FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
2008 Regulators Forum: Putting Efficiency First
New rate structures prioritize conservation, but will customers buy it?
really big issue. Last year, our energy efficiency programs collectively saved about one-tenth of 1 percent of all energy consumed in ERCOT.
Now, if we continue to push the ball down the field, it could get to be a big number within, say, 10 years from now. At that point it may become a much bigger issue, because customers will be picking up the cost of it and they’ll begin asking harder questions.
Fortnightly: It gets back to the rate incentive for utilities, and how ratemaking structures benefit customers. It’s one thing to say the utility is making a prudent investment. It’s another to say the utility is setting up rate plans that offer the best deal for customers. How can regulators make sure customers are getting the best possible deal?
Ervin (N.C.): I don’t know that you can make sure, but you can up the odds.
Some commissions, like North Carolina’s, function on almost a pure judicial model. We essentially rule on cases brought by parties. Other commissions are like FERC, and they operate principally on rule making.
In the near term, my commission is unlikely to order a utility to invest in a particular type of smart meter and do a certain thing with it. That type of order would exceed our institutional competence. What’s more likely to happen, at least in a state with a model like ours, is that a company will decide it will be beneficial to adopt a particular sort of meter. If that meter requires the use of specific rates, then they’d come forward with such a proposal. That’s been the practice in the past.
In the mid-’90s the utilities in North Carolina sat down with their industrial customers and developed what I think were pretty successful experiments with real-time pricing, at least in the cases of Duke and Progress Energy. We’ve also had TOU rates that haven’t gotten much response in the residential classes. Hopefully new metering technology would enable us to develop and implement a rate in North Carolina that would be more time sensitive, would be beneficial to customers, and would find more customer acceptance than the older style TOU rates.
Our utility companies have clearly indicated to us that they are interested in smart-grid, smart-metering types of things, but I think they understand that in order to persuade us to allow cost recovery of such meters, that they’re going to need to come forward with a proposal seeking approval of a particular rate. Similarly an intervener or public advocacy agency that thought something ought to be done would be free to propose it as well. That’s where our regulatory lever would be.
Smitherman (Texas): I need to be careful because two utilities have filed advanced-metering deployment cases recently. The commission has established the minimum functionality we’d like to see in meters. We’re not saying the brand of meter you have to buy, but if you want to get recovery you have to have this functionality.
Our rules say there’s a presumption that costs spent in accordance with a