Getting it Right on Electricity Rate Design

Here at the Environmental Law and Policy Center, we are motivated by the belief that economic progress and environmental protection go hand in hand. To that end, we deploy innovation and multidisciplinary collaboration in our work because we know that tough challenges, change and progress demand it. In my work as a public interest attorney in the electric utility field, I see every day how important that approach is to the many important questions swirling around rate design.

I will not attempt to tackle those questions here, but rather offer an overview of why getting it right on electricity rate design is so important, as the title of this publication suggests. Other authors gathering here do offer specific insights, ideas and examples from their work in rate cases across the country, and I encourage you to click around and explore and engage them. At the end of the day, getting rate design right is good for business and jobs, for the utilities themselves but far beyond as well. Entrepreneurs and innovators are ready to bring new technologies and services to market that will improve people’s lives by creating jobs, keeping electricity affordable and cleaning up our environment.

On the flip side, an over reliance on regulatory approaches and business models of the past discourages a more robust economy of companies from investing in the future, and it oftentimes penalizes individuals for saving energy at home. States that accept and defend outdated approaches will get left behind while their neighbors benefit from new business investment, job growth and a higher quality of life.

We all know that the pace of change in today’s electricity sector is fast, and the nature of that change is dynamic. That stands in conflict with the history of the industry, which was built and driven for decades by a predictable and linear growth principle: bigger is better. More power generated, more consumption and more customers meant everyone was getting what they wanted. That is no longer a fit for today’s energy realities. Consumers want more choice, more control and lower costs. Communities want equity and fairness for all of their citizens, and cleaner air. And utilities want some measure of the predictability that has always governed their industry.

The regulatory change that can help reconcile this conflict lags well behind the market, consumer and technology forces that are driving today’s change, so we need new approaches. We need approaches reaching for the future, not clinging to the past. And we need approaches that embrace flexibility and bridging differences over rigidity and pitting stakeholders against one another.

In Wisconsin, back in 2014, we saw the worst of this conflict, as entrenched utility interests fought hard to lock in the past. The utilities dramatically increased fixed charges, which penalized energy conservation and disproportionately harmed seniors, low-income residents, and other vulnerable customers. The Public Service Commission of Wisconsin approved these rates, despite the utilities’ failure to justify them with facts and evidence.

But one thing that came out of that fight was a realization. Many of the individuals and organizations you see gathered here were in the trenches of that fight. We talked to each other, shared information and experiences, asked questions. We collectively realized that it would take new and collaborative approaches to move forward, and prevent the status quo from taking us backwards.

So we are doing things differently. We are coming together as a community of advocates fighting for clean, efficient and affordable energy across the country. We are listening to one another, acknowledging our differences, sharing insights and experience and building trust. We share a vision for the future and are now doing the hard work of exploring and forging common ground on policy to get there. We invite other stakeholders throughout the electricity sector to join us.