An article authored by Brattle principal Phil Hanser discussing the rate design process has been published in the September 2012 issue of Public Utilities Fortnightly.
The article, “Rate Design by Objective,” examines how with the exception of dynamic pricing, most energy companies’ rate designs have been inherited from past rate cases, which don’t necessarily reflect the current market realities they face. This situation extends beyond integrated utilities to local distribution companies, generation and transmission cooperatives, and almost any type of provider of energy services. Mr. Hanser argues that it is necessary for energy companies to revisit their rate design process, particularly since rates are a key component of consumer interaction.
Additionally, shifts in the industry including the restructuring of electricity markets, as well as the changes in the generation mix due to environmental regulations, fuel prices, and renewable portfolio and clean energy standards, have left many energy companies’ rates out of sync with the changing industry. For some utilities, this can lead to loss of customers who switch to competitors with rates more in tune with the new market realities.
To read Mr. Hanser’s article in its entirety, please visit the Public Utilities Fortnightly website.