RATE DESIGN FOR THE DISTRIBUTION EDGE

The report argues that traditional bundled, volumetric block rates are obsolete for a grid with increasing distributed energy resources (DERs) because they fail to reflect the temporal and locational value of electricity. It proposes evolving rate design along three continuums: attribute unbundling (separating energy and capacity), temporal granularity (moving toward real-time pricing), and locational granularity (addressing distribution 'hot spots'). The authors suggest a transition strategy using a combination of evolving default rates and opt-in alternatives, supported by third-party technologies to maintain a simple customer experience. Recommendations for regulators include increasing data transparency, enhancing valuation methodologies for DER attributes, and establishing clear timelines for rate transitions.

• Traditional bundled, volumetric block rates for mass-market customers provide insufficient incentives for deploying and operating distributed energy resources (DERs) at the times and locations where they offer the most benefit to the grid.
• The report advocates for increasing rate sophistication across three specific dimensions: the attribute continuum (unbundling energy, capacity, and ancillary services), the temporal continuum (shifting from flat rates to time-differentiated or real-time pricing), and the locational continuum (providing geographically differentiated incentives).
• Separating energy (kWh) and capacity (kW) charges through demand charges can improve utility investment recovery and incentivize customers to reduce peak stress on the system, though it requires advanced metering infrastructure.
• Time-of-Use (TOU) pricing and Real-Time Pricing (RTP) can direct DER investments toward peak-shaving and load-shifting, which is critical for managing the 'duck curve' ramping needs seen in markets like California.
• To manage the transition, regulators should implement a system of evolving default rates while offering opt-in and opt-out alternatives to ensure customer flexibility and social equity.
• The complexity of sophisticated rates can be mitigated for the end-user through the use of third-party aggregators, energy management software, and smart devices that optimize performance automatically.
• Regulators are encouraged to improve the rate design process by increasing the transparency and quality of system data and adopting rigorous, open methodologies for valuing DER attributes.

APA

Glick, D., Lehrman, M., & Smith, O. (2014). RATE DESIGN FOR THE DISTRIBUTION EDGE. RMI. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2014-25_eLab-RateDesignfortheDistributionEdge-Full-highres.pdf

Chicago

Glick, Devi, Matt Lehrman, and Owen Smith. RATE DESIGN FOR THE DISTRIBUTION EDGE. RMI, 2014. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2014-25_eLab-RateDesignfortheDistributionEdge-Full-highres.pdf.

Wikipedia

{{cite report |last1=Glick |first1=Devi |last2=Lehrman |first2=Matt |last3=Smith |first3=Owen |title=RATE DESIGN FOR THE DISTRIBUTION EDGE |publisher=RMI |date=August 2014 |url=https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2014-25_eLab-RateDesignfortheDistributionEdge-Full-highres.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{glick2014rate, author = {Glick, Devi and Lehrman, Matt and Smith, Owen}, title = {{RATE DESIGN FOR THE DISTRIBUTION EDGE}}, institution = {RMI}, year = {2014}, month = aug, url = {https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_2014-25_eLab-RateDesignfortheDistributionEdge-Full-highres.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }