A Conversation: Who Should Pay for an Upgraded Grid?

Everyone wants reliable and affordable electricity service generated from increasing amounts of clean, renewable resources like wind and solar. A nationwide conversation is underway over how to recover the costs of upgraded electricity distribution grids that are essential to achieving that objective.

Greentech Media recently invited me and Lisa Wood of the Edison Institute for Electric Innovation (representing the nation’s investor-owned electric utilities), to debate the issues surrounding utility rate design; the podcast can be found here.  

Listeners will hear something more like a constructive conversation than an adversarial debate, although certainly Lisa and I have differences; she takes a positive view of raising fixed charges on utility bills, which I view as an unnecessary reduction in customers’ rewards for saving energy.

We agree, however, on the importance of ensuring that all grid users make a reasonable contribution to the costs of upgrading it. I describe a way of accomplishing this that avoids shifting part of every customer’s bill to a fixed charge that is independent of electricity use, and we talk about how to negotiate what a “reasonable contribution” might mean in particular contexts.

We express joint optimism about prospects for time-varying rates, which reward customers who act to reduce stresses on the grid as electricity consumption and generation patterns change throughout the day. 

The subject of rate design is an important and continuing conversation for the utility sector.  Have a listen and see if you agree with our views. Or take a look at a recent report from Lawrence Berkeley National Laboratory entitled Recovery of Utility Fixed Costs: Utility, Consumer, Environmental and Economist Perspectives that includes our thoughts as well.