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An article from
Sponsored


AVOIDING THE ‘TAX ON GOD’ DILEMMA WHEN TRANSITIONING TO DYNAMIC RATES

Published Sept. 26, 2022
By Brad Langley, VP of Marketing, GridX
 * 
 * 
 * 
 * 
 * 

YangYin via Getty Images
Sponsored content
By GridX
SPONSORED CONTENT BY

Modern rate structures help utilities meet decarbonization goals by providing
financial incentives to shift energy usage away from peak periods, preventing
the activation of dirty peaker plants, optimizing EV charging, etc. They can
also save customers money on their bills (certainly an added benefit)!

Much has been written on the need to get more people on these rates to be truly
effective. Fortunately, utilities have emphasized engagement and education,
including communicating the bill impact of different plans to help people make
the right choice. GridX is at the forefront of this work with successful
implementations at Southern California Edison (SCE), PG&E and several other
utilities across the country.




But there is more to the story here. While we must provide personalized analysis
to individuals to get them on the right rate, we can’t ignore the value of also
analyzing whole populations during these transitions.

Whole population rate analysis is the process of calculating bills for an entire
utility’s customer base on a current and alternative rate plan using the
historic load profile of homes and businesses. When done right, it gives the
utility valuable business intelligence like the revenue impact, which measures
the financial ramifications of transitioning from a current to future rate plan.
When not done right (or at all), mistakes are made, resulting in a poor
experience and higher bills.

THE ‘TAX ON GOD’ DILEMMA

A few years ago, a more progressive utility was in the process of rolling out
new default, opt-out Time of Use (TOU) rates for small business customers. The
effort included a new demand charge, which is a part of some utility tariffs and
is applied based on a customer’s highest peak load. Adding a demand charge will
be financially punitive for businesses whose usage pattern includes large spikes
in demand.

When the utility completed its analysis on the impacts of this new rate
structure, it felt confident in the resulting data, and began implementing the
rates. The analysis, based on a relatively small sample of customers, showed
minimal bill impacts to small businesses, and communicated that assumption to
customers. Everything was going fine until the calls began rolling in. One
unique customer class started seeing huge spikes in their bills…churches.



The utility immediately launched an investigation. It found that the sample data
didn’t account for the fact that churches see significant spikes on the
weekends, resulting in energy bills potentially doubling or tripling based on
the new demand charge.

By neglecting to use smart meter data for the whole population, the utility
created the perception they were “taxing God,” which couldn’t have been further
from the truth. It was an honest mistake, but one that could have been avoided.

THE MORAL OF THE STORY

Is there a better example of why communicating an “average” bill impact isn’t
going to cut it if we are going to make modern rates a ubiquitous tool in
enabling our clean energy future?

As modern rates become more complex and diverse – today there are 53,000
approved ones across the U.S. (a number that will continue to grow) – we must
use all available tools when evaluating and designing these constructs. That
includes big data technology that analyzes an individual’s smart meter data to
ensure their needs are understood and met when transitioning to a new rate.

While this was an unintended mistake, utilities can’t take for granted the
importance of getting this right the first time. We shouldn’t unnecessarily
‘tax’ anyone for making the decision to adopt a rate that benefits them and the
utility.

Dynamic rate design is one of the most important tools for decarbonizing the
grid. But we must figure out how to make these types of choices more accessible
and better for customers if we are to achieve our targets.

For more on the ‘tax on God’ story and why electricity rate design is such a
critical decarbonization tool, check out this podcast.

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EDITORS’ PICKS

 * Albert Pego via Getty Images
   
   
   AMEREN MISSOURI EXPECTS $1.3B IN INFLATION REDUCTION ACT TAX CREDITS WILL
   HELP OFFSET CUSTOMER RATES BY 4.5%
   
   The IRA’s benefits could be higher depending on how nuclear tax credits are
   calculated, the utility said in a Wednesday filing at the Missouri Public
   Service Commission.
   
   By Ethan Howland • Oct. 14, 2022
 * Explore the Trendline➔
   simpson33 via Getty Images
   Trendline
   
   
   CUSTOMER ENGAGEMENT/SERVICE/BEHAVIORAL ENERGY EFFICIENCY/DSM
   
   Utilities are using a variety of new resources and strategies to engage with
   customers, drive energy efficiency and manage demand, drawing on everything
   from electric vehicles to new rate designs.
   
   By Utility Dive staff


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Editors’ picks
 * Albert Pego via Getty Images
   
   
   AMEREN MISSOURI EXPECTS $1.3B IN INFLATION REDUCTION ACT TAX CREDITS WILL
   HELP OFFSET CUSTOMER RATES BY 4.5%
   
   The IRA’s benefits could be higher depending on how nuclear tax credits are
   calculated, the utility said in a Wednesday filing at the Missouri Public
   Service Commission.
   
   By Ethan Howland • Oct. 14, 2022
 * Explore the Trendline➔
   simpson33 via Getty Images
   Trendline
   
   
   CUSTOMER ENGAGEMENT/SERVICE/BEHAVIORAL ENERGY EFFICIENCY/DSM
   
   Utilities are using a variety of new resources and strategies to engage with
   customers, drive energy efficiency and manage demand, drawing on everything
   from electric vehicles to new rate designs.
   
   By Utility Dive staff

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 * 2 NEVI hurdles: Uptime and bottlenecks
   

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