SPEER, the South Central Partnership for Energy as a Resource, has filed a whitepaper with the Texas PUC concerning alternative ratemaking under which the organization recommends that the PUCT, "should adopt transmission and distribution rates that include small fixed charges for truly fixed costs and, that allocate the majority of costs, even for residential and small commercial customers, on the basis of customer coincident peak demand."

"Our suggestion here is that all customers receive a TDU charge that is largely based on that customer’s contribution to peak demand. There is some concern that a true coincident peak charge would have unintended negative consequences in the energy market, and for small customers it would be unknown until after the fact. The most appropriate resolution of these competing concerns could be to have the TDU charge reflect a time-of-use related charge, based on the peak of the previous year. So this might boil down to a TDU charge per kW, based on demand in a predetermined peak window, like 4:00 PM to 7:00 PM on summer weekdays. The beauty of this approach is that if the accelerating adoption of DERs, including efficiency and energy management systems, begins to shift the peak period, as it has in Hawaii and California for example, the window used to determine the peak charge can automatically shift as well," SPEER said

"Competitive retail electric providers would still layer on top of this peak demand charge their own charges for retail services and energy. If retailers simply pass on TDU charges, as most do today, this could result in a combined rate structure reflecting the long-run cost of delivery infrastructure, and the cost of energy consumption. Customers would be incented to not only reduce consumption, but reduce coincident peak demand. This would help improve the overall utilization of the utility assets already constructed, and avoid unnecessary new revenue requirements. And, it would provide more appropriate incentives for the adoption of peak shifting or peak reduction investments in distributed generation, and energy storage, as well as improved building envelop measures that allow climate systems to be downsized," SPEER said

"Because the TDU actually bills the retail electric provider (REP), not the consumer directly, the REP could also choose to undertake actions to reduce its total costs or reduce its exposure to TDU charges. It need not simply pass on the TDU charge as a line item. Viewed in aggregate, a TDU charge based on the total demand of a REP’s customers could lead the REP to view the charge as something not entirely out of its control. It could offer programs more readily understandable, and actionable by its customers, like peak load management incentives, or programs for efficiency or demand response, onsite storage, or generation, to impact its overall TDU charge. It could improve its own competitiveness by reducing peak costs," SPEER said

Concluding its whitepaper, SPEER said, "The PUCT should adopt transmission and distribution rates that include small fixed charges for truly fixed costs and, that allocate the majority of costs, even for residential and small commercial customers, on the basis of customer coincident peak demand."

Link to whitepaper

Tags:
Texas   Pricing   Alternative ratemaking  

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