EDITOR’S NOTE: Ralph Cavanagh, the nationally known co-director of the Natural Resources Defense Council energy program, will keynote the upcoming Energy Times flagship event, Empowering Customers & Cities in Chicago November 4-6. Commonwealth Edison is host utility for the conference.
Electricity sales in the United States are not collapsing, but since 2000 the rate of growth has lagged well behind that of the population.
Linking utilities’ financial health to escalating commodity sales won’t work any longer. This yields two crucial questions: given declining growth in those commodity sales, how do utilities secure the reasonable revenue certainty required to make enduring provision for reliable and affordable services, and how can regulators allocate the costs of those services equitably among all users?
The simple but wrong answer to both questions would be to stop charging for electricity service based on consumption levels. The “all you can eat” pricing model may work well for some businesses, but none have environmental and equity dimensions comparable to electrical generation.
The list of alternatives begins with revenue decoupling, which makes utilities indifferent to retail energy sales volumes without abandoning the tradition of volumetric pricing and its incentives for customers to use energy efficiently.
Also promising are variable demand charges and minimum bills - which retain volumetric pricing for most customers but ensure that everyone connected to the grid makes an appropriate contribution.