Overview of DG Rate Issues

When a Massachusetts energy user considers using renewable energy to generate electricity on-site, electric utility rates will have a significant impact on the savings and costs from such a decision. One question is whether the utility will impose a "standby charge," but the level and structure of other parts of each utility's rates will also have an impact on project economics.  In this way, utility rates can represent a barrier to clean distributed energy resources (DER) in Massachusetts, or can stimulate their growth, depending on state policy decisions.  Such decisions also have a range of important impacts on other ratepayers, on electric utilities, and on the state's economy and environment.

This web page and the linked reference materials provide detailed information through 2007 on the following topics:

  • standby charges and other electric utility rates affecting distributed generation (DG) and related distributed energy resources, and
  • rate-related public policy options to stimulate renewable energy growth
  • other materials on electric rates and DG business models.

New:

These selected reference materials are in the form of pdf files unless otherwise noted.  They are listed by date, in sections that only represent approximate categories. For those not interested in reviewing all these documents, the following materials in bold type face are suggested as starting points because they appear to be particularly relevant, comprehensive and/or recent; they are listed both here and in the sections below below:

  1. November 2007 -- Creating Incentives for Electricity Providers to Integrate DER, a Report of the EPRI DER Public/Private Partnership, Technical Report 1014899, E. Petrill et. al., funded by California Energy Commission (John Sugar), Massachusetts Technology Collaborative (Fran Cummings), Massachusetts Division of Energy Resources (Gerry Bingham) and National Association of State Energy Officials as a State Technology Advancement Collaborative (STAC)
  2. August 2006 -- Presentations on CHP and Standby Rates, NARUC 2006 Summer Meeting
  3. August 2006 -- Aligning Regulatory Incentives with Demand-Side Resources, a workshop hosted by NARUC and EPA
  4. May 2006 -- The Value of DG under Different Tariff Structures, by Ryan Firestone et. al., LBNL-60589
  5. 2006 -- Utility Incentives for Demand-Side Resources, section 6.2 of EPA's Clean Energy-Environment Guide to Action
  6. December 2005 -- Rate Structures for Customers With Onsite Generation: Practice and Innovation, by Synapse Energy Economics and Regulatory Assistance Project
  7. November 2005 -- Distribution System Regulation, Draft for MADRI Regulatory Sub-Group
  8. September 2005 -- Designing Financial Incentives for Utility Involvement in Distributed Resources, prepared by NERA for EEI
  9. June 2005 -- MADRI Scoping Paper on the Throughput Issue: Addressing the Adverse Impact of Distributed Resources on Utility Earnings, F. Weston and W. Shirley
  10. May 2005 -- Framework for Developing Win-Win Strategies for Distributed Energy Resources in Massachusetts, EPRI, Attachment C of DG Collaborative's 2005 Report
  11. June 2004 -- Settlement of standby tariff case by NSTAR and 8 other parties in DTE 03-121 -- for the many additional materials filed in this case, enter Docket Number "02-121" at DTE website
  12. January 2004 -- Massachusetts Symposium on Regulatory Frameworks for DG

 

Standby Charges

Standby charges are charges to a DG owner to cover the utility's cost of "standing by" with a distribution system that will be able to deliver electricity at times when the owner's distributed generation system goes down. Currently, NSTAR is the only utility in Massachusetts that has implemented standby charges, and these charges apply primarily to non-renewable generation. In other utility territories, standby charges may be considered by state utility regulators in the future on a generic basis or for individual distribution companie(s).

For recent activity in Massachusetts on this topic, see:

For a recent report funded by NREL with detailed research across multiple states on current and potential standby charges, see:

For presentations from differing perspectives at a recent national meeting, see: August 2006 -- Presentations on CHP and Standby Rates, NARUC 2006 Summer Meeting, Committee on Electricity, San Francisco, CA

For recent materials developed or presented in terms of the conditions in the Northeast, see:

Other materials:

Utility Incentives: Decoupling/Realigning Utility Rates

Customer Incentives for PV & Other DG

Policy Development

Policy options that have been considered in Massachusetts or other states range from focussed changes to the "rate design" such as shifting recovery of utility costs from variable charges to fixed charges, to more systemic or structural changes to rates such as approaches to "decouple" a utility's distribution revenue from its sales to reduce its incentive to increase throughput.

Policy Materials Specific to Massachusetts

  • Background on current activities in Massachusetts to develop a win-win framework can be found at www.masstech.org/dg/winwin.htm.  These activities include:

"Decoupling" Utility Rates & Other Utility Incentives

Related DG and DER Policies in Other States (selected)

Policy Options Considered in the Mid-Atlantic (at MADRI)

 In addition to particular materials available below, see the latest info at Mid-Atlantic Distributed Resources Initiative Working Group.

Current Massachusetts Rate Provisions

Other Reference Materials on Electric Rates and DER Business Models

 

 

Other Source Materials for Reference (web pages)

Rate issues are subject to change through the regulatory process and through potential collaborative discussions, and this page and the linked pages are under revision. Suggestions for additional information and other comments or questions may be directed to:

          Fran Cummings, RET Policy Director