Future Rate Design for Distribution Service

Unbundling of electric rates that must occur in the transition to industry restructuring creates the opportunity to apply new thinking to the structure of rates for distribution service. New rate designs applied during the transition to competition can help ease the phase-in to competitive markets.

ESC’s Rate Design Service

ESC designs unbundled rates consistent with each utility’s cost structure and with the ultimate decomposition of rates required for industry restructuring. ESC carefully analyzes utility cost structures to accurately assign fixed and variable charges to each component of unbundled rates. This approach identifies the revenue subject to competition and the degree of competitive vulnerability when deregulation takes effect. The new rate designs also stabilize distribution revenues by providing a natural hedge against weather variability. The new rate structures can also reflect locational differences in service costs.