Rate Design & Decoupling Recent Experience in Wisconsin, U.S.A.

Transcription

1 Rate Design & Decoupling Recent Experience in Wisconsin, U.S.A. Eric Callisto, Commissioner Public Service Commission of Wisconsin September 11, 2012 ERC/NARUC Conference Amman, Jordan

2 Goals of Presentation Innovative rate design in Wisconsin history and current status Decoupling experience so far and lessons learned 2

3 Rate Design in the United States t Background Pre-1970s: declining block structures The more you use, the less you pay per unit First introduced in the 1930s, as part of effort to improve rural standard of living Assumes declining i costs of production (which h was true through the late 1960s) Real price of energy in the U.S. dropped by 43% from 1951 to

4 Rate Design in the United States t Background 1970s economic & industry changes: Economic growth slows, inflation rises Utility marginal costs increasing Technological plateau of production efficiency for electric generation Oil Embargo of (fuel prices ) Result: Ballooning revenue requirements Huge increase in rate requests 4

5 Early Innovation in Rate Design Policy/Regulatory Response State and Federal Level 1970s No more declining blocks (volume discounts) Incorporate marginal cost pricing principles Better reflect seasonal and time-of-day differences in utility s costs of production More information for consumers Promotion of conservation and efficiency 5

6 Innovative Rates Today Many of the same drivers: Promote efficient growth Conservation & sustainability Reliability Customer empowerment Lower bills Peak shaving Match demand with optimal resource 6

7 Innovative Rates Terms Used Innovative = Retail offerings other than flat or energy & demand structure Time-of-Use = Time variant rates, generally divided into 2 or 3 tiers (on-peak, off-peak, standard), price schedule fixed & predefined Critical Peak Pricing = Very high critical peak prices for limited hours on event days, usually combined with TOU rate Peak Time Rebate = Provides credit to customer for load reduction during peaks, often w/o penalty if load increases Real-Time Pricing = Dynamic pricing rate that constantly changes with time, reflecting wholesale market prices 7

8 Innovative Rates Wisconsini Nearly all WI utilities have TOU offerings for both residential and commercial/industrial Most TOU offerings are 2-tier, some 3-tier Limited critical peak pricing options Limited real time market pricing Experimentation on utility-specific basis 8

9 Innovative Rates Highlights ht Large IOU & Municipal Offerings: Optional 2-tier rates for residential Residential default to TOU where usage exceeds threshold (e.g.,60,000 kwh/year) Mix of optional & mandatory TOU rates for small commercial, depending on utility Mandatory 2-tier TOUs for customers >200kW Optional interruptible service for large customers RTP offering for large C&I, non-firm service 9

10 Time of Use Rates Uptake? Small Commercial TOU: About 16,000 participating p customers Percentage of uptake varies by utility (between 1% and 12% of customers) As a % of energy, uptake is much higher as much as 50% for Wisconsin s largest utility General trend is for the larger utilities to have higher percentage of TOU uptake for small C&I customers 10

11 Time of Use Rates Uptake? Residential TOUs: 50,000 participating p customers statewide Less variation among utilities Between about 1 4% of customers Between 1 6% of energy Highly dependent on utility outreach/marketing 11

12 Other Time Variant Offerings Experimental offerings: 3-tier TOU residential 3-tier TOU + CPP for residential and small commercial Flat rate + peak time rebate for residential and small commercial Takeaways so far: Very low uptake for residential customers M/V issues with rebate; potential revenue shortfall with CPP (decoupling necessary?) 12

13 Revenue Decoupling Revenue decoupling: Provides utility revenue stability regardless of sales (utility revenues are decoupled from sales) Wisconsin 1 of 10 U.S. states with electric utility decoupling Recent federal law encouraging alignment of utility incentives with efficiency goals 13

14 Decoupling Pilot in Wisconsini Part of Rate Stipulation Between Customer Groups and Wisconsin s 2 nd Largest Utility 4-Year Pilot Starting in 2009, still ongoing Outgrowth of Wisconsin Climate Change Task Force recommendations issued in 2008 Balance of revenue decoupling with increased conservation/efficiency and community rate pilots 14

15 Decoupling Pilot Components Revenue Decoupling Doesn t apply to large energy customers Designed to capture both over- and undercollections of gross margin based on bill counts Applied separately to each rate schedule Electric capped at $14M + carrying costs Natural gas capped at $8M 15

16 Decoupling Pilot Components Conservation/Energy Efficiency Increased utility contribution to statewide energy efficiency programs For electric, 2% of utility revenue in 2009, increasing to 3.5% in 2012 For gas, 2% of utility revenue in 2009, increasing to 3% in 2012 $62.3M additional for C/EE over 4 years 16

17 Decoupling Pilot Components Community Pilots (3 being implemented) Testing extent to which TOU rates + increased EE options and tracking tools impact usage 2 of the pilots offer a 3-tier TOU and CPP (offered as opt-in) + customer usage tracking software 3 rd pilot adds inverted block most on 3-tier TOU, 100 customers on inverted block (both opt-out) To date, 45% opt-out rate of 3-tier TOU, and 31% opt-out from inverted block conservation rate 17

18 Decoupling Pilot Revenue Impacts Revenue Stabilization Revenue decoupling utility under-collections in 2009: $30.5M (electric); $6.7M (gas) Total make whole payments = $20.7M (hit electric cap on ratepayer giveback) Utility under-collections in 2010: $27.7M (electric); $16.9M (gas) Total make whole payments = $22.0M (hit electric and gas caps on ratepayer giveback) Utility over-collections in 2011: $16M (electric); $2.9M (gas) Total payments back to customers = $16.9M (hit electric cap on utility giveback) Caps applied in each year:

19 Decoupling Pilot - Takeaways Be brave money is going to move back and forth, and you need to accept that Be patient t with customers it is complicated Mixed results on customer acceptance Weather and the economy are key drivers of use all else incidental? Get energy efficiency in quick Are there other, easier options to incent the utility to be a full partner in energy efficiency? 19

20 Contact Information Eric Callisto, Commissioner Public Service Commission of Wisconsin 610 North Whitney Way Madison, Wisconsin U.S.A. (608)