Figure 64: The proposed FVT is analogous to the rate structure used by cell carriers. Customer Charge. Embedded costs and expenses associated with serving the customer, such as the meter, meter servicing, and customer billing, are recovered through a charge on a ($/customer) basis. Network Subscription Charge. The embedded of the grid are inelastic and do not change dynamically with consumption or time of use. Embedded costs of grid infrastructure should be recovered based on the customer’s size or share of peak demands. A Network Subscription Charge covers the cost of the existing grid infrastructure such as distribution, sub-transmission, transmission, and utility-owned generation assets. This charge could theoretically be created according to location specific grid asset utilization. One type of Network Subscription Charge is a demand charge ($/kW). Demand charges are defined by a customer’s share or usage during the peak demands on the various assets in the electrical network on a cost causation basis. It is important that the demand charge reflects the utility capacity planning and maintenance policies so that it reflects real world costs rather than a synthesized cost allocation. If demand metering is not available, then a monthly average demand charge ($/kW-month) or monthly energy subscription charge ($/kWh) may approximate this value. E3 in its FVT has proposed a Network Subscription Charge based on a rolling 12-month maximum monthly peak energy consumption or average demand in a peak month figure. A charge based on average demand or total consumption can provide an incentive for energy efficiency investments that lower average energy consumption. Dynamic Pricing. The Dynamic Price is calculated using a location and time-varying price on electric energy ($/kWh). The focus of the forward-looking marginal cost prices is to provide customers with clear price signals that allow the customers to make consumption and production decisions based on actual marginal and avoidable cost impacts. Marginal and avoidable costs include locational marginal energy costs, electrical losses, avoidable T&D capacity costs, and avoidable generation, i.e. resource adequacy, capacity costs during peak periods. Avoidable T&D capacity costs reflect potential local network upgrade deferral value and would incentivize behaviors that can help reduce the need for planned distribution or sub-transmission upgrades. Marginal cost prices could also include adders for externalities or non-monetized societal costs such as carbon emissions.
Figure 64: The proposed FVT is analogous to the rate structure used by cell carriers. Customer Charge. Embedded costs and expenses associated with serving the customer, such as the meter, meter servicing, and customer billing, are recovered through a charge on a ($/customer) basis. Network Subscription Charge. The embedded of the grid are inelastic and do not change dynamically with consumption or time of use. Embedded costs of grid infrastructure should be recovered based on the customer’s size or share of peak demands. A Network Subscription Charge covers the cost of the existing grid infrastructure such as distribution, sub-transmission, transmission, and utility-owned generation assets. This charge could theoretically be created according to location specific grid asset utilization. One type of Network Subscription Charge is a demand charge ($/kW). Demand charges are defined by a customer’s share or usage during the peak demands on the various assets in the electrical network on a cost causation basis. It is important that the demand charge reflects the utility capacity planning and maintenance policies so that it reflects real world costs rather than a synthesized cost allocation. If demand metering is not available, then a monthly average demand charge ($/kW-month) or monthly energy subscription charge ($/kWh) may approximate this value. E3 in its FVT has proposed a Network Subscription Charge based on a rolling 12-month maximum monthly peak energy consumption or average demand in a peak month figure. A charge based on average demand or total consumption can provide an incentive for energy efficiency investments that lower average energy consumption. Dynamic Pricing. The Dynamic Price is calculated using a location and time-varying price on electric energy ($/kWh). The focus of the forward-looking marginal cost prices is to provide customers with clear price signals that allow the customers to make consumption and production decisions based on actual marginal and avoidable cost impacts. Marginal and avoidable costs include locational marginal energy costs, electrical losses, avoidable T&D capacity costs, and avoidable generation, i.e. resource adequacy, capacity costs during peak periods. Avoidable T&D capacity costs reflect potential local network upgrade deferral value and would incentivize behaviors that can help reduce the need for planned distribution or sub-transmission upgrades. Marginal cost prices could also include adders for externalities or non-monetized societal costs such as carbon emissions.
CSIRDD_Sol4_E3_DRAFT_final_report_Aug2016.docx