DRA Report: Time Variant Pricing for California’s Small Electric Consumers
DRA’s 2011 white paper Time Variant Pricing for California’s Small Electric Consumers compares the efficacy of time-of-use (TOU) rates and critical peak pricing (CPP) with respect to various California energy policy and economic objectives. DRA concludes that TOU rates offer comparable, if not superior, benefits to those obtainable from CPP. In particular, residential and small commercial rate design can be made more efficient; thereby enhancing the effectiveness of the state’s energy programs, especially energy efficiency, in promoting energy policy objectives. The report also explores how different rate designs impact customers, which could contribute to customer selection of rate design options and the consequent impacts on overall utility cost of service.
Based on its analysis, DRA recommends that most residential and small business customers should transition, over time, to stable, predictable rates that vary by season and time of day. Widespread use of such “time-of-use” (TOU) rates would benefit these customer classes on the whole by:
- Moderating the growth in electric utility revenue requirements.
- Reducing the residential and small business classes’ share of those revenue requirements.
Dynamic pricing should be offered to smaller customers only on a voluntary “opt-in” basis, as a supplement to TOU rates.