Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
Demand-Response and Smart-Meter Provisions: Breakthrough or Non-Event?
Regulators and Utilities: The Ball’s in Your Court
and regulators is to start with a large portion of smart-meter technology costs, then subtract a medium-sized portion of utility operating benefits. Add a dose of utility profit incentives and subtract a small portion of demand-response benefits, enough to make the result a positive business case. Then take the rest of the demand-response benefits and pass them out to consumers over the long run.
The holistic approach leads to a common ground that benefits all stakeholders—utilities, consumers, and even regulators. The other option is business as usual.
PUCs can look solely at the narrow meter-reading benefits of smart meters and conclude the business case is not attractive. They can look at current utility tariffs and see that time-of-use rates and meters already are available—a requirement going back to the Public Utility Regulatory Policies Act. But few customers know about today’s time-of-use rates. Rate designs are rarely customer-friendly, and time-of-use meters don’t meet the EPACT requirement to have communications, or to provide consumers with more opportunities to manage their bills. State regulators rightly could conclude that state policy and regulations trump the smart-meter consumer provisions of EPACT.
But the business-as-usual option denies consumers the savings of demand response. The General Accounting Office reported in August 2004 that these range up to $15 billion per year for programs across the United States. The big picture provides a terrific tool and impetus for utilities and regulators to empower consumers to capture these savings.