Rate Design Matters: The Intersection of Residential Rate Design and Energy Efficiency

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ACEE explores the relationship between changes in residential rate design and energy efficiency, focusing on how recently proposed rate structures alter customer behavior through a review of recent pricing studies across the country.

Report Summary:

  • Scenarios with the lowest payback periods have lower customer charges, tiered or flat rates, and TOU rates
  • Scenarios with the longest payback periods are those with higher customer charges (more than $25 per month) and demand charges.
  • Utilities should focus on targeting and recognizing the customers that will be negatively impacted by rate changes to protect vulnerable populations (low-income) from large rate increases or to assist them with these increases if they occur.
  • Only customer-specific costs (such as bill and collection) and adopting time-varying rates (specifically, a TOU rate with a CPP or PTR element) comes closest to meeting ACEEE’s three principles of rate design: price signals that encourage conservation and energy efficiency, simplicity, and utility revenue stability.

Click here to read the full report from ACEEE -Rate Design Matters: The Intersection of Residential Rate Design and Energy Efficiency

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