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March 19, 2012
Brattle Principal Ahmad Faruqui Featured in Restructuring Today Article on Dynamic Pricing in California

Brattle principal Ahmad Faruqui was quoted in a Restructuring Today article on a recent presentation he gave discussing California’s dynamic pricing rate design.

Dr. Faruqui’s presentation, “California’s Search for a Better Rate Design,” was presented at the California Foundation on the Environment and the Economy (CFEE) workshop, “Rate Design for a 21st Century Electricity System: How does it all add up?” on March 6th in St. Helena, California. The Restructuring Today article provides a synopsis of Dr. Faruqui’s presentation, which gave a brief history of California ratemaking and explained how rate design is at a crossroads due to competing legislative and regulatory drivers.

In his presentation, Dr. Faruqui noted that the “specter,” the standard residential tariff, “is haunting California.” He discussed how the tariff features inclining block rates that, in theory, can encourage energy efficiency. The problem, however, is the tariff bears no relationship to the marginal cost of providing electricity to consumers, Dr. Faruqui explained during his presentation.