1. Future Electric Utility Regulation Advisory Group Meeting
Future Electric Utility Regulation Series:
Value-Added Electricity Services: New Roles for Utilities and Third-Party Providers
Future Electric Utility Regulation Advisory Group Meeting
NASUCA Meeting June 6, 2017
March 27, 2014
Lisa Schwartz Berkeley Lab, Electricity Markets and Policy Group

2. Future Electric Utility Regulation Series
A series of reports from Berkeley Lab taps leading thinkers to grapple with complex regulatory issues for electricity
Unique multi-perspective approach highlights different views on the future of electric utility regulation and business models and achieving a reliable, affordable, and flexible power system to inform ongoing discussion and debate
Primary funder of initial six reports: U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability - Electricity Policy Technical Assistance Program
Office of Energy Efficiency and Renewable Energy’s Solar Energy Technologies Office is co-funding new reports under DOE’s Grid Modernization Initiative
Expert advisory group provides guidance and review (see extra slides)
feur.lbl.gov

3. Reports published so far
1. Distributed Energy Resources (DERs), Industry Structure and Regulatory Responses
2. Distribution Systems in a High DER Future: Planning, Market Design, Operation and Oversight
3. Performance-Based Regulation in a High DER Future
4. Distribution System Pricing With DERs
5. Recovery of Utility Fixed Costs: Utility, Consumer, Environmental and Economist Perspectives
6. The Future of Electricity Resource Planning
7. The Future of Centrally-Organized Wholesale Electricity Markets
8. Regulatory Incentives and Disincentives for Utility Investments in Grid Modernization
Reports, webinar slides and recordings at feur.lbl.gov

4. One example: Report #5
Recovery of Utility Fixed Costs: Utility, Consumer, Environmental and Economist Perspectives
Utility - Lisa Wood, Institute for Electric Innovation/The Edison Foundation, and Ross Hemphill, RCHemphill Solutions (former ComEd VP)
Consumer - John Howat, National Consumer Law Center
Environmental - Ralph Cavanagh, Natural Resources Defense Council
Economist - Severin Borenstein, University of California, Berkeley 5

5. 6

6. Four Perspectives on Fixed Cost Recovery*
Wood/Hemphill
Howat
Favored approaches and why
Formula ratemaking – streamlined, enables investments in critical infrastructure
Higher fixed charges – cost-based, provides transparency in pricing grid services
Demand charges – cost-based, may incent more EE and DR
Time-varying rates – Properly designed and optional, some customers can reduce bills
Decoupling – With consumer protections, enables EE
Formula rate plans – With performance standards and consumer protections
Minimum bills – But in most cases won’t effectively address fixed cost recovery shortfall
Least favored approaches and why
*See footnotes on prior slide & report at feur.lbl.gov
Decoupling and LRAM – Work well for EE, but too much cost-shifting with high levels of distributed solar
Minimum bills – Level of minimum bill unlikely to recover full cost of grid services
Higher fixed charges – Shifts costs from high- to low-volume customers (low-income & elder), reduces EE incentives & control over bills
Demand charges – Consumers lack ability to respond
LRAM – Incentive for utility to overstate savings and weaken EE program effectiveness

7. Environmental and Economist Views*
Cavanagh
Borenstein
Favored approaches and why
Minimum bills – Ensure that all customers make a reasonable contribution to maintaining critical infrastructure
Time-varying rates – Economically efficient, support EE & distributed resources
Decoupling – Necessary but not sufficient to recover fixed costs & enable EE
Formula rate plans – Facilitates recovery of escalating multi-year costs of grid upgrades, use with decoupling
Demand charges – Works with EE & solar, link to system-wide peak
Time-varying rates – Should reflect full social marginal cost (SMC), with remaining revenue from higher volumetric rates and higher fixed charges
Higher fixed charges – Use with time-varying rates (see above). Concerns remain re: large vs. small users and low-income households. “Claim that ‘Fixed costs should be recovered with fixed charges’ has no basis in economics.”
Least favored approaches and why
Higher fixed charges – Reduce customers’ incentive for EE and distributed resources
LRAM – Creates incentive for utility to promote EE programs with little savings, incentive to increase energy sales remains
Minimum bills – “identical to fixed charge plus free electricity,” not cost-based
Demand charges – inefficient, more volatile than dynamic pricing, not cost-based
Others – Don’t fix problem

8. Another example: The Future of Centrally-Organized Wholesale Electricity Markets
Four perspectives:
Craig Glazer, PJM
Jay Morrison and Paul Breakman, National Rural Electric Cooperative Association
Allison Clements, Natural Resources Defense Council
National Association of State Utility Consumer Advocates
Four questions:
Are today’s centrally-organized market designs adequate to accommodate state public policy goals, and what potential design changes would further enable deployment of resources that achieve the goals of reliability, affordability and resource mix?
What are the market impacts of environmental regulations further constraining the deployment of fossil fuel resources?
What are the market impacts of integrating increasingly higher levels of renewable resources with zero marginal cost?
Are today’s market designs adequate to acquire the flexible resources needed to better integrate increasing levels of variable energy resources at least cost? 9

9. Questions report will address
New Report: Value-Added Electricity Services: New Roles for Utilities and Third-Party Providers (1)
Questions report will address
What new value-added services does grid modernization enable, and what are the appropriate roles for utilities and third-party service providers? Should utilities directly compete with competitive providers of new value-added services, or provide new platforms and procurement mechanisms to enable third-party services?
What policy and regulatory changes may be needed in the face of increasing competition for electricity services from third-party providers?
How should regulators address utility costs for new value-added services, considering customers who do not participate in these offerings?  
What policy and regulatory approaches best balance promoting innovation with consumer protection?

10. New Report: Value-Added Electricity Services: New Roles for Utilities and Third-Party Providers (2)
Perspectives
Consumers: National Association of State Utility Consumer Advocates
Utilities: Jon Blansfield and Lisa Wood, Institute for Electric Innovation
Third-party providers: Ryan Katofsky, Advanced Energy Economy
Timeline
June - Draft perspectives due to Berkeley Lab
July – Revisions by authors and presentation at NARUC meeting (July 17)
August – Review by Advisory Group and DOE
September – Final report published, public webinar

11. For More Information
Lisa Schwartz Electricity Markets and Policy Group Lawrence Berkeley National Laboratory (510) Join Berkeley Lab’s Electricity Markets and Policy Group mailing list ( and stay up to date on our publications, webinars and other events. Follow the Electricity Markets & Policy Group on

12. Future Electric Utility Regulation Advisory Group
Commissioner Lorraine Akiba, Hawaii Public Utilities Commission
Janice Beecher, Institute of Public Utilities, Michigan State University
Doug Benevento, Xcel Energy
Ashley Brown, Harvard Electricity Policy Group
Paula Carmody, Maryland Office of People’s Counsel
Ralph Cavanagh, Natural Resources Defense Council
Steve Corneli, consultant
Tim Duff, Duke Energy
Peter Fox-Penner, Boston University Questrom School of Business
Scott Hempling, attorney
Val Jensen, Commonwealth Edison
Commissioner Travis Kavulla, Montana Public Service Commission
Steve Kihm, Seventhwave
Chair Nancy Lange, Minnesota Public Utilities Commission
Lori Lybolt, Consolidated Edison
Sergej Mahnovski, Edison International
Kris Mayes, Arizona State University College of Law/Utility of the Future Center
Jay Morrison, National Rural Electric Cooperative Association
Delia Patterson, American Public Power Association
Commissioner Carla Peterman, California Public Utilities Commission
Sonny Popowsky, Former consumer advocate of Pennsylvania
Karl Rábago, Pace Energy & Climate Center, Pace University School of Law
Rich Sedano, Regulatory Assistance Project
Peter Zschokke, National Grid