Rate Programs & Tariffs

The objective of these two research projects, conducted under the DRRC’s “ RON 02 – Incentives and RateDesign for Energy Efficiency and Demand Response” was to develop an analysis framework for evaluating incentives and rate design for demand response. The Energy and Environmental Economics team developed a framework consisting of a number of screens that evaluate different aspects of DR rate design performance. The assessment includes economic efficiency and fit with the California emerging market structure, potential for significant load reduction, value to the system and customers, potential bill savings, and customer acceptance. Taken together, the screening steps should help to ensure that a DR rate design that scores highly against these criteria would be implementable within the California market, regulatory, and policy context. The E3 team then evaluates illustrative DR rate designs with the evaluation framework as a proof of concept. The analysis, which is completed without input from stakeholders, uses only readily available or proxy data, and therefore the results are not necessarily meaningful beyond a validation of the concept. The Christensen Associates team developed a conceptual framework for designing retail electricity rate structures that provide appropriate incentives for energy efficiency and demand response. The conceptual framework is based upon well-established economic theory of public utility pricing going back at least twenty years, and upon power industry experience of a similar length of history. The emphasis within this document is on the proper application of pricing principles in designing a portfolio of products that will produce the efficient amount of demand response. The report also describes prototype rate designs that illustrate the types of retail rates that provide these incentives.