We were engaged to evaluate a New England municipal utility’s tariffs and rate design policies, and to develop a strategy to address the potential for increased customer interest in rooftop solar and other distributed generation resources throughout our client’s service territory. The primary concern was that existing Net Energy Metering (“NEM”) tariffs create a risk of insufficient recovery of the utility’s fixed costs as the penetration of rooftop solar systems increases. This under-recovery occurs as a result of rate structures that embed a significant portion of fixed utility costs in variable charges: as the volume of energy sold decreases (as a result of customer self-generation), the proportion of the utility’s fixed costs recovered through rates falls as well.
Our analysis began with a review of the company’s existing tariffs and programs related to distributed resources. We benchmarked these rates and programs against those of a set of regional utilities, and performed a quantitative assessment of the effects of a variety of rate structures on the utility’s annual revenues. This analysis informed a plan to transition to a more progressive and sustainable rate structure. Our recommendations were designed to ensure that our client’s electric distribution rates remain sufficient to recover the company’s costs, and that rates remain fair to all customers—both those that own solar resources and those that do not.
