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 below.