Analyst Nicole Irwin. It is available for download using the link below.

Associated Experts
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Dr. Toby Brown specializes in the regulation and economics of the gas and electricity sectors. He has consulted for pipelines, utilities, and regulators and he has particular expertise in incentive-based regulation in the energy sector. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Faruqui web
Dr. Faruqui specializes in smart grid strategies involving the consumer. His expertise includes demand forecasting, innovative rate design, energy efficiency, demand response, advanced metering infrastructure, technology assessment, and cost-benefit analysis. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
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Mr. Hledik has expertise in assessing the economics of smart grid investments and policies. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Jurgen weiss0492
Dr. Weiss specializes in issues broadly motivated by climate change concerns, such as renewable energy, energy efficiency, energy storage, the interaction between electricity, gas and transportation, and carbon pricing. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4