Metering and Billing: Building a Better Pricing System

Deck: 

Two-part real-time pricing reflects the two-part pricing found in other business sectors.

Fortnightly Magazine - May 2004
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Georgia Power Co., Duke Power Co., and their customers have reaped the benefits of two-part real-time pricing (RTP) for nearly 10 years. In the regulated electric industry, two-part RTP pricing operates under the premise that: (1) the most efficient and least expensive price to charge for a volatile commodity is a spot price based upon the commodity's spot market or, in the absence of a spot market price, the commodity's marginal cost (one can also argue that the market price is the utility's marginal cost);1 and (2) under most circumstances, revenues received from this spot price are insufficient to satisfy the overall revenue requirements of the utility's embedded/financial cost, such that a second pricing component, besides the spot price, is necessary. This second component is an agreed-to fixed load shape of hourly kilowatt-hour usage, often referred to as a customer baseline load shape (CBL) and priced at the utility's standard rate, which will then recover cost obligations beyond the spot price. The bill can be thought of as a fixed load shape at standard tariff prices, and changes from this load shape priced at spot prices.

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